The Competition Commission of India imposed penalties on three Indian airlines for concerted action in fixing and revising fuel surcharge on cargo transport.
Jet Airways, IndiGo's parent InterGlobe Aviation, SpiceJet were collectively fined a total of Rs 54.36 crore, according to a statement on CCI's website. A cease and desist order has also been issued against the airlines.
CCI noted that the airlines had “acted in a concerted manner in fixing and revising the FSC rates” breaching provisions of the Competition Act, 2002 that forbid anti-competitive agreements including cartels. It's order was passed based on information filed by the Express Industry Council of India which alleged cartelisation by the three airlines, Air India Ltd. and Go Airlines Ltd.
The regulator deprecated the airlines for using fuel surcharge as a pricing tool whereas it was essentially introduced to mitigate fuel price volatility, the statement said.
...the Commission notes that the basic concern in the present caseis the overcharging of cargo freight, in the garb of fuel surcharge, by theair cargo transport operators which adversely affect consumers beside stifling economic development of the country. It is important for thegrowth of the market that these cartels be broken and more transparencybe brought in price fixing by the airlines by taking firm steps in thisdirection.CCI Order
Fuel surcharge constitutes about 20-30 percent of airlines' cargo revenue. Using that as the ‘relevant turnover’, the CCI calculated the quantum of the penalty at 3 percent of the airline’s average relevant turnover of the last three financial years.
This is CCI’s second order in the matter. When the complaint was first filed the Director General of Investigations had found no proof of allegations of anti-competitive conduct. But the CCI found otherwise and imposed penalties on the three airlines. No penalty was imposed upon Air India as its conduct was not found to be similar. Go Airlines leased its cargo space to third party vendors and had no control over the commercial aspects of the cargo operations and hence no action was taken against it.
On appeal by the three airlines the Competition Appellate Tribunal set aside the first CCI order and remanded the matter back to CCI. In this second order lower penalties have been imposed.