Price Fixing: Commission investigates Nigerian airlines over ‘coordinated’ increase in domestic fares

*The Federal Competition and Consumer Protection Commission, in conjunction with the Nigerian Civil Aviation Authority, investigates the Airline Operators of Nigeria over the recent distorting, ‘coordinated base or minimum’ airfare of N50,000 across all routes in the West African country

Gbenga Kayode | ConsumerConnect

As part of its statutory responsibility to restore a free and undistorted domestic aviation market in Nigeria, the Federal Competition and Consumer Protection Commission (FCCPC) has enjoined members of the Airline Operators of Nigeria (AON) to discontinue their coordinated N50,000 minimum airfare in the country.

ConsumerConnect reports the regulatory Commission, in conjunction with the Nigerian Civil Aviation Authority (NCAA), has commenced an investigation with respect to this subject capable of distorting operations in the local aviation market.

The regulator stated that AON is “a trade association for domestic airlines under the Federal Competition and Consumer Protection Act, 2018 (FCCPA).”

The Commission noted this measure is pursuant to Sections 17(a),(e),(l),(s),18(3)(a), 107(1)(a), 108, 157 and 158 of the Federal Competition and Consumer Protection Act 2018; Regulation 18.15.2 of the Nigerian Civil Aviation Regulations (Air Transport Economic Regulations) 2015.

Mr. Babatunde Irukera, Executive Vice-Chairman/Chief Executive (EVC/CEO) of FCCPC, said this in a release titled, ‘Interim Statement Regarding Coordinated Increase In Airfares By Certain Scheduled Domestic Airlines Operators’, issued Wednesday, March 2, 2022, in Abuja, FCT.

The regulatory Commission also stated that the FCCPC Sunday, February 20, became aware that domestic airlines purportedly under the aegis of AON, after a series of meetings over a period of three weeks.

It said these included meeting held Thursday, February 17 and Saturday, February 19, in supposedly association meetings discussed multiple industry-wide issues; particularly challenges experienced by AON members.

“Some subjects of the discussions included foreign exchange, cost of ground handling services, rising cost of jet fuel and air fares.

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

“The investigation also confirms that one of the items of discussion during at least one of those meetings was to set base or minimum airfares,” FCCPC said.

The EVC/CEO also stated that the Commission’s understanding from intelligence so far gathered is that there was significant controversy and or an initial lack of consensus with respect to coordinated conduct resulting in setting airfares.

Irukera further said: “The Commission also has 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.

“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.”

According to the Commission, 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.

Some Nigerian Airlines

“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 e-mail that ticket fares were reviewed effective February 18, 2022, with the least fare being N50,000 across all routes,” stated the FCCPC.

The statement also said: “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 initial 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.”

Irukera, however, stressed that the Federal Competition and Consumer Protection Act 2018 prohibits “conduct or any coordination between competitors including on the platform of trade associations.”

He said that the Act 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.”

Coordination in increasing prices (otherwise known as cartel) is an unambiguous infringement of the FCCPA, said he.

The regulator further noted 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.

The Commission stated: “The FCCPA, Civil Aviation Act, and implementing regulations of both legislation 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.”

The FCCPC, however, said that the prevailing law expressly prohibits coordination, agreement or cooperation between competitors in setting fares.

As such, the Commission with the collaboration of the Nigerian Civil Aviation Authority (NCAA) has commenced an investigation with respect to this subject, the FCCPC EVC/CEO noted.

He further stated: “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.”

The Commission, therefore, said in the circumstances and besides engaging the relevant stakeholders entered and dispatched 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 enjoins scheduled domestic airline operators to ensure strict and prompt compliance with the Interim Order pending outcome of the Commission’s investigation,” said Irukera.

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