Competition penalties going by global turnover call for a rethink

livemint.com:

₹64.3 crore while in 2021 it was over ₹1,000 crore. Recovery of such fines has only been 0.4% over the past five years. The current framework for fine imposition and recovery must be made more enforcement-oriented.

As of now, there is a provision in the Competition Act (Section 39) for recovery of the penalty amount under the Income Tax Act 1961, which could be used liberally after getting cases finalized in appeals, etc. Perhaps the CCI needs to be provided additional manpower and a dedicated wing for this purpose. The preamble of our Competition Act begins with “keeping in view of the economic development of the country…" and we must concurrently analyse its impact on foreign direct investment (FDI).

Globally, India is among the most attractive FDI destinations, ahead of China, with 8% plus economic growth, low inflation, a huge consumer market and the world’s largest population (with a median age of under 30), apart from a stable regime and friendly policies, all of which offer investors high returns. Strong inflows of FDI are accompanied by technology that benefits us. Fines imposed on global turnovers could deter firms that sell multiple products in multiple markets across the world.

The prospect of being penalized in various jurisdictions based on their global instead of relevant turnover could also expose them to double jeopardy. If we look at other jurisdictions, while some mention penalties on global turnover, these are scrutinized at various stages. As per the EU Digital Markets Unit, the EU regulator can fine a firm up to 20% of its global turnover, but European Commission guidelines have a two-step approach that takes the nature of infringement, firm’s market share and other aggravating circumstances into