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The Supreme Court's 2017 ruling in the Excel Crop Care case, which mandated that the Competition Commission of India (CCI) to only impose penalties under Section 27(b) of the Competition Act, 2002, based on the "relevant turnover" has been overturned by the rules introduced by the new rules
In a significant move to enhance the framework of competition law in India, the Centre has announced the implementation of three significant regulations and guidelines under the Competition (Amendment) Act, 2023. These regulations will have the effect of overturning the 2017 Supreme Court judgment in the case of Excel Crop v Competition Commission of India to the extent of it restricting penalties to ‘relevant turnover’.
This development announced by the Competition Commission of India (CCI), as per the Press Information Bureau (PIB), comes in the wake of the Competition (Amendment) Act, 2023, signalling a decisive shift towards aligning India's competition law with global best practices.
The three sets of regulations – the CCI (Settlement) Regulations, 2024; the CCI (Commitment) Regulations, 2024; and the CCI (Determination of Turnover or Income) Regulations, 2024 – alongside the CCI (Determination of Monetary Penalty) Guidelines, 2024, represent a comprehensive overhaul aimed at streamlining procedures and ensuring penalties are equitable and reflective of the market impact caused by anti-competitive behaviour.
In-Depth Examination of the New CCI Regulations:
Reflection on the Supreme Court’s Excel Crop Judgment:
The Supreme Court's 2017 ruling in the Excel Crop Care case mandated that the Competition Commission of India (CCI) could only impose penalties under Section 27(b) of the Competition Act, 2002, be based on the "relevant turnover" — specifically, the turnover associated with the product or service involved in the infringement, rather than a company's total turnover. The decision came while upholding the view of the Competition Appellate Tribunal's (COMPAT).
This stance arose in response of concerns to the CCI's approach to penalties, which often considered a company's total turnover, resulting in disproportionately high fines, especially for companies with multiple lines of business unrelated to the anti-competitive conduct. COMPAT criticised the CCI for not adequately justifying the rationale behind the magnitude of fines imposed, leading to arbitrary and potentially unjust penalties.
By insisting on 'relevant turnover' as the basis for penalties, the Supreme Court aimed to make the punitive measures more equitable, ensuring that they correspond more closely to the scope and scale of the infringement. This decision was perceived to lower the deterrent effect of competition law, as it significantly reduced the potential penalty that could be imposed on multi-product companies, potentially affecting the CCI's ability to enforce compliance effectively.
The decision was perceived by many as weakening the deterrence strength of competition law. By focusing solely on the relevant turnover, it was argued that the ruling reduced the financial impact of penalties on large, diversified corporations, thereby diminishing the law's ability to act as a deterrent against anti-competitive practices.
The Impact of the Guidelines :
These guidelines, effective from March 6, 2024, are structured across seven chapters, detailing penalty calculations for enterprises and individuals while underscoring the CCI's residual powers.
These guidelines aim to ensure fair, proportional penalties that deter anti-competitive behaviour while reflecting each case's specifics.
[Source: PIB]
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