This Article attempts to address certain important concepts and aspects from the case of Re: Alleged Cartelization in the Airlines Industry Suo Motu Case No. 03 of 2015.

The case of In Re: Alleged Cartelization in the Airlines Industry Suo Motu Case No. 03 of 2015, pertains to alleged cartelization amongst various domestic airlines operating in India in contravention of the provisions of Section 3 (1) read with Section 3(3) of the Competition Act, 2002 (Act, 2002). These airlines included Jet Airways (including JetLite), Indigo, SpiceJet, GoAir and Air India to four major routes viz. Delhi-Bombay-Delhi, Delhi-Bangalore-Delhi, Delhi-Hyderabad-Delhi, and Delhi-Pune-Delhi.

In order to examine whether market shares of the airlines on the identified routes exhibit any pattern of stability, the Director General (DG) collected the relevant data regarding the number of passengers travelled on each route every month from April 2010 to March 2016 from the airlines. This period included the investigation period i.e., April 2012 to March 2014 as also the pre-investigation (April 2010 to March 2012) as well as post-investigation (April 2014 to March 2016). The DG and the Competition Commission of India (CCI) came to certain conclusions after briefly discussing the factual findings that are:

The Director General (Dg) Observations:

1. On the basis of monthly market share: It was observed that the monthly market shares of all the airlines mentioned above were fluctuating in the given time period which did not draw any link between them. To form a cartel, the airlines had to maintain certain stability in their relative market share but that was absent in their behavior. Therefore, no contravention.
    
2. On the basis of annual market share: By doing a year-on-year growth analysis in terms of number of passengers, it was observed that a significant variation in growth was witnessed by different airlines as compared to growth in the overall market which resulted in some of the airlines losing market share whereas few others gaining. Therefore, no contravention.
    
3. Consolidated All India Annual Market Share and its analysis: The DG investigation revealed that the variation in the market shares of the five airlines did not witness any specific pattern. Indigo has been able to significantly increase its market share from 21.7% in 2010-11 to 38.7% in 2015-16 at the cost of other airlines such as Air India, Jet Airways, and Spice Jet lost market share on a consolidated all-India basis level. Go Air has been able to barely maintain its market share during the period. Therefore, no contravention.
    
4. Economic analysis of monthly share: To come to a definitive conclusion, the DG used certain economic tools for his perusal such as:
   1. Herfindahl-Hirschman Index (HHI): This index is used to measure market concentration. It is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers. It can range from close to 0 to 10,000. A market with an HHI of less than 1,500 is considered a competitive marketplace, an HHI of 1,500 to 2,500 is moderately concentrated, and an HHI of 2,500 or greater is highly concentrated.
       
   2. Descriptive statistics measures (like standard deviation, variance and frequency distribution): Descriptive statistics, in short, help describe and understand the features of a specific data set by giving short summaries about the sample and measures of the data. Descriptive statistics consists of three basic categories of measures:
      • Measures of central tendency describe the centre of the data set (mean, median, mode);
      • Measures of variability describe the dispersion of the data set (variance, standard deviation);
      • Measures of frequency distribution describe the occurrence of data within the data set (count).
         
   3. Analysis of variance single factor test (ANOVA): is an analysis tool used in statistics that splits an observed aggregate variability found inside a data set into two parts: systematic factors and random factors.
   4. Levene's test: It is used to test if the samples have equal variances. In some statistical tests, it is assumed that variances are equal across groups or samples. This test can be used to verify that assumption.

On the basis of the above tests, the DG found that there were fluctuations in the market share in the three routes i.e., Delhi-Bombay-Delhi, Delhi-Bangalore-Delhi, Delhi-Hyderabad-Delhi. Hence, did not show any stability or parallelism. However, in one route i.e., Delhi-Pune-Delhi, it was observed that there was no significant variance during 2011 and 2012-14 but variance was found to be quite significant during 2014-16. But it was concluded that the fluctuations in other routes were quite significant and no definitive conclusions could be drawn from this to consider cartelisation. Therefore, no contravention.

