This tweak is likely to be part of the Competition Amendment Bill, which will be taken up by Parliament in its ongoing session.
The Centre is also planning to make compensation claims applicable even to violations resolved under the ‘settlement scheme’, the people cited above added.
Currently, the Competition Commission of India (CCI) imposes a penalty up to 10% of a company’s average turnover in the relevant market. The government may tweak this by changing the definition of average turnover by adding an explanation that it means the “global turnover derived from all products and services by a person or an enterprise” through activities out of India, the people said.
To understand the change, consider that an Indian automaker has been found guilty of anticompetitive practices in the passenger car segment. Until now, turnover used to mean the revenue generated by the company through the sale of passenger cars in India. But if the proposed tweak is passed, the turnover would mean the total turnover of the company, including that generated in other segments where it has businesses, like say truck or two-wheeler manufacturing. The new turnover would also include proceeds from exports.
“The move would have a major impact on companies from sectors such as auto, pharma and paints,” said a person cited above. “Also, digital companies which provide a wide array of services, if they are found to be monopolising in one segment, the fine will be considered on the total entity turnover.”
According to legal experts, through these tweaks, the government is planning to revert to the original definition of turnover in the Competition Act, 2002. The concept of considering only the relevant market turnover by the CCI happened due to a judgement by the Supreme Court in the case related to Excel Corp. In this case, the apex court held that the “relevant turnover” and the “principle of proportionality” must be considered while imposing penalties.”Currently, the CCI can only impose a penalty on the entity’s turnover pertaining to products/ services that have been affected by such contravention,” said Vaibhav Choukse, partner at law firm J Sagar Associates. “After the amendment, the CCI will have the power to impose a penalty on the overall turnover of the contravening party irrespective of whether the contravention was found only for a particular product/service.”
He said the new definition would also include the turnover from exports which may not have an adverse effect on competition in India.
The government is also planning to include competition violations resolved under the settlement scheme under the purview of compensation claims.
Settlement scheme is one where an entity accused of indulging in anticompetitive practices may approach the CCI and pay certain fees to settle the dispute. This can be availed of after the director-general of the CCI completes its investigation but before the competition watchdog passes a final order.
The competition law allows any entities who have been adversely impacted by anticompetitive practices of a company to file for compensation once the CCI passes an adverse order. But after the proposed change, such entities can claim compensation even in cases where the accused had settled the case.