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India – CCI Dismisses Charges Of Abuse Of Dominant Position Against DIPP For Not Allowing FDI In Air India.

12 November, 2013

 


On October 8, 2013, the Competition Commission of India (‘CCI’) dismissed the charges against the Department of Industrial Policy and Promotion (‘DIPP’) of discrimination against the national carrier, Air India. DIPP is the arm of the Government responsible for formulation of Foreign Direct Investment (‘FDI’) Policy as well as the promotion, approval and facilitation of FDI in India. Under the earlier policy, foreign airlines could not participate in the equity of an air transport undertaking offering scheduled and non-scheduled air transport services (other than cargo airlines). However, this policy was revised (through Press Note No. 6 (2012 Series) of September 20, 2012) to permit foreign airlines to invest upto 49% in any Indian passenger airlines engaged in scheduled and non-scheduled transport services except Air India. The complainant, Shri. Shubham Srivastava, accused DIPP of modifying India’s FDI policy in a manner that is inconsistent with the Competition Act, 2002 (‘Act’).


CCI identified the relevant market as ‘formulation, promotion, approval and facilitation of FDI policy in civil air transport services in India’. In its order, CCI relied upon the definition of ‘enterprise’ as defined in Section 2(h) of the Act, which includes a department of the Government engaged in any activity relating to control of goods, or provision of services, and held that DIPP is an ‘enterprise’ as it controls the provision of services in the relevant market. In support of this, CCI cited its earlier decision in Shri Debapriyo Bhattacharya v. The Principal Secretary & Anr.1, and reasoned that a department of the Government can be classified as an ‘enterprise’ if the functions discharged by it amount to ‘control of articles or goods, or the provision of services’.


While making its assessment, CCI noted that DIPP is constitutionally empowered to frame executive policy of this kind in relation to FDI. Moreover, DIPP’s revision of the FDI policy merely gave private airlines an additional option to finance their capital needs through investments from foreign airlines. This action of DIPP may, in fact, promote competition by “facilitating cash crunch airlines to avail FDI for their operations, growth and expansion”. Accordingly, CCI found that DIPP’s act of revising the FDI policy does not prima facie raise any competition concern and dismissed the complaint.

 

End Notes:

1 Case No. 54 of 2011

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
[email protected]

 

Abhijit Joshi, AZB & Partners 
[email protected]


Shuva Mandal, AZB & Partners 
[email protected]

 

Samir Gandhi, AZB & Partners
[email protected]


Percy Billimoria, AZB & Partners 
[email protected]

 

Aditya Bhat, AZB & Partners 
[email protected]

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