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India: CCI enquires into airline ticket pricing

November 21, 2018

Source: www.cci.gov.in
Numerous players are competing in the common market to carve out their space. The healthy competitive spirit in the modern market not only bolsters the productivity and international competitiveness of the business sector but also promotes dynamic markets and economic growth. The essential aspect of fair and open competition is that it offers multiple options for the consumers. In the form of lower prices and more choice while enabling the vendors and manufacturers to deliver a greater variety of products to their customers around the world.

Regulating the Competition in India

With the aim to encourage and sustain competition in the market, protect the interests of the consumers and ensure freedom of trade is carried on by other participants in the market, the Competition Act, 2002 (hereinafter referred to as the “Act”) was enforced. Competition Commission of India (hereinafter referred to as the “CCI”) is the competition regulator which ensures proper monitoring of the competitive trade practices standing by its motto of fair competition for greater good a regulator.

Competitive Pricing

As a part of their business strategy, corporate entities often devise out various schemes to attract more customers towards the products and services they intend to sell. This includes advertisements, offers, gifts, reduced prices in order to survive the competition offered by rival competitors. Concerns may arise where pricing hampers the fair competition.

The Act recognizes a number of modes where pricing may be categorized as improper from the point of view of fair competition. Some of such means are stated below:

  • Predatory pricing, whereby the sale of goods or provision of services by the dominant entities is at a price which is below the cost, as may be determined by regulations of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.
  • Cartelization whereby an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution directly or indirectly determines purchase or sale prices goods or provision of services.

CCI investigates

Considering the similar pattern of pricing of tickets by all airlines, CCI has initiated an inquiry into the pricing of tickets by all airlines.
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The airlines have been following a pricing mechanism in respect of the sale of their tickets, wherein fares are lower if the ticket is booked in advance while, the tariffs increase when the travel is booked closer to the date of departure.

The comparable framework being followed by all airlines raises the apprehension of improper practices hampering fair competition in the market. However, the airlines contend that the ticket booking system is a software-based system, which takes into account historical booking patterns while pricing the tickets.

The investigation by CCI would throw light on the nature of practices being taken up by the airline business houses ensuring that while formulating customer friendly schemes, they do not violate fair competitive practices.

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