CCI finds no proof of cartelisation among 5 airlines, ends ticket price fixing probe

The Competition Commission of India (CCI) has found no evidence of cartelisation among five airlines to fix ticket prices, the regulator said in an order on Monday, concluding an investigation spanning five years.
In a suo motu case in 2015, the CCI had ordered a probe into alleged anti-competitive practices after it noticed similar priced tickets being offered on certain routes by carriers like Indigo, state run-Air India, SpiceJet, GoAir and the now defunct-Jet Airways.

After two investigations by the CCI’s Director General (DG) of four major routes operated by the carriers, the commission agreed with the DG’s findings of no evidence for collusion between the airlines.

Following a letter from the Lok Sabha secretariat in 2014, seeking an examination into the presence of cartelisation in the airline sector, the CCI sought information from the airlines on the routes between Delhi and four cities including Mumbai, Pune, Bengaluru and Hyderabad for FY13-FY14.

Based on this, the commission, in 2015, ordered the DG to probe the airlines, the report of which was submitted to the regulator the following year.

Covering the period from FY11-FY16, the report noted that due to the use of softwares to determine prices, “price parallelism has become the natural outcome, but it cannot be said to be the result of any agreement or action in concert.”

However, the commission felt that certain aspects like the dynamic pricing model, role of algorithms in the softwares used by these airlines and the impact on ticket prices needed deeper inspection and, in 2016, directed the DG to conduct a further investigation.

As per the report of the supplementary probe, submitted to the CCI in 2019, the algorithms running the softwares were based on inputs from route analysts working at the airlines on parameters like flight frequency, aircraft capacity, seasonality, competitor’s fares, time slot among other things.

“The algorithm as well as the final price of the ticket is determined by the personnel working in the revenue management team of each airline,” it said, adding, “The role of the software is limited to the extent of helping the revenue management team to arrive at a price that will optimize revenue.”

The closure comes as a relief to the beleaguered airline sector as an adverse finding could have resulted in a fine of up to three times the profit made in each year the prices were fixed, or 10% of the annual revenue, whichever is higher.