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Anti-trust regulator reworks penalty rules, seeks comments till January 12

Multinational companies that operate in many jurisdictions might face significant problems because of penalties based on their global turnover

R. Suryamurthy New Delhi Published 25.12.23, 07:45 AM
Representational image.

Representational image. File Photo

The Competition Commission of India (CCI) has released draft regulations to determine ‘‘turnover’’ of enterprises, which will have a bearing on penalties.

The Competition (Amendment) Act 2023 states penalties will be levied on a ‘‘global turnover basis’’. The CCI has sought comments till January 12.

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Multinational companies that operate in many jurisdictions might face significant problems because of penalties based on their global turnover.

Experts consider this as a strengthening of the powers of the CCI. They said the consideration of total turnover may lead to “unfair and punitive” outcomes and cause discrimination between enterprises who commit a similar contravention but are penalised differently depending on the expanse of their business.

As per the amendment, the penalty could go up to 10 per cent of average sales or income for the three preceding years on entities party to an anti-competitive agreement or had abused its dominant position.

Indirect taxes, trade discounts and intra-group sales will be excluded while computing the turnover.

Rajat Mohan, senior partner, AMRG & Associates, said: “The CCI is poised to become a more formidable regulatory authority, with enhanced capabilities to ensure compliance and fair competition practices.”

“These regulations have the potential to significantly impact the operations of conglomerates, potentially leading to major disruptions or even closures if compliance is not maintained. This underscores the importance for companies to diligently adhere to competition laws and regulations.”

Turnover, or income, includes the total value of sales or revenue or receipts, by whatever name called, and other operating income, as per the audited financial statements maintained by such enterprise, the draft regulations said.

In case an enterprise is required to prepare a consolidated financial statement under Section 129 of the Companies Act, 2013 or under any law, turnover or income shall be derived based on such audited consolidated financial statements.

In case audited financial statements are not available, turnover shall be the amount certified by the statutory auditor of the enterprise and supported by an affidavit by any of the persons authorised to sign the financial statements of the enterprise.

“The question remains — will the unfairly modified 2023 Amendment to include global turnover stand the test of time? Companies will have to be more careful and will have to make sure that these details are made available to the authorities as and when sought for,” Prashanth Shivadass, partner, Shivadass & Shivadass Law Chambers, said.

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