Draft Regulations on Turnover Determination

December 23, 2023

The Competition Commission of India (CCI) has recently unveiled draft regulations aimed at determining the ‘turnover’ of enterprises. This regulatory development holds considerable significance, as it directly impacts the calculation of penalties imposed on enterprises for engaging in anti-competitive conduct.

Penalties Based on ‘Global Turnover Basis’

The backdrop for these draft regulations stems from the Competition (Amendment) Act 2023, which introduced the notion of levying penalties on a ‘global turnover basis.’ This legislative amendment specified that regulations would be formulated to guide the determination of turnover for penalty imposition. Notably, this approach diverged from a previous Supreme Court ruling that constrained the Competition Commission’s powers in penalty imposition.

Exclusions from Turnover Computation

In the proposed regulations, the CCI explicitly outlines exclusions from the computation of ‘turnover.’ Indirect taxes, intra-group sales, and discounts are identified as elements to be excluded. This clarification aims to provide a clearer and more precise understanding of the financial metrics that will be considered when determining turnover for penalty calculation.

Stakeholder Input: Window for Comments Opened

Recognizing the significance of these regulations, the CCI has opened a window for stakeholders to submit their comments. The period for submitting feedback extends until January 12 of the coming year. This inclusive approach ensures that industry participants and experts have an opportunity to contribute to the refinement of these regulations before they are finalized.

Impact on Multinational Companies

The shift towards calculating penalties on a ‘global turnover’ basis has raised concerns, especially for multinational companies operating across diverse jurisdictions. This change could potentially expose such companies to significant penalties, considering their extensive global operations. However, experts also view this development as a strategic move to enhance the CCI’s authority and serve as a deterrent against potential violations of antitrust laws.

Strengthening CCI’s Powers

The introduction of ‘global turnover’ as a benchmark for penalty imposition is a noteworthy feature of the amended law. This provision, inserted through the Competition (Amendment) Act 2023, did not undergo public consultations. Despite potential challenges, this change is seen by experts as a measure that strengthens the CCI’s powers, positioning it to more effectively deter enterprises from engaging in anti-competitive practices.

Future Guidelines on Penalties

In addition to these draft regulations, the CCI is expected to issue guidelines on penalties in the near future. These guidelines are anticipated to provide further clarity on the application of penalties and contribute to a more transparent and predictable regulatory framework.

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