Impact of the new provision

The 2023 Bill provides that, for the purposes of Section 27 of the Act, “turnover” means global turnover derived from all products and services by an enterprise or person. This amendment was brought in quite late in the day and was not discussed by the Parliamentary Committee tasked with scrutinising the 2023 Bill. There was also no debate in Parliament on this or any other amendment.

The amendment effectively overturns the Supreme Court’s position in the Excel Crop Care case, by allowing the CCI to impose penalties based on all products and services. It then goes one step further to include global turnover.

The amendment is likely to impact multi-product companies and those with a global presence more significantly than purely domestic players, which could also lead to unfair outcomes and discrimination between domestic companies and entities with global operations (as it would include export turnover or turnover otherwise having no nexus with India).

The key worry is that the CCI will need to exercise care in imposing penalties so as to ensure they are not disproportionate to the nature and scope of the infringement.

Big Tech companies, among others, seem to be the main targets of this new provision, which appears to be aimed at companies that may have limited reported Indian revenues. It is perhaps intended to force such companies to consider the proposed settlements and commitments mechanism, instead of being rapped with big penalties.

However, it is questionable whether the new provisions will ‘put manners’ on them, as it is anticipated that given the delays in the Indian appellate system, they would prefer to challenge any poorly reasoned order on the penalty aspects, instead of compromising early on.

Way forward

This makes the penalty guidelines to be introduced by the CCI all the more relevant. These have long been the need of the hour, and the Supreme Court in the Excel Crop Care case specifically noted their absence.

Such guidelines are the norm in mature competition jurisdictions (for example in the European Union and the UK, which rely on ‘relevant’ or ‘affected’ turnover in their guidelines) to reduce arbitrariness and discretion while applying penalties.

We hope that the CCI will build on the principle of proportionality, and a balanced approach, in these guidelines and their application. A failure to do so could result in litigation, raising the issues seen in the Excel Crop Care case, and even risk striking down this expansion for being unconstitutional.

This article was originally published in Money Control on 12 April 2023 Co-written by: Shweta Shroff Chopra, Partner; Aman Singh Sethi, Partner. Click here for original article

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