CCI notifies Rule for levy of Penalty based on Global Turnover, Commitment and Settlement Mechanism [Read Notifications]

The Competition Commission of India (CCI) rolled out three separate key regulations and the much-awaited penalty guidelines, taking a giant step in the implementation of certain crucial amendments effected in the Competition law in April last year.

CCI has now drafted three regulations relating to turnover or income determination, commitment, and settlement processes. The law governing turnover determination is projected to have a significant impact on multi-product firms and those with global operations.

The CCI’s penalty guidelines would provide parties with clarity on the principles that the competition watchdog would apply when penalising any violations of the Competition Act. Experts believe it will provide stability and confidence to the CCI’s ideas. Interestingly, the penalty criteria were developed without public consultation.

Penalty Guidelines

One of the Tax Professional stated that the penalty criteria are especially significant given that the CCI has the authority to impose a penalty based on a company’s global turnover.

“Although the guidelines are non-binding, the CCI must consider them while Imposing sanctions and providing explanations for deviating from them. It is particularly encouraging to see the Commission acknowledge the establishment of a competition compliance program as a mitigating element in penalty computation,” he stated.

While it would have been ideal if such a significant set of rules had been developed after extensive consultation, it is envisaged that the CCI will constantly fine-tune the standards in response to challenges encountered during implementation, he added.

Another tax professional the penalty guidelines include both aggravating and mitigating factors, as well as a comprehensive methodology to be considered/adopted by the CCI when imposing penalties on contravening enterprises/individuals for violating Competition Act provisions such as enforcement and combinations.

Multiple Checks

This will help the CCI establish uniformity in deciding sanctions and add transparency and predictability to its decision-making process.

“This will also bring a lot of certainty to the stakeholders as it will ensure numerous checks on the penalty from being disproportionate and also assist in risk assessment at the outset”, he added.

To avoid harsh fines, corporations under investigation, particularly Big Techs, would be urged to use the settlements or commitments mechanism in abuse/vertical restraint instances, or leniency in cartel investigations, analysts added.

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