The Competition Commission of India (CCI) has issued a show-cause notice to Tata Group-owned Air India, asking why it should not investigate its proposal to Vistara.
Tata Group has 30 days to respond to the CCI order and receive approval for the merger without an investigation, reported LiveMint.
If the fair-trade regulator is unsatisfied with the response and decides to launch an investigation, the Tata Group can either divest its stake in Vistara or commit to “behavioural guidelines” that will not severely impact competition in the aviation industry, according to the report citing a person familiar with the matter.
In April, the Tatas approached CCI for the merger of Air India and full-service airline Vistara, a joint venture with Singapore Airlines (SIA). While Tata Sons holds 51 per cent of Vistara, the remaining 49 per cent is owned by Singapore Airlines.
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After the merger, SIA will be holding a minority stake of 25.1 per cent in the entity.
Under Section 5 of the Competition Act, mergers and acquisitions of businesses that meet the asset and turnover thresholds require CCI approval.
CCI reviews mergers and proposals through two phases of investigation. Under the Phase-1 of the investigation, it is mandatory to form a prima facie opinion on whether a merger is likely to cause or has caused adverse effects on competition in a relevant market in India.
The Phase-2 investigation is pursued when the regulator sees potential fallout on competition due to a merger.
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Tata Group in a filing said the merger will not lead to a change in the competitive landscape or cause any adverse effect on competition in India, according to LiveMint report.
Earlier this month, CCI approved the acquisition of the entire shareholding of Air Asia India Ltd by Air India Ltd.
Air Asia India is a joint venture between TSPL and Air Asia Investment Limited (AAIL), with TSPL currently holding 83.67 per cent and AAIL holding a 16.33 per cent stake.
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