Key changes in India's new penalty guidelines and turnover regulations under the Indian Competition Act

Competition Act, 2002, which was amended in April 2023 vide Competition (Amendment) Act, 2023 (“Competition Act”) provides for penalties with respect to anti-competitive agreements, abuse of dominance and also regulates combinations and mergers having appreciable adverse effect on competition in India.

Vide notification dated 05 March 2024, the Government of India, further, notified and brought into force amendments to Sections 27(b), 48, 48A, 48B and 48C of the Competition Act.

In pursuance of which, the CCI (on 6 March 2024) issued Competition Commission of India (Determination of Turnover or Income) Regulations, 2024 (“Turnover Regulations”) and Competition Commission of India (Determination of Monetary Penalty) Guidelines, 2024 (“Penalty Guidelines”).

With the help of some key questions and answers, we explain the amendments to sections on Turnover Regulations and Penalty Guidelines.

What is the nature of penalty that can be imposed on a company/ enterprise for breach of behavioural provisions of the Competition Act?

Section 27(b) of the Competition Act, empowers the CCI to impose penalties on person or enterprise – found in contravention of section 3 or section 4 of the Competition Act.

Vide notification dated 05 March 2024, the Government of India, further, notified and brought into force amended Section 27(b) of the Competition Act – which adds the word “income” in the section.

Further, the amended section 27(b) now provides explanation stating that ‘turnover’ for the purpose of imposing penalty under Section 27(b) of the Competition Act shall mean ‘global turnover’ derived from all the products and services by an enterprise.

Furthermore, the proviso to section 27(b) also mentions that in the cases of cartelisation, the CCI may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or 10% of its turnover or income, as the case may be, for each year of the continuance of such agreement, whichever is higher.

In terms of the Turnover Regulations ‘turnover’ or ‘income’, as the case may be, includes value of sales (or revenue or receipts, and other operating revenue, as per the audited financial statements maintained by such enterprise.

While calculating the ‘turnover’ other income, indirect taxes, trade discounts and intra- group sales, if any, shall not be taken into consideration.

How will CCI determine turnover or income when audited financial statements are unavailable?

In case audited financial statements are not available, turnover or income or relevant turnover or any other financial information, as sought by the CCI, shall be the amount certified by the statutory auditor of the enterprise, or in his absence by a chartered accountant, and supported by an affidavit by a person duly authorised by the enterprise in this regard.

How will profit be calculated?

In order to calculate the profit of an enterprise, the CCI shall consider profit after tax.

What is relevant turnover?

The Penalty Guidelines define “relevant turnover” to mean, ‘the turnover derived by an enterprise directly or indirectly from the sale of products and/or provision of services, to which the contravention relates and determined for the purposes of imposition of penalty’.

Can CCI consider relevant turnover or global turnover for imposing penalty?

In terms of the Penalty Guidelines, the CCI may impose a penalty on an amount up to 30% of the average relevant turnover or average income, as the case may be, of the enterprise for the purpose of determination of penalty to be imposed on an enterprise under Section 27(b) of the Competition Act.