Competition Bill may propose levying penalty on firms' global turnover

The government will likely tweak the Competition Amendment Bill 2022 to propose that penalties on companies be calculated as a percentage of their global turnover instead of the current practice of levying it on their turnover within the country, it is learnt.

Further alterations to the Bill, which is likely to be introduced in the parliament soon, include a change in the definition of turnover for the purpose of penalties as global turnover derived from all products and services sold by a person or an enterprise, according to sources.

This would mean much larger penalties would be imposed than what is currently levied by the Competition Commission of India (CCI).

At present, penalties can rise up to 10 per cent of a firm’s turnover, which is limited to the national figure and also the product or service in question. For instance, the penalty on Google for anticompetitive practices in the Android mobile device ecosystem was calculated as a percentage of its Indian revenue from Android.

The government has rejected several suggestions made by the parliamentary standing committee for changes in the Bill, including increasing the proposed time limit of 150 days for approving merger applications. It has, however, increased the time limit of prima facie investigation for the merger deal from the proposed 20 days to 30 days.

Changes in the Bill

• Merger timeline reduced to 150 days
• 30 days time for prima facie investigation of merger deals
• IPR is not a defence against charge of abuse of dominant position
• Effects-based test for anti-competitive behaviour rejected  

The standing committee was also against shortening merger review timelines as it could be burdensome for an already understaffed commission.

The government has also not agreed to bring in an effects-based analysis for assessing abuse of dominance or to allow intellectual property rights as a defence in the competition law.

The panel had said that the Ministry of Corporate Affairs had not put forth any strong argument to support its suggestion that IPR could not be used as a defence against abuse of dominant position.

It said, “... it would be more desirable for CCI to specifically take into consideration the rights that a party may have in relation to reasonable exercise of its IPR when dealing with abuse of dominance cases to avoid uncertainty.”

The Jayant Sinha led panel had asked the CCI to study different factors such as impact on consumers, innovation, and competition before deciding whether conduct had violated the competition law. The suggestion, it is learnt, has not been accepted by the government.

The suggestion to allow cartels to opt for the settlement scheme is also likely to be introduced in the Bill.

The standing committee had also raised concerns that the Bill does not specify what constitutes active participation as it could also include entities providing intermediate services such as digital platforms or an industry association organising meetings without agenda to share sensitive information.

The committee, therefore, suggested the insertion of the line “if it is proved that such person intended to actively participate” in the clause.