Retrospective fine? Experts seek clarity on CCI rule on global turnover

MCA notification dated March 5 empowers the Commission to impose penalty on global turnover of a company and not just the turnover derived from the product or service under investigation

The Competition Amendment Act’s latest provision for calculating penalties based on global turnover is likely to be applicable on the ongoing Competition Commission of India (CCI) investigations, including in various Big Tech cases awaiting final orders. However, experts say there is a need for clarification on whether this law applies to new complaints or the ongoing investigations.

“The Ministry of Corporate Affairs (MCA) notification (regarding global turnover for penalty calculation) is an explanation to Section 27 of the principal Act. It deals with the type of orders that the CCI can pass. It would mean trouble for companies as in cases where order is not yet passed, the penalty can go up to 10 per cent of global turnover,” an official source said. 

The notification, dated March 5, empowers the Commission to impose penalties on a company’s global turnover, not just the turnover derived from the product or service under investigation.  “The 2023 Amendment to Section 27 uses the term ‘substituted’, which implies that the global turnover provision will have a retrospective operation. Courts have offered views both for and against. If the intent is to substitute, it would apply to existing proceedings as well. A clarification will be necessary to avoid any negative ramifications,” said Prashanth Shivadass, partner, Shivadass & Shivadass Law Chambers. 

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

“The CCI has not given transitional provision in its guidelines. Lot of cases that are pending for final hearing could use this provision. But the CCI would need to clarify so that there is no doubt,” said Vaibhav Choukse, partner and head of Competition Law, JSA Advocates and Solicitors. 

Industry, it is learnt, has also raised concerns around the discriminatory treatment with respect to penalty between domestic and global companies as well as multi-product versus single-product firms. 

The CCI would also consider the extent of cooperation by the enterprise during the director general’s investigation in adjusting the penalty amount along with voluntary termination of alleged anti-competitive conduct, under intimation to the CCI.

• MCA notification allows CCI to levy penalties based on a company’s global turnover, not just turnover related to the investigated product or service
• The term "substituted" in the Amendment suggests retrospective application, prompting differing views
• CCI norms allow penalties of up to 30% of relevant turnover, but new law permits fine of up to 10%
• Absence of transitional provisions in guidelines calls for the need for clarity