India’s fair-trade regulator has issued a notice to Air India asking the Tata-owned airline why its proposed merger with Vistara should not be investigated, according to two people familiar with the matter.
Salt-to-software conglomerate Tata Group has 30 days to respond to a notice by the Competition Commission of India (CCI) to secure approval to merge its airlines without an investigation.
If the CCI reacts unmoved and decides to go ahead with the investigation, the Tatas have two options – one, to divest their stake in Vistara and two, to commit to “codes of conduct” that will not adversely affect competition in the aviation sector. one of the above mentioned persons.
The Tatas had in April sought the CCI’s approval to merge Air India and Vistara, the group’s joint venture with Singapore Airlines (SIA).
CCI’s announcement comes amid growing unrest among passengers over rising fares, prompting the government to ask airlines to ensure reasonable fares. Air India and larger rival IndiGo have ordered a record number of aircraft, raising fears that India’s aviation market is heading for a duopoly.
CCI approval is required for mergers and acquisitions of businesses that exceed the asset and turnover thresholds set by the Competition Act.
CCI has become one of the most powerful regulators in India in recent years. In addition to the mandate to approve mergers, the CCI now has powers to conduct raids if it believes an entity has harmed consumers.
The regulator reviews merger proposals in a two-stage investigation. The so-called Phase 1 investigation requires forming a prima facie opinion as to whether the merger is likely to cause or has caused an adverse effect on competition in the relevant market in India. A Phase 2 investigation is initiated when the CCI sees a potential impact on competition as a result of the merger.
Air India is represented by AZB & Partners, Mumbai and SIA Shardul Amarchand Mangaldas & Co.
Tata will hold 51% of the total issued and paid-up share capital of the merged entity and SIA will hold 25.1%, according to a filing before the CCI. The merger will not result in a change in the competitive landscape or cause any adverse effect on competition in India, Tata said in the filing.
Tata announced the Air India-Vistara merger in November in a bid to take on IndiGo, which dominates the Indian skies with a market share of more than 60%. Air India and Vistara together have a market share of 18.4%, according to May traffic data compiled by the civil aviation authority DGCA.
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