Competition Commission issues show cause notice on Air India-Vistara merger

The Competition Commission of India (CCI) has taken action regarding the proposed merger of Tata Group airlines Vistara and Air India by issuing a show cause notice to the parties involved, according to media reports on Tuesday, June 27.

The move comes as the fair trade watchdog seeks to determine whether the merger could potentially harm competition within the marketplace. Vistara and Air India, both full-service carriers, are subsidiaries of the Tata Group, with Singapore Airlines holding a 49 percent stake in Vistara.

The merger plan, announced by Tata Group in November of last year, includes the integration of Vistara with Air India, with Singapore Airlines also acquiring a 25.1 percent stake in Air India.

If approved, the deal would result in a significant consolidation within India's rapidly growing aviation sector. However, concerns have been raised about the potential impact on competition, prompting the CCI to initiate an investigation.

The approval for the proposed merger was submitted to the CCI in April of this year. The involved parties include Tata Sons Pvt Ltd (TSPL), Air India Ltd, Tata SIA Airlines Ltd (TSAL), and Singapore Airlines Ltd.

If the merger is finalised, Air India would become the largest international carrier in the country and the second-largest domestic carrier.

Under competition law, the CCI possesses the authority to conduct a thorough examination of mergers and acquisitions when there are apprehensions about potential anti-competitive practices associated with the deal.

Section 29 of the Competition Act outlines the procedures for investigating combinations, which encompass mergers and acquisitions. It stipulates that if the CCI determines that a combination is likely to result in a significant adverse effect on competition in the relevant Indian market, it must issue a show cause notice to the parties involved, giving them thirty days to respond.

The purpose of this notice is to prompt the parties to provide justifications as to why an investigation into the combination should not be initiated.

Should the responses provided by the parties fail to satisfy the regulator, the process moves to the second stage. In this phase, the parties are required to make the details of the proposed deal public, and comments from stakeholders are invited.

Additionally, the CCI has the authority to request further information from the parties involved before reaching a final decision on the merger.