Jet-Sahara talks: Is CCI fit to probe under cartelisation?
With Jet Airways chairman Naresh Goyal announcing on Tuesday that the Air Sahara-Jet Airways deal would be finalised only if it is beneficial to his shareholders, the building blocks are being put in place for what appears to be an accretive merger.india Updated: Jan 18, 2006 01:51 IST
With Jet Airways chairman Naresh Goyal announcing on Tuesday that the Air Sahara-Jet Airways deal would be finalised only if it is beneficial to his shareholders, the building blocks are being put in place for what appears to be an accretive merger.
What it also does is raise questions about cartelisation in the aviation industry. The US and Europe have stringent anti-trust laws, while India is still awaiting a clearcut law on this vital subject.
When contacted, Vinod Dhall, acting Competition Commissioner and a member of Competition Commission of India (CCI) told the Hindustan Times, “If CCI were legally able to undertake enquiries of cartels, use of dominance and regulation of combinations, then this would fit into the third slot.”
What does the proposed Jet acquisition of Air Sahara mean? What does India’s competition law mandate with regard to cartels and M&A? Any large merger above the threshold given in the Act (Rs 1,000 crore in assets and Rs 4,000 crore turnover when an individual company acquires another individual company and Rs 3,000 crore in assets and Rs 12,000 crore in turnover when a group acquires another group) comes under the CCI’s microscope.
Another interesting aspect about the competition law which has been mired in controversy since its inception is that parties which are merging or being acquired may or may not give notice to the CCI.
However, Dhall said that the CCI could suo moto take action wherever it reckoned that competition was being killed and consumers were harmed. However, only a 12-month window exists for CCI to begin any sort of enquiry.
The Jet-Sahara deal definitely results in an element of cartelisation whereby the new entity has a market share of 47 per cent.
What that cartelisation will result in remains a matter of conjecture. But with the CCI itself in limbo and the lengthy Supreme Court case resulting in the government carrying out amendments in the Competition Amendment Act Bill to be pushed in the budget session of Parliament, the exact role and scope of the CCI is still to be defined. Sections 3, 4, 5 and 6 provide the commission the necessary authority.
The CCI being already frazzled by certain amendments in the Act pending before Parliament, including the creation of an Appellate Tribunal (reported by HT), there is another serious inroad into its powers and autonomy. There is another intriguing and controversial amendment in the Act for carrying out review of the existing appointments of the commission, inserted at the insistence reportedly of the Law and Justice Ministry.
Why this is interesting is that Section 11 of the Act states that no member could be removed except after enquiry conducted by the Supreme Court.
Section 10 of the Act states that every member would have a fixed term of five years.
Most importantly, for the Commission to be truly functional, it requires the presence of two members and at the moment it has only one. Moreover, the amendment to the Bill also proposes to continue MRTPC for two more years, ostensibly to deal with the pending cases.
Why was the CCI thought of in the first place? Only because this body was ineffective in curbing cartels or punishing monopolist firms. It has instead been dealing with unfair trade practices.