Air India Limited — Combination C-2022/04/922
- Case No.C-2022/04/922
Ratio decidendi
The rule this decision rests on
A combination in which one joint venture partner exits and the other gains sole control of the target is assessed by considering the scope and degree of control exercised by the exiting partner and by the continuing partner, and the continuing partner's interests in other enterprises that have horizontal overlaps or vertical or complementary interfaces with the target. Horizontal overlap analysis asks whether the combination is likely to cause an appreciable adverse effect on competition by enhancing the market power of the merging parties. Where parties sit at different levels of the supply chain, the inquiry extends to the risk of input or customer foreclosure, considering the ability and incentive to foreclose. Where the exiting joint venture partner's influence over the target is not such that its removal is likely to affect the market behaviour of the target and of the acquirer group's overlapping entities, the combination raises no competition concern on that account. Having assessed the combination against the factors in Section 20(4), the Commission is of the opinion that it is not likely to cause any appreciable adverse effect on competition in India in any relevant market, and it may therefore be approved under Section 31(1).
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
COMPETITION COMMISSION OF INDIA 13th June 2022 Notice under Section 6(2) of the Competition Act, 2002 given by Air India Limited CORAM: Mr. Ashok Kumar Gupta Chairperson Ms. Sangeeta Verma Member Mr. Bhagwant Singh Bishnoi Member Order under Section 31(1) of the Competition Act, 2002 1. On 26th April 2022, the Competition Commission of India (Commission) received a notice (Notice) under Section 6(2) of the Competition Act, 2002 (Act), given by Air India Limited (Air India). The Notice was given pursuant to the letter dated 03rd March 2022, issued by Tata Sons Private Limited (TSPL) exercising the call option under the Shareholders Agreement executed inter alia between AirAsia Aviation Group Limited (formerly known as AirAsia Investment Limited) (AAGL), AirAsia (India) Limited (AirAsia India) and TSPL on 29th December 2020.
2. The Commission, vide its communication dated 18th May 2022 and 20th May 2022, issued under Regulation 14(3) of the Competition Commission of India (Procedure in regard to transaction of business relating to combinations) Regulations, 2011 directed the notifying party to remove defects in the Notice and furnish certain information relevant for the purpose of assessment of the Proposed Combination. Notifying party submitted its response vide submissions dated 24th May 2022.
3. The proposed combination envisages acquisition of 16.33% shareholding in AirAsia India by Air India from AAGL, and transfer by TSPL of its entire 83.67% shareholding in AirAsia India to Air India.
4. Air India is an indirect wholly owned subsidiary of TSPL. TSPL is the ultimate holding company of the entities belonging to the Tata Sons group Acquirer and the Target belong to the same group, i.e., the Tata Sons group. TSPL is an investment holding company and is present in the passenger air transport sector through Air India, AIXL, Air India SATS Airport Services Pvt. Ltd. (AISATS), Tata SIA Airlines Ltd. (Vistara) and AirAsia India. Vistara is a joint venture between TSPL and Singapore Airlines Limited (SIA), with TSPL and SIA holding 51% and 49% of the total equity shareholding, respectively. AirAsia India is a joint venture between TSPL and AAGL. Presently, TSPL and AAGL holds 83.67% and 16.33% of the shareholding of AirAsia India, respectively.
5. Air India, AIXL, Vistara and AirAsia India provide domestic scheduled air passenger transport service, air cargo transport services in India, and charter flight services in India. Air India, AIXL and Vistara also provides international scheduled air passenger transport service. AISATS, a joint venture between Air India and SATS Limited, is engaged in the business of providing ground handling services at Delhi, Bengaluru, Hyderabad, Mangalore, and Thiruvananthapuram domestic airports, and cargo handling services at Bengaluru airport. TSPL also has indirect shareholding and control over Taj SATS Air Catering Limited (Taj SATS) and Taj Madras Flight Kitchen Private Limited (Taj Madras). Taj SATS and Taj Madras provide in-flight catering services in India. TSPL also holds majority shareholding in Taj Air Limited, which provides charter flight services in India.
6. The focus of analysis of likely effect of horizontal overlap(s) of a combination is to examine whether it is likely to cause an AAEC on the competition by enhancing the market power of the merging parties. When parties to a combination are placed at different levels of the supply chain, it may be relevant to examine whether the risk of input foreclosure or customer foreclosure leading to competition harm arises taking into account the ability and incentive for doing so. In case of a combination, where from target JV, one of the two JV partners exit and the continuing JV partner gains sole control over the target, it would be relevant to consider the scope and degree of control exerted by the exiting JV partner and continuing JV partner. Further, it would be relevant to examine the scope and degree of interest of the continuing JV partner in other enterprises that exhibit horizontal overlaps or vertical/complementary interface with the target.
7. Arrangement between the JV partners in relation to AirAsia India presently provides that so long as TSPL holds a majority of the share capital of the Target, TSPL has the right to appoint a majority of the directors and AAGL has only right to nominate only 1 director on the board of the Target. Each of TSPL and AAGL has the right to be consulted by AirAsia India’s board, prior to making decisions in relation to the certain corporate actions. There are certain rights relating to exit available to JV partners.
8. The Tata Sons group is present in passenger air transport operations in India, through two JVs AirAsia India and Vistara, and through Air India including AIXL. Out of these two JVs, in AirAsia India, the control exerted by Tata Sons group is significant as it already has 83.67% shareholding along with certain contractual rights. On the other hand, in the other JV (Vistara), which is held jointly with SIA, both the Tata Sons group and SIA have comparable stake, resulting into JV partners having ability to exercise control over Vistara. The Proposed Combination concerns the JV i.e. Air Asia India wherein the JV partner AAGL is exiting completely from the JV. As such the influence exerted by AAGL over AirAsia India is not such that its removal is likely to affect the market behaviour of AirAsia India and overlapping entities of Tata Sons group so as to raise competition concern.
9. Considering the facts on record including the details provided in the Notice given under Section 6(2) of the Act and assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have any appreciable adverse effect on competition in India in any of the relevant market(s) and therefore, the Commission hereby approves the same under Section 31(1) of the Act.
10. This order may be revoked if, at any time, the information provided by the notifying party is found to be incorrect.
11. The information provided by the notifying party is confidential at this stage in terms of and subject to the provisions of Section 57 of the Act.
12. The Secretary is directed to communicate to the notifying party accordingly.
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