You fixed air fares, you ‘re a cartel, FCCPC tells airlines, says action violates regulations

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Amid insistence by airline operators under the aegis of Airline Operators of Nigeria (AON) that they did not fix N50, 000 base fares for a one-way ticket, the Federal Competition and Consumer Protection Commission (FCCPC) has indeed attributed the action of the carriers to price-fixing, saying detailed investigations by the commission showed glaringly that the airlines did so.

Executive Vice Chairman/Chief Executive FCCPC, Mr. Babatunde Irukera in a press release entitled, “Coordinated increase in airfares by certain scheduled domestic airline operators made available to Aviation Metric said the FCCPA prohibits conduct or any coordination between competitors including on the platform of trade associations.

According to Irukera, “Specifically, Section 107 (1)(a) forbids competitors from fixing prices, and Section 108 prohibits any conspiracy, combination, agreement or arrangement between competitors in any manner that unduly restrains or injures competition”.

He further stated that coordination in increasing prices (otherwise known as a cartel) is an unambiguous infringement of the FCCPA, stressing that the current and prevailing Nigerian Civil Aviation Regulations (Air Transport Economic Regulations) in regulation 18.15.2 (i) and (iii) expressly prohibits airlines from engaging in any contract, arrangement, understanding, conspiracy or combination in restraint of competition which includes directly or indirectly fixing a charge, fee, rate, fare or tariff and any collusive action.

According to him, “The FCCPA, Civil Aviation Act and implementing regulations of both legislations respect the right and prerogative of airlines (as other businesses) to set their fares independently subject to, and in accordance with prevailing law and applicable processes. However, prevailing law expressly prohibits coordination, agreement or cooperation between competitors in setting fares”.

He noted that as such, the Commission with the collaboration of the Nigerian Civil Aviation Authority (NCAA) has commenced an investigation with respect to this subject.

He further stated that although the investigation is at early stages, there is sufficient probable cause to proceed and also provide interim measures to restore a free and undistorted domestic aviation market.

“In the circumstances,  the Commission is in addition to engaging the relevant stakeholders entering and dispatching interim orders under Sections 17(a),(e),(l),(s),18(3)(a), 157 and 158 of the FCCPA prohibiting the performance or continuation of any agreement or arrangement associated with, or resulting from discussions, deliberations, debates, argument or resolutions of/at any meeting of the AON or its members regarding any increase in airfares and or any conduct not necessarily directly in compliance, but in response to changes in the market on account of a compliance by others”.

The commission’s boss explained that the FCCPC became aware that domestic airlines purportedly under the aegis of the Airline under the Federal Competition and Consumer Protection Act, 2018 (FCCPA)) after a series of meetings over a period of three weeks including on Thursday, February 17, 2022, and Saturday, February 19, 2022, in supposedly association meetings discussed multiple industry-wide issues; particularly challenges experienced by AON members.

Some subjects of the discussions he stated included foreign exchange, cost of ground handling services, the rising cost of jet fuel and airfares.

The Commission’s preliminary investigation, he noted disclosed the meeting dates of AON to have been on or about February 8, February 17, and February 23, 2022.

The investigation he reiterated also confirmed that one of the items of discussion during at least one of those meetings was to set base or minimum airfares, hinting that the commission’s understanding from intelligence so far gathered was that there was significant controversy and or an initial lack of consensus with respect to coordinated conduct resulting in setting airfares.

Irukera averred that the Commission also had credible information that while attendees at the meeting may not have arrived at a consensus, the meeting ended in a resolution that encouraged, permitted or consented to the coordinated conduct.

He said, “The Commission’s understanding from the deliberations at the meeting is that the attendees engaged in mutual discussions and exchange of their respective revenue management models or other commercially sensitive information”.

“In furtherance of the discussions and or resolution at the meeting, certain champions of the coordinated conduct of imposing a base fare or a Minimum Re-Sale Price (MRSP) for their services in a coordinated and contemporaneous manner proceeded to increase their fares to a minimum of N50,000 across all sectors”.

“Specifically, Air Peace, Azman Air, and United Nigeria Airlines immediately proceeded with the increase. Arik followed.

“ However, on Friday, February 18, 2022, at 6:31 p.m. Aero Contractors informed its trade partners (travel agents) and its commercial executive team by email that ticket fares were reviewed effective February 18, 2022, with the least fare being N50,000 across all routes. Aero Contractors noted in this communication that all other airlines have effected same increase”.

“Within days, Max Air also increased fares to the same minimum N50,000. Ibom Air and Dana approximately 48 hours after what appears to be the initially coordinated conduct, also increased fares although not to the purported N50,000 minimum.

“Green Africa Airlines maintained its existing fares between N33,000 and N38,650 but has progressively increased its fares rising to approximately N47,000 on its Lagos-Abuja route on Wednesday, February 23, 2022”, he added.

Wole Shadare