NEW DELHI: The government on Wednesday notified amendments in competition laws allowing the Competition Commission of India (CCI) to impose penalty on the global turnover of a company.
Earlier, CCI could levy a penalty only on the sales of the particular business segment that was in question.
“In exercise of the powers conferred by sub-section (2) of section 1 of the Competition (Amendment) Act, 2023 (9 of 2023), the Central Government hereby appoints the 6th day of March, 2024 as the date on which the provisions of sections 20, 35 and 40 of the said Act shall come into force,” a government notification said.
It empowers CCI to impose a penalty on the global turnover of a company derived from all the products and services, and not just on turnover derived from the product under investigation, said Vaibhav Choukse, partner and head of Competition Law at JSA Advocates and Solicitors.
According to experts, the new rules will impact big tech companies having multiple business verticals. “To avoid steep penalties, the amendment would encourage companies under investigation, especially Big Techs, to opt for, the settlements or commitments mechanism in abuse/ vertical restraint cases or, leniency in cartel cases,” Choukse said.
The amendment also requires the CCI to publish detailed penalty guidelines to provide clarity regarding the methodology for computing penalties, which is also expected to be published soon, he said.
“To avoid ambiguous/unfair imposition of penalties, it is expected that the guidelines will provide a step-wise process for arriving at a penalty amount, and must take into account the principle of proportionality,” he added.
Commenting on the CCI’s guidelines, he said it provides for both, aggravating and mitigating factors and comprehensive methodology to be adopted by the commission while imposing penalties on contravening enterprises or individuals for violating provisions of the Competition Act.
As a first step, the CCI will calculate the penalty which can be up to 30% of the average relevant turnover or income, subject to the legal maximum. In the next step, the said penalty will be adjusted basis the aggravating and mitigating factors listed in the guidelines, subject to legal maximum.
The guidelines clarify that in cases where the determination of 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.
“This will aid the CCI in having consistency in determining penalties and bring transparency and certainty to its decision-making process. This will also bring a lot of certainty to the stakeholders as it will ensure multiple checks on the penalty from being disproportionate and also assist is risk assessment at the outset,” Choukse said.
