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Key Features of the Turnover Regulations and Penalty Guidelines

Authored by Zenia Cassinath (Principal Associate)

The Competition Commission of India (Determination of Turnover or Income) Regulations, 2024 (“Turnover Regulations”) and the Competition Commission of India (Determination of Monetary Penalty) Guidelines, 2024 (“Penalty Guidelines”) were introduced with effect from 7th March 2024. Through the introduction of the Turnover Regulations, the Competition Commission of India (“CCI”) has provided clarity on the nature of income that will be considered for calculating penalties relating to anticompetitive agreements and abuse of dominance violations.

Whereas, the Penalty Guidelines provide a method for determining the quantum of penalty that can be imposed for the contravention of various provisions of the Act as well as the various aggravating and mitigating factors that the CCI would consider while determining the quantum of penalty for offences related to (i) anticompetitive agreements and abuse of dominance violations by individuals or enterprises (including their KMPs); (ii) failure to comply with the CCI’s orders and/or directions; (iii) submission of false or misleading information; and (iv) gun-jumping violations. Set out below is a brief overview of the key features of the Turnover Regulations and Penalty Guidelines.

Determination of Turnover for Penalty Calculations

As per the Turnover Regulations, the ‘turnover’ considered for the purposes of imposing a penalty will be based on (i) the audited consolidated financial statements in case of an enterprise; and (ii) the gross total income as per income tax returns, in case of an individual. Further, it may be noted that for enterprises, turnover will include the values of all sales and other operating revenues but will not include the enterprises’ (i) other income; (ii) indirect taxes; (iii) trade discounts; and (iv) intragroup sales. Whereas turnover for an individual, will be such individual’s gross total income after excluding income from house property and capital gains.

Method for Calculating Penalties

As a first step, the CCI will determine a base penalty amount considering factors like nature and gravity of contravention, nature of the affected industry or sector etc., which can be up to 30% of the average relevant turnover (i.e. the enterprises’ turnover derived from the sale of products/services to which the contravention relates) or average income (“Base Penalty”).  Thereafter this base penalty will be adjusted by the CCI, subject to the statutory maximum, after it has considered the aggravating and mitigating factors set out for each violation covered in the Penalty Guidelines.

CCI’s Discretion

It may be important to note that if the CCI is unable to ascertain the average relevant turnover of the enterprise for the purposes of penalty calculations, it has been granted the discretion to use the global turnover of an enterprise for the purposes of calculating the Base Penalty. Further, if CCI is of the view that the penalty amount as calculated under the Penalty Guidelines is not sufficient to create deterrence, the CCI has the power to increase the penalty amount, subject to the legal maximum. Additionally, the CCI has also been conferred with the power to deviate from the method of calculating penalties under Penalty Guidelines in ‘exceptional circumstances’.

Factors Considered by the CCI

The CCI, while determining the quantum of penalty to be awarded qua contraventions dealt with under the Penalty Guidelines, will consider factors like (i) duration of the contravention and extent of involvement of enterprise/person; (ii) recurrent nature of the contravention;(iii) quality of evidence furnished and extent of cooperation etc. That said, with respect to certain specific contraventions (discussed below) the CCI may also heed the following factors –

Anticompetitive Agreements and Abuse of Dominance:  the CCI, while assessing such violations by individuals or enterprises (including their KMPs) may consider factors such as (i) recourse to coercive or retaliatory measures by an enterprise against another enterprise(s); (ii) admission of the contravention; (iii) voluntary termination of the alleged anticompetitive conduct; (iv) implementation of a competition compliance programme etc.

Gun jumping: The CCI, while assessing such violations, may consider factors including (i) the extent of consummation of combination without notifying the CCI and violation(s) of the standstill obligations; (ii) extent to which the parties are forthcoming with information, materials, documents during assessment process; (iii) voluntary filing of notice with the CCI; and (iv) conduct of the parties including making voluntary disclosures etc.

Other Violations under the Guidelines: For other violations, dealt with under the Penalty Guidelines, the CCI may also takes into consideration the factors like (i) extent and reasons of non-compliance or non-cooperation, (ii) nature of misleading information, (iii) whether the person furnishing untrue or incomplete information was cognisant of the same etc.

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