The Ministry of Corporate Affairs has notified the provisions in the Competition (Amendment) Act, 2023 to empower the regulator to levy a penalty based on a company's global turnover. This is expected to give the Competition Commission of India (CCI) significant teeth to take on multinational companies and Big Tech firms found to be engaging in anti-competitive behavior.
"The provisions of sections 20, 35, and 40 of the said Act shall come into force on the 6th day of March, 2024, as the Central Government hereby appoints," the MCA stated in a statement.
The new clause allows the CCI to assess penalties based on a company's worldwide turnover, which implies that the fine amount may be significantly greater. In the past, the CCI had the authority to fine people according to the relevant domestic entity's turnover. In situations when a dominant position is abused, the punishment could be as much as 10% of the turnover. If a cartel was found, the fine may be up to three times the profit for each year the agreement was in place, or 10% of the turnover.
But until the Supreme Court's 2017 decision in the Excel Corp case, the CCI had the authority to impose fines according to the firm's global turnover.
According to experts, the notification is expected to have significant effects on companies that offer multiple products and those that operate globally. It may also result in unfair and discriminatory outcomes between domestic companies and those that operate globally, as well as between companies that offer multiple products and those that only offer one.
As per Vaibhav Choukse, Partner and Head of Competition Law at JSA Advocates and Solicitors, "the amendment would encourage companies under investigation, especially Big Techs, to opt for, the settlements or commitments mechanism in abuse/vertical restraint cases or, leniency in cartel cases, in order to avoid steep penalties."
In order to give clarity on the process for calculating penalties, the amendment also mandates that the CCI publish comprehensive penalty guidelines. According to him, these rules should be released shortly. It is anticipated that the guidelines will include a step-by-step procedure for determining a penalty amount and must take into consideration the proportionality criterion established by the Supreme Court in the Excel Corp Case in order to prevent unclear or unfair penalty imposition.
