Legal Vacuum Behind Airport Retail Monopolies in India
I. Introduction
Air travel in India has increasingly turned into a luxury rather than a routine mode of travel. Beyond skyrocketing fares, passengers face uncontrolled ‘retail pricing’ inside airports. Once inside, passengers are locked into a captive market where food, beverages, and essentials are sold at three to five times their street price—sometimes higher. This is not just ‘opportunistic overcharging’; it is a systemic problem caused by the way airport retail is structured.
Existing scholarship largely frames this as a consumer problem, but the issue has a deeper corporate governance and regulatory dimension. The airport operators enter into exclusive ‘concession agreements’ with vendors, restricting competition and creating entrenched monopolistic conditions. Regulatory oversight on this matter is splintered: the Airports Economic Regulatory Authority of India (AERA) only regulates aeronautical charges; the Competition Commission of India (CCI) has not yet developed a regulatory approach for captive concession agreements; and the Ministry of Civil Aviation (MoCA) has remained entirely silent on retail pricing. This study aims to explain the mechanism of airport retail pricing, showcasing how exclusive concession agreements lead to monopolistic structures through the lens of corporate governance and competition law. It identifies gaps in the regulatory frameworks provided by MoCA, AERA, and CCI, offers comparative insights from the US, and concludes with suggested reforms suited to the Indian context.
II. Mechanics of Airport Retail Concessions and Pricing
Airports do not run shops directly; instead, they provide exclusive concessionary rights to chosen vendors under long-term agreements. Consequently, the selected vendors gain exclusive rights to manage their outlets, resulting in single-operator dominance in each category (water, food, clothing items, etc.) and enabling unchecked retail price inflation. To operate their outlets, vendors pay rent as Minimum Annual Guarantee (MAG) or revenue share, whichever is higher. MAG is fixed annually, regardless of sales, and is usually very high. This prompts them to make profits at any cost, and the prime strategy employed is the unchecked surge in prices. For instance, in 2006, at Delhi’s Indira Gandhi International Airport, Alpha Future committed to pay a MAG of ₹372 crore for a 39-month duty-free concession. When actual sales projections dramatically went downhill, the vendor requested to reduce the MAG to ₹216 crore, highlighting how such high MAGs can create extreme financial pressure and ultimately contribute to price inflation.
Once the passengers cross security, they cannot access the outside markets and are compelled to make purchases from the airport vendors, making demand inelastic. Airport operators themselves support this high pricing model due to their reliance on non-aeronautical revenues—retail, parking, advertising—to cover operational costs. The combined effect is that both the operators and vendors shake hands to maximise passenger spending and shift their burden of costs onto the passengers. The core argument raised by the vendors to justify the high pricing is the exorbitant rent payable to the airport operators, but that is not the real story; the deeper cause lies in the very design of concession agreements, which pave the way for monopolistic conditions.
III. The Three Pillars of Inaction: MoCA, AERA, and the CCI
MoCA, the apex body for civil aviation, oversees airport infrastructure, PPP frameworks, and issues detailed guidelines across the sector. Despite such a wide regulatory footprint, it has remained silent on the retail pricing inside airports—an area that has the most immediate impact on the vast majority of the passengers. The irony is that MoCA fixes baggage allowances, but not whether water should cost ₹20 or ₹100. Through the Airports Authority of India’s (AAI) PPP leases, MoCA receives a significant revenue share from airport operators. Its silence is not an omission but a policy choice tilted towards revenue maximisation over passenger protection
The AERA, established under the AERA Act of 2008 (AERA Act), regulates aeronautical charges (including landing, parking, navigation, and user development fees), and it is Section 13 of the Act that grants exclusive jurisdiction to AERA in this regard. However, no section in the AERA Act empowers AERA to regulate the non-aeronautical services—retail outlets, food stalls, parking, etc. Additionally, the charter of rights granted to passengers by the Directorate General of Civil Aviation (DGCA) is silent on the matter, and no right to protect the passengers from exploitative high pricing is mentioned in the charter. This results in a split regulatory approach: passengers are protected against airlines overcharging in airfare components, but not against exploitative charging by vendors. Thus, the absence of a regulation creates a pervasive incentive structure; the higher the retail prices, the healthier the operator’s non-aeronautical revenue stream.
