Etihad slapped Rs1 crore fine by CCI

Fair trade regulator Competition Commission of India (CCI) has slapped a Rs1 crore fine on Abu Dhabi's Etihad Airways for implementation of a part of its $900-million deal with Jet Airways even before getting CCI's nod.

The deal, announced on 24 April, comprised four major components: equity in airline for $379 million; equity in Jet's frequent flyers programme for $150 million; sale and lease-back of three slots at Heathrow for $70 million and $300 million for debt financing.

The company, however, purchased Heathrow slots on 26 February leasing them back to Jet well before the announcement of the commercial agreement and the process of obtaining clearance got under way. According to CCI sources, the carrier had been fined under section 43 of the Competition Act for "consummating parts of a deal without approval of CCI".

The deal was mired in controversy as the aviation ministry gave away additional flying right of 37,000 seats (spread over three years) to Abu Dhabi on 24 April.

The Rs2,060 crore deal has had a troubled trajectory ever since its announcement in April.

The Competition Appellate Tribunal (COMPAT) issued notices to the Competition Commission of India (CCI) and Jet on a plea challenging the clearance by the competition watchdog.

The penalty would not impact approval for the deal given by CCI last month. According to the competition regulator, it kept the quantum of fine low at Rs1 crore following Jet and Etihad contending that they were not aware of the requirement for certain disclosures.

In his dissenting note, however, CCI member Anurag Goel said the fine should be Rs10 crore.

The fine of Rs1 crore related to pacts entered into between the two carriers on 26 February for sale of three landing/take-off slots of Jet at London Heathrow Airport to Etihad (LHR transaction) and also included the lease of the same slots back to Jet.

Keeping in view the facts and circumstances, the Commission said it was imposing a penalty of Rs1 crore on Etihad, which according to the regulator, had the obligation to give notice to it regarding the deal. The fine is to be paid by the company within 60 days. According to the regulator, the parties made disclosure of all the agreements entered into between them, including LHR transaction and CCA (Commercial Cooperation Agreement).

Making a note that apparently, there had been no effort by the parties to conceal the transactions, the CCI observed the parties' contention was that they were under an impression that LHR was an independent transaction.

''This contention has not found favour with this Commission but the fact remains that the party was under an impression, though wrongly, that LHR transaction was an independent transaction and the party consummated LHR transaction,'' the order said.