Alerts & Updates 14th Mar 2024
The competition law regime in India has seen significant changes with the Competition Commission of India (CCI) having notified the following regulations: (i) CCI (Settlement) Regulations, 2024; (ii) CCI (Commitment) Regulations, 2024; and (iii) CCI (Determination of Turnover or Income) Regulations, 2024. These regulations have been notified pursuant to consultation process with industry stakeholders. Additionally, the CCI has also issued the CCI (Determination of Monetary Penalty) Guidelines, 2024 for the methodology to determine monetary penalty that can be imposed for contraventions under the Competition Act, 2002 (Act). Separately, the Ministry of Corporate Affairs (MCA) has modified the financial thresholds applicable to combinations and the de-minimis exemption for notification to the CCI. In this alert, we cover the key changes along with implications of these regulatory changes.
On March 7, 2024, the CCI published the CCI (Settlement) Regulations, 2024 (Settlement Regulations) and the CCI (Commitment) Regulations, 2024 (Commitment Regulations) (together, Regulations). A day earlier, the Government notified Section 48A and Section 48B, which were introduced under the Act by the Competition (Amendment) Act, 2023 (Amendment Act), to come into force with effect from March 7, 2024.
The Settlement Regulations and Commitment Regulations have been published after public consultation on the draft settlement and draft commitment regulations published by the CCI for comments in September 2023. Along with the Settlement Regulations and Commitment Regulations, the CCI also released statements (here and here) setting out the reasons for accepting or rejecting stakeholder comments. The statements and the Regulations are a welcome insight into the CCI’s consideration of the comments and underscores the importance of stakeholder consultations.
– Any party against whom the CCI has initiated an inquiry on alleged contraventions of Section 3(4) or Section 4 of the Act, can avail of the commitments mechanism provided the Director General (DG) has not issued its investigation report.
– Any party against whom the DG in its investigation report finds contraventions of Section 3(4) and/ or Section 4 of the Act, can avail of the settlements mechanism.
– A settlement application must be filed within 45 days of a party receiving the DG Report or its confidential version (if applicable). However, a settlement application may also be filed within a further period of 30 days (after the expiry of the initial 45-day period), if ‘sufficient cause’ can be shown for the delay in filing.
– A commitment application must be filed within 45 days of a party receiving the CCI’s prima facie order or before receipt of the DG Report, whichever is earlier. A commitment may also be filed within a further period of 30 days (after expiry of the initial 45 day period), if ‘sufficient cause’ can be shown for the delay in filing.
– Under both a settlement and a commitment application, a party would have to furnish details including (i) complete details of the settlement or commitment applicant; (ii) details of the CCI’s prima facie opinion (in case of a commitment) or details of the CCI’s prima facie opinion and the DG’s findings (in case of a settlement); (iii) details of the commitment or settlement proposal; and (iv) details of any previous proceedings or commitments or settlements etc. A settlement proposal is required to address all the contraventions identified under the DG report. However, a party can offer a partial commitment on certain alleged contraventions identified in the CCI’s prima facie
– Proof of payment of the settlement or commitment fee is also required to be submitted with the application for settlement or commitment.
– Parties are also required to furnish an undertaking with certain waivers, along with the application for settlement or commitment.
– The non-refundable filing fee is based on the turnover of the applicant for the preceding financial year, and ranges between INR 2,50,000 and INR 50,00,000 in either case (i.e., a commitment or a settlement application).
– Once filed and defects (if any) in the applications have been cleared by the party, the CCI will consider the application. The CCI can ask a party to file a revised settlement or commitment application, if it is not prima facie satisfied with the commitment or settlement proposal.
– The CCI will then invite comments from the DG or any other third parties, on the commitment or settlement proposal. The CCI will then consider the settlement or commitment proposal along with the comments received. At this stage, the CCI can either accept or reject the settlement or commitment proposal or if it is not satisfied, can direct the party to file a revised settlement or commitment application, which will then either be accepted or rejected by the CCI.
– Before the CCI passes an order accepting the settlement proposal, it will communicate the settlement amount to the party which is required to be accepted within 15 days of the CCI’s communication and then paid by the party within 30 days from the date of its acceptance.
– In case of a rejection of the settlement or commitment proposal, the CCI will pass a rejection order and proceed with its inquiry in the matter.
– Once CCI accepts a settlement proposal, it will communicate the settlement amount to the applicant, calculated based on the penalty guidelines. There is no such amount that needs to be paid in case of commitments.
– The settlement amount determined by the CCI cannot be negotiated. If a party does not accept the amount, the settlement process fails and the CCI will continue with its inquiry in the matter.
– Yes, a party can withdraw a settlement or commitment application at any stage of the process before the CCI passes an order accepting or rejecting the proposal.
– In case a party has not complied with the terms of a commitment or settlement order or if the CCI finds that a party has made false disclosures during the settlement process, the CCI can revoke (and withdraw) its commitment or settlement order and then restore its inquiry in the matter.
