Initial penalties on cos won't be on global turnover: CCI's new guidelines

While determining monetary penalties, the Competition Commission of India (CCI) will reckon on factors such as how long the rules were violated, whether the offence has been repeated, and the extent of cooperation by the company, the latest guidelines issued by the antitrust watchdog on Wednesday said.

The penalty for anti-competitive practices will not initially be imposed on global and total turnover but adjusted over the penalty calculated on the relevant turnover of the company.

The guidelines, issued without public consultation, follow the Ministry of Corporate Affairs’ notification that empowers the CCI to impose penalties on the global turnover of a company and not just the one derived from the product or service under investigation.

The CCI guidelines say it will calculate the penalty up to 30 per cent of the average relevant turnover, based on the nature and gravity of the contravention. It will, however, adjust this penalty up to the maximum, which, according to the new law, can, based on various factors, go up to 10 per cent of the company’s global turnover. For instance, the role of the enterprise in orchestrating the contravening conduct and the duration of such contravention will be taken into account. 

The CCI, at the same time, has introduced several mitigating circumstances. It will, for instance, take into account whether a competition compliance programme has been implemented within the enterprise or there is cogent evidence establishing that its involvement in the contravention is substantially limited.

The CCI will take note of the extent of cooperation by the enterprise during the director general’s investigation in adjusting the penalty along with the voluntary termination of alleged anti-competitive conduct.

Some experts said after approval by the authority concerned, the draft formulation and the explanatory note must be placed on the ministry’s website for at least 30 days. “In a departure from past practice, the CCI has not floated the guidelines for public consultation. This is despite the MCA’s policy on pre-legislative consultation and comprehensive review of existing rules and regulations prescribed under the law which came into effect on January 1,” a competition law expert said.

The guidelines and the notification will come into effect on March 6.

“To avoid steep penalties, the amendment would encourage companies under investigation, especially Big Techs, to opt for settlements or the commitment mechanism,” said Vaibhav Choukse, partner and head of competition law, JSA Advocates and Solicitors. 

The guidelines also state in cases where the determination of relevant turnover is not feasible, the CCI may consider the global turnover, derived from all products and services.

Experts say the move will have implications for multi-product companies and those with global operations, and might lead to unfair and discriminatory outcomes (between them and domestic companies).

The amendment empowers the CCI to “impose such penalty, as it may deem fit, which shall be not more than 10 per cent of the average of the turnover or income”. The amendment Act defines “turnover” as global turnover. 

“The amendments fortify the apparatus for redress, specifically in the realm of compensation recovery for losses arising from contraventions. The overarching objective is to bolster the efficacy of competitive practice enforcement and engender an equitable milieu for commercial endeavour,” said Jidesh Kumar, managing partner, King Stubb & Kasiva, Advocates and Attorneys.

Turnover and settlement & commitment regulations notified

The Commission has also brought in Settlement and Commitment regulations for cases involving anti-competitive vertical agreements and abuse of dominant position, except cartelisation, at different stages of investigation.

“This will enhance CCI’s regulatory process, including swifter market corrections, especially in fast changing digital markets. It will also fast track case resolutions, without compromising on quality, ensuring efficient investigation and resolution. Further, this will benefit the company under investigation by expediting the resolution of disputes with regulators,” Choukse added.