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regular-article-logo Thursday, 25 July 2024

Competition Commission of India can levy penalties on MNCs on their global turnover

MNCs indulging in anti competitive practices could face penalty of up to 10 per cent of their global turnover or 30 per cent of relevant turnover of product

R. Suryamurthy New Delhi Published 07.03.24, 11:10 AM
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The Centre on Wednesday amended the Competition Act that allows the Competition Commission of India to slap penalties on MNCs on their global turnover against the earlier practice of a penalty on the relevant product.

MNCs indulging in anti competitive practices could face penalty of up to 10 per cent of their global turnover or 30 per cent of the relevant turnover of the product.

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Besides, individuals such as the CEO and others, could be fined upto 10 per cent of the average income of the person for the last three preceding financial years if they are found to be collaborating the anti-trust practices.

The CCI notified the penalties after the corporate affairs ministry notified the provisions relating to settlement and commitment under the competition law.

To avoid steep penalties, the amendment would encourage companies under investigation, especially big techs, to opt for the settlements or commitments mechanism in abuse/vertical restraint cases or, leniency in cartel cases.

“The Commission, to begin with, would consider, having due regard to all or any of the following factors, an amount up to thirty per cent 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,” according to the Competition Commission of India (Determination of Monetary Penalty) Guidelines, 2024 notified on Wednesday.

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

Vaibhav Choukse, partner and head of competition law, JSA Advocates and Solicitors said: “The CCI has issued the much awaited penalty guidelines for the first time. It provides for both, aggravating and mitigating factors and comprehensive methodology to be considered/ adopted by the CCI while imposing penalties on contravening enterprises / individuals for violating provisions of the Competition Act.”

“This will aid the CCI in having consistency in determining penalties and bring transparency and certainty to its decision-making process. This will also bring a lot of certainty to the stakeholders as it will ensure multiple checks on the penalty from being disproportionate and also assist is risk assessment at the outset,” he said.

Prashanth Shivadass, Partner, Shivadass & Shivadass Law Chambers, said: “The amendment is an added deterrent to companies from engaging in any anti-competitive behaviour.

“Of course, we have not seen an increase in compensation claims, but the government has gone one step further by stating that even when there is a settlement between parties, that will not bar any compensation claims.”

Suhana Islam Murshedd, Partner, Aquilaw said “the notification ushers in a new era in the realm of competition law. The western jurisdictions have utilised such provisions for commitment/settlement”.

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