The Competition Act 2002 (CCI Act) empowers the CCI to prevent anti-competitive agreements (Section 3) and abuse of dominant position (Section 4) in the market. But it has remained conspicuously aloof in these domains when it comes to airport retail concession agreements. Its inaction is reflected from three angles, firstly, the CCI views airports merely as infrastructure hubs, rather than recognising the downstream retail market within terminals. This definitional flaw prevents a proper antitrust analysis of concession agreements. Secondly, long-term concession agreements foreclosing entire categories of goods inside the airports qualify as exclusive supply and distribution agreements under Section 3(4) of the CCI Act. However, the CCI has not tested them against the appreciable adverse effect on competition (AAEC) standard; instead, it treats them as routine commercial contracts. Thirdly, airport operators are given a statutory monopoly over terminal access. By imposing inflated MAG on vendors, they indirectly compel passengers—who are a captive consumer base—to bear the cost through higher retail prices. This reflects an exploitative practice under Section 4(2)(a)(i) of the CCI Act, which prohibits imposing “unfair or discriminatory” prices on consumers, yet the CCI has failed to examine this dimension of abuse. Indian jurisprudence has already recognised that exclusive agreements and dominance-based exploitation merit scrutiny. In Fx Enterprise Solutions India Pvt. Ltd. v. Hyundai Motor India Ltd. (2017), the CCI analysed exclusive distribution agreements under Section 3(4) of the CCI Act, while in DLF Home Developers Ltd. v. CCI (2014), the then Competition Appellate Tribunal (COMPAT, functions transferred to NCLAT) upheld findings that unfair terms had been imposed on the basis of dominant market power. . The airport concession agreements—foreclosing entire classes of retail from access as well as imposing excessive costs onto a captive consumer in the form of retail prices—clearly fit into this analytical framework, yet remain unexamined.
IV. Comparative Insights from the US
In contrast to India, where the retail pricing inside airports remains largely unregulated, the US has implemented certain measures to ensure fair competition and passenger protection from exploitative retail markets. Rather than leaving pricing to concessionaires, major airport authorities have adopted formal “street-pricing” policies, binding through concession agreements and audits.
The Port Authority of New York & New Jersey, which manages JFK, LaGuardia and Newark airports, issues a Concessionaire Street Pricing Standards & Procedures Manual that caps concession prices at no more than “street price + 10%.” Street price refers to the regular price charged at comparable stores outside the airport, usually within the same city or region. The additional 10% is to cover the high costs of running operations within airports for rent, security, logistics and so on. As an example, a bottle of water that costs $2 in the neighbourhood store outside the airport could not be sold for over $2.20 by a concessionaire that operates inside JFK. Vendors are also required to submit price lists for approval before the authority and undergo periodic compliance checks, and are subject to penalties if they incur any violations.
V. Suggested Reforms for India
- Include Retail Pricing in the AERA Act: Currently, AERA governs only aeronautical charges, and retail does not come within its purview. An amendment outlining express authority to AERA to set price benchmarks and observe compliance with these non-aeronautical services should be enacted to curb exploitative pricing.
- Examination of Exclusive Concessions by CCI: CCI should offer detailed instructions at a sectoral level specifying that extensive, deep-rooted airport concessions fall under both Section 3(4) (exclusive supply agreements) and Section 4 (abuse of dominance) of the CCI Act. There should be a compulsory AAEC assessment for such contracts to restore the competitive equilibrium.
- Mandate Street Pricing in Concession Contracts: MoCA should require that all concession agreements adopt a “street pricing + reasonable markup” formula, as practised in the US, where a 10% markup is typical. This way, passengers are not taken advantage of, and vendors would at least have the opportunity to recoup the very high costs of operation.
- Inclusion in Passenger Rights: The Passenger Charter issued by DGCA should be amended to mandate (a) clear display of maximum retail prices (MRP), (b) compulsory availability of essentials like bottled water at MRP, and (c) a quick grievance redressal mechanism to deal with complaints of overcharging. This small change would bring retail pricing under the garb of enforceable passenger rights
VI. Conclusion
The existence of airport retail monopolies in India is a reflection of both structural and regulatory failure. Exclusive concession agreements at airports create a captive market wherein vendors can charge exorbitant prices. The MoCA, AERA, and the CCI have thus far turned a blind eye to this issue, leaving passengers to suffer without any degree of protection. An international example, such as the street-pricing model used in the US, reveals that proper regulatory mechanisms can achieve fair pricing while still meeting airport revenue objectives. India needs to amend its legal and regulatory framework to provide AERA jurisdiction over non-aeronautical revenues, have the CCI supervise exclusive concession agreements, and require street-pricing as a condition in concession agreements. Until reforms are implemented, Indian airports will remain not just travel gateways, but gateways to unchecked exploitation.
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