CCI's powers to penalise on global turnover basis to deter anti-competitive ways

The competition law provision to impose penalties based on a company's global turnover will act as a deterrent to more egregious violations, encourage entities to opt for commitments and settlements and help in faster corrective measures, according to experts.

With the amendments coming into force, the Competition Commission of India (CCI) now has the power to impose a penalty of up to 10 per cent of a company's global turnover for competition law violations.

The provision could have a larger impact on companies having multi-products or multi-services and also assumes significance as cases related to digital markets are being probed by the CCI.

The watchdog will have the discretion on whether to impose penalties based on the global turnover or on the relevant turnover of a particular company that has violated competition norms.

The penalty can also be up to 30 per cent of the average relevant turnover/ income, subject to the legal maximum, which is 10 per cent of the global turnover.

In cases where the determination of the relevant turnover is not feasible, the CCI will have the discretion to consider the global turnover of the company (derived from all products and services) for the determination of the penalty amount.

Avaantika Kakkar, Partner (Head - Competition Law) at leading law firm Cyril Amarchand Mangaldas, said the calculation of penalty based on global turnover is intended as a deterrent to more egregious violations of competition law.

The CCI's penalty guidelines clearly incorporate aspects of proportionality and reasonableness in that they refer to the relevant turnover or income of enterprises for the purposes of imposing penalties. This is in line with the guidance from the Supreme Court of India, she noted.

Vaibhav Choukse, Partner and Head of Competition Law at JSA Advocates and Solicitors, said the provision allowing imposing a penalty of up to 10 per cent of the global turnover draws its inspiration from the provision that is in force in the European Union.

With the new norms, the penalty that could be imposed for violations could be higher. As a result, companies and individuals are encouraged to opt for commitment and settlement options or leniency, Choukse said.

"Big tech players and companies having multi-products and multi-services will be impacted more, in case the CCI decides to impose penalties for competition law violations," he said and highlighted that overall, the provision pertaining to penalties based on the global turnover of a company will act as a deterrent and help curb anti-competitive practices.

Earlier this week, the corporate affairs ministry notified the provisions related to the calculation of penalty based on the global turnover of a company as well as on settlement and commitment.

Kakkar also stressed that the competition ecosystem will be robust based on robust enforcement of the law and added that the regulator was always well-empowered in this regard.

"Amendments are perhaps a step forward towards evidencing institutional commitment to free and fair competition in India." In the context of the latest amendments, she said the impact on digital markets and alleged violations by big techs would be at par with the impact across other markets where violations of the law occur. This law is not intended to target any single sector over others, she added.

On the CCI's penalty guidelines, Choukse said it provides for both aggravating and mitigating factors and the comprehensive methodology to be considered while imposing penalties.

According to him, since there is no mention of the transition process, with respect to the implementation of the new norms, it is yet to be clear whether the amended norms will be applicable to ongoing cases as well.

Alay Razvi, Partner at law firm Accord Juris LLP, said the amendment, which will allow penalties to be calculated on a company's global turnover, will help in faster corrective measures to ensure fair competition.

Commitments and settlements can be offered for cases involving anti-competitive vertical agreements and abuse of dominant position, except cartelisation, at different stages of investigation.

With respect to the provisions related to commitments and settlements, Choukse said it will enhance the CCI's regulatory process, including swifter market corrections, especially in fast-changing digital markets.

In both commitment and settlement under the competition law, entities will not be required to admit their guilt, if any. There is also no option for appeal.