The CCI's Observations
After the investigation of the DG, the CCI on the basis of the market share reports was in conclusion that there was no such pattern of stability or parallelism between the airlines, rather, there was a significant amount of fluctuations observed in the market shares. The CCI also held that the pattern of parallelism is actionable under the Act, 2002 only if one does not adapt to the market conditions independently and is dependent on the information from his own competitors. However, in the present case, there was no such communication made. Hence, there was no contravention of the provisions of Section 3(1) of the Act, 2002 read with Section 3(3). The case was closed under Section 26(6) of the Act, 2002.

The factual finding is significant to a determination of collusion because of the following reasons:

1. The actions undertaken by the parties can be evaluated and a pattern can be established by observing their movements.
2. The agreements (if any) can be produced as evidence for determining collusions as such agreements could be related to fixing prices, limits, controlling supplies, production, etc.
3. A factual finding can aid in inferring a number of coincidences between the parties to establish a collision.
4. The factual finding can establish whether the parties share a common economic incentive because of which they colluded.

To conclude, together with observing the patterns of factual findings and applying the economic tools to them, it can be well-established whether there is a collision or not.

Price Parallelism
Price parallelism is a situation where the prices of the company tend to move in the same direction possibility of prior consultation of price movement. Showing similar or parallel pricing by competitors is insufficient to constitute a violation of section 3(3) and it becomes necessary to show 'plus factors' because of the following reasons:

1. Certain markets become regional due to which regional coordination on prices and strategies becomes relatively easy leading to collusive price leadership.
2. The smaller players tend to follow the bigger player, hence, charging a similar or near about price from the consumer.
3. There are some markets where the selling price cannot be set more than a certain bar to gain profits. Due to such reasons the prices of the products become similar or run parallel with the other competitors present in the market.
4. The prices of the products are usually set by the consumers in the relevant market.
5. The conditions of the market are such that usually the sellers are in the position to predict the demand of the consumers and hence can set the prices accordingly which do not differ from other competitors' prices.
6. The products in the same relevant market are identical and specialized, therefore, they attract the same price.

The additional or 'plus factors' that the CCI looks for in the establishment of a violation of Section 3(3) of the Competition Act, 2002 are:

1. Meetings between executives of the airline companies where prices were discussed;
2. Presence of a platform where sharing pricing information and monitoring price movements are discussed;
3. Certain e-mail exchanges where sensitive information and strategies to fix prices were included;
4. Super high-profit margins of airline companies;
5. A pattern of stability in the production and market share figures. There is no variance in the pricing pattern;
6. Evidence of price, capacity, exports, evaluation, dispatch, or production parallelism;
7. When the investigating parties are deliberately hiding material information from the Director General.

In the case of MDD Medical Systems India (P) Ltd. v CCI (2012), it was held that the Court noted that price parallelism in the market was indisputable and had been going on for years despite the fact that the manufacturers had different cost of production, geographical location and profit margins.[1] While in the case of Cement Cartel (2016), apart from the establishment of price parallelism the Commission considered "plus factors" such as the decrease in capacity utilisation, a change in price after meetings of Cement Manufacturers' Associations which also provided an opportunity for discussions and information exchange, dispatch parallelism, inter alia.

To conclude, price parallelism requires certain plus factors to prove collusion between the players.

1. Harshita Fatesaria, Sakshi Saran Agarwal, Shourya Bhansali, 'Making a case of Cartelisation.' (SCC Blog, 15 February, 2005) (https://www.scconline.com/blog/post/2021/02/15/cartelisation/), accessed on 16 July 2023.
2. Michael Bromberg, 'Herfindahl-Hirschman Index (HHI) Definition, Formula and Example' (Investopedia, 26 May 2023) (https://www.investopedia.com/terms/h/hhi.asp) accessed on 16 July 2023.
3. ibid.
4. Adam Hayes, 'Descriptive Statistics: Definition, Overview, Types, Example' (Investopedia, 21 March, 2023) (https://www.investopedia.com/terms/d/descriptive_statistics.asp) accessed on 16 July 2023.
5. ibid.
6. Will Kenton, 'Analysis of Variance (ANOVA) Explanation, Formula and Applications' (Investopedia, 12 June, 2023) (https://www.investopedia.com/terms/a/anova.asp) accessed on 16 July 2023.
7. National Institute of Standards and Technology, 'Levene Test for Equality of Variances' (NIST) (https://www.itl.nist.gov/div898/handbook/eda/section3/eda35a.htm) accessed on 16 July 2023.