Apple trying to block probe, CCI tells Delhi HC in global turnover dispute

The Delhi High Court issued notices to the CCI and the Centre to respond to Apple's plea challenging rules that allow penalties on a company's global turnover

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The Competition Commission of India (CCI) on Monday told the Delhi High Court that global tech giant Apple is trying to scuttle the probe against it by challenging the rules allowing penalties on the global turnover of companies, reported Bar and Bench.

 

The regulator made the submission to a Division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela during the hearing of Apple’s petition challenging provisions that enable the antitrust regulator to impose penalties on a global turnover basis.

 

“The object of this is the global turnover concept has been taken in those circumstances where you don’t have a base in India, how do you punish them?” asked Senior Advocate Balbir Singh, appearing for the CCI.

 

“Apple has approached the court at this time to scuttle the proceedings before the CCI,” he added.

 

The court also issued notice to the Centre and the CCI to file their responses in a week. The next hearing is scheduled to take place on December 16.

 

What’s the case?

In its plea, the California-headquartered technology major has contested amendments introduced in 2023 to Section 27(b) of the Competition Act, as well as the CCI’s 2024 guidelines on determining monetary penalties.

 

Under Section 27(b), the CCI may impose financial penalties of up to 10 per cent of the average turnover or income of the preceding three financial years if an enterprise or a group is found to have abused its dominant position or engaged in anti-competitive practices.

 

The guidelines passed last year broadened the explanation for the section, making clear that “turnover” would be interpreted as “global turnover”, significantly expanding the potential financial exposure of multinational corporations operating in India.

 

“Where the determination of relevant turnover is not feasible..., the Commission may consider the global turnover, derived from all products and services, for the purpose of determination of the amount of penalty,” the CCI guidelines say.

 

Apple, in its petition, has argued that the clause is “arbitrary”, and has also disputed its retrospective application, saying the CCI had in March directed the company to furnish audited financial statements for financial years 2022, 2023 and 2024. It stated that the provisions could expose it to a penalty of nearly $38 billion.

 

Senior Advocate Abhishek Manu Singhvi, appearing for Apple, said that the penalty imposed, considering the global turnover, will have a “humongous effect” on the company.

 

“The idea is usually, in a market, there are multi-product companies and the companies may have a dominant position with respect to product A. Usually, you can be penalised with respect to that product. If the sale is ₹100, you can be penalised a portion of that. That will be affected for turnover across Indian but never for global turnover. My turnover in England does not affect turnover in India. My case here starts in 2021. This amendment is made effective from March 6, 2024. The effect is humongous,” Singhvi said, as quoted by Bar and Bench.

 

What did the court say?

Upon hearing the submission, the Bench asked the CCI to explain the rationale behind imposing penalties on global turnover.

 

“Please tell us, prima facie, if the CCI initiates proceedings in relation to one product. How can you take into account turnover with respect to other products? Does it not appear very unreasonable to include other products?” the court asked.

 

What did the CCI say?

 

In response, CCI’s counsel said that at times there are entities with no turnover in India, and the provisions have been introduced to bring them under the scope of antitrust regulations.

 

“There was a shortfall in law and the object of this is the global turnover concept has been taken into account in those circumstances where you don’t have a base in India, how do you punish them? We are following the relevant turnover concept, but the global turnover concept is for a very different reason where you don’t have a presence in India,” Singh said.