CCI Rule: Penalties Based on Company’s Financial Performance

The Competition Commission of India (CCI) has introduced new rules that allow it to impose penalties on companies based on their global turnover for violations of the Competition Act. The new rules also provide for settlement of cases through negotiation and cooperation.

The CCI is the fair trade regulator in India that enforces the Competition Act, 2002. The act aims to prevent practices that have an adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade.

Prior to the amendments, the penalties were restricted to up to 10% of the turnover (of the preceding three years) generated from the products and services where the rules were infringed . This meant that the CCI could only consider the turnover from the relevant market in India, which could be lower than the actual impact of the violation.

The new rules allow the CCI to consider the average relevant turnover or income of the enterprise from all sources, including its global operations, for determining the penalty amount. The penalty amount can be up to 30% of the average relevant turnover or income of the enterprise. The commission may further adjust this amount based on factors, such as the duration of the contravention, the enterprise’s role, coercive measures employed, admission of contravention and cooperation during investigations.

The new rules also introduce settlement regulations 2024 for companies to file settlement proposals for ongoing cases, the process of settlement and the settlement amount . In settlement cases, violating entities can accept their lapses and negotiate with the CCI to impose lesser penalties. The settlement amount will depend on various factors, such as stage of investigation, nature and gravity of contravention, extent of cooperation and public interest.

The new rules are expected to enhance the deterrence effect of the CCI’s enforcement actions and encourage compliance with the competition law. They are also likely to reduce litigation costs and delays for both the CCI and the companies involved.

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