CCI Can Now Levy Penalty On Global Turnover Of Offenders

The Ministry of Corporate Affairs notified the Competition Commission of India on Wednesday of the amendments to competition law that will empower the Competition Commission of India to levy penalties on the global turnover of companies.

The amendment will allow the CCI to impose a penalty on the turnover of a company derived from all products and services across the table.

In substance, the imposition of penalties won't be limited to the product or service under investigation derived from doing business in India.

The amendment is set to come into effect on March 6.

What is most important to note is that what is prescribed in the act is a cap and not a basis for calculating penalties, Yaman Verma, partner at Shardul Amarchand Mangaldas, told NDTV Profit.

Verma added that if this is applied genuinely in all cases, then the penalty can still be proportionally calculated on the basis of the relevant turnover, and this in turn can be compared with the global turnover to fall in line with the Supreme Court's 2017 ruling.

In 2017, the Supreme Court pointed out that while the objective of the Act is to stop anti-competitive practices and punish the perpetrators, penalties cannot be disproportionate. It thus limited the scope of penalties to the relevant turnover.

Last year, an amendment regarding the calculation of penalties for entering into anti-competitive agreements was introduced in the Competition Act.

Prior to the enactment of this amendment, the CCI assessed penalties based on a company's revenue generated in India from the particular good or service that was the subject of the investigation, or what in common parlance is known as “relevant turnover.”

It is interesting to note that last year, the competition regulator came out with regulations pertaining to voluntary commitments and settlements.

Under these regulations, a company under the lens of CCI's investigation can choose to make voluntary commitments to change its business practices or it can choose to settle with the regulator, resulting in reduced penalties.

This is clearly a carrot-and-stick policy, Aman Singh Sethi, partner at Shardul Amarchand Mangaldas, said.

The carrot is the settlement and commitment provisions and the stick is the global turnover penalties along with the pre-deposit requirement. CCI has done a laudatory job to implement this in a manner that will lead to faster market correction, Sethi added.