India’s anti-trust regulator to probe if Air India-Vistara merger hurts competition: Report

The proposed Air India-Vistara merger might not have smooth sailing as previously predicted. The Competition Commission of India (CCI) has issued a show-cause notice to the Tata Group-owned Air India, asking why an investigation should not be conducted into the merger, according to a report in Mint. 

The Tata Group has been given 30 days to respond to the notice by the fair-trade regulator and secure approval for the merger of its airlines without any investigation. 

The publication, quoting a source said, if the CCI is not impressed by the response and launches an investigation, the Tata Group will have to either divest its stake in Vistara or commit to “behavioural guidelines” that will not impact competition in the aviation sector. 

Notably, CCI approval is mandatory for any ‘mergers and acquisitions’ that meet the asset and turnover threshold enshrined under Section 5 of the Competition Act.

The statutory body under the Government of India conducts its homework into any merger in two phases. The first phase involves ascertaining if the merger is likely to cause an adverse effect on the competition in the relevant market or not. The second phase of the investigation is launched when the regulator sees a potential fallout in competition due to a merger.

Tata Group approaches CCI 

The issuance of the show cause notice comes in the backdrop of Tata Group approaching the anti-trust regulator in April. 

“The proposed transaction relates to the consideration of the merger of Tata Singapore Airlines Limited (Vistara) into Air India and the acquisition of shares in the merged entity by Singapore Airlines and Tata Sons,” a notice filed by the Tata Group with CCI said at the time. 

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Despite Air India assuring in the letter that the merger will not lead to any change in the competitive landscape or cause any adverse effect on competition, the regulator fired the show-cause notice anyway. 

Tata Sons currently holds 51 per cent of Vistara while the remaining 49 per cent is owned by Singapore Airlines (SIA). After the proposed merger, SIA will hold a minority stake of 25.1 per cent in the newly-formed entity, 

Air India-Vistara merger 

Tata announced the merger of Air India-Vistara in November last year, in an attempt to take on homegrown domestic aviation market leader IndiGo. 

The low-cost carrier has a market share of more than 60 per cent and it recently placed an order of record 500 A320 planes from French manufacturer Airbus. The multi-billion dollar deal broke the record of the largest-ever number of aircraft ordered by a single airline company, eclipsing that of 470 jets ordered by Air India, earlier this year. 

(With inputs from agencies)