– In such a case, the party would be liable for legal costs payable to the CCI, which can be up to INR 1 crore.
– The settlement process is required to be completed in 180 working days and the commitment process is required to be completed in 130 days after the receipt of the applications, respectively. These timelines may be further extended if needed by the CCI.
– No, the CCI’s settlement or commitment order is final and binding. In the case of settlements, the settlement applicant might still be exposed to compensation applications if the settlement proposals are accepted by the CCI.
– The CCI will not use the information provided by the settlement or commitment applicant in case the proceedings fail due to (i) rejection of the settlement or commitment application; or (ii) withdrawal of the application. However, the CCI may still use the information provided by other third parties including objections and suggestions received to the settlement or commitment application.
– In case of a revocation of the settlement or commitment order by the CCI, it may use the information provided by the applicant in the settlement or commitment application.
| S. No. | Overview of Regulations | Potential implications |
| 1. | Timeline for submitting an application.
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| 2. | Partial settlements or commitments.
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| 3. | Withdrawal of a settlement or a commitment application. A settlement or a commitment application may be withdrawn by the settlement or commitment applicant any time before the CCI passes the settlement or commitment order.
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| 4. | Condition on submitting a settlement or a commitment application. The Regulations state that if any amount is due under the Act from the settlement or commitment applicant, then the settlement or commitment application filed by such an applicant shall not be considered by the CCI. |
NCLAT) in any matter, it would be fair to argue that the penalty amount is “due” or “liable for recovery” until the stay is vacated. Such parties arguably ought to be eligible to avail of settlement and commitment mechanisms in other on-going cases. |
| 5. | Rejection of a settlement or a commitment application. The CCI can reject a settlement or commitment application, after providing an opportunity of hearing, if:
Additionally, a settlement application shall also be rejected if the settlement applicant fails to communicate its acceptance of the settlement amount or to pay the settlement amount within the prescribed timelines. A hearing shall not be granted in case a settlement application is rejected for failure to communicate acceptance of the settlement amount or pay the same within the prescribed timelines. |
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| 6. | ‘Invalid’ settlement or a commitment application. If the settlement or the commitment applicant, as the case may be, fails to clear the defects to the application communicated by the CCI within 10 days of receipt of such communication, such settlement/ commitment application shall be treated as “invalid” by the CCI. | The Regulations do not clarify if the settlement or commitment applicant will have the opportunity to submit a fresh settlement or commitment application in case the first application is ‘invalid’ due to failure to clear defects. However, there is no express bar on the settlement or commitment applicant to file a fresh application if they are not time barred from filing an application. |
| 7. | Deemed ‘admission’ of facts established against settlement or commitment applicant in proceedings on the same cause of action inside as well as outside India. The settlement or commitment applicant shall also be required to provide details of investigations in India and outside India with the same cause of action as part of their settlement or commitment application. However, any such facts that have been established or admitted by the settlement or commitment applicant under such ongoing or concluded proceedings with the same cause of action shall be deemed to be “admitted” against the applicant in respect of the settlement or commitment proceedings. |
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| 8. | Revocation and withdrawal of a settlement or a commitment order. The Regulations provide that the settlement or commitment order shall stand revoked if:
Before revoking a settlement or commitment order, the CCI shall grant an opportunity to show cause to the settlement or commitment applicant. |
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| 9. | Determination of settlement amount. The Settlement Regulations provide that the range of the settlement amount shall be guided by the Penalty Guidelines, under which the ‘base penalty amount’ can be 30% of the relevant turnover and the penalty determined by the CCI can extend up to 10% of the global turnover. Also, only a flat 15% discount shall be allowed on such settlement amount as determined.
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Operationalization of the settlements and commitments mechanisms is a welcome step that will hopefully go a long way in reducing litigation and ensuring quicker market corrections. However, the efficacy of these newly introduced mechanisms is yet to be tested and it is certainly left to be seen if the CCI’s decisional practice sheds some much needed clarity on ambiguities on the broad scope of undertakings and waivers, ‘deemed’ admission of facts, and use of information. Additional clarity on these Regulations would provide a much-needed boost to the efficacy of these mechanisms.
The CCI (Determination of Turnover or Income) Regulations, 2024 (Turnover Regulations) have been published after public consultation in December 2023. Some of the key changes brought about by the Turnover Regulations are:
Determination of turnover or income of the enterprise under Section 27 of the Act.
On March 6, 2024, the CCI published the CCI (Determination of Monetary Penalty) Guidelines, 2024 (Penalty Guidelines). A day earlier, the MCA notified the amended Section 27 and 48 of the Act (as amended by the Amendment Act), that have now been enforced. The Penalty Guidelines have been issued under Section 64B of the Act to determine the penalty that can be imposed on account of contraventions of the Act. While the Penalty Guidelines are not binding on the CCI, it will have to consider them in cases wherein it imposes a penalty under the Act.
| Calculation of penalty to be imposed under Section 27(b) of the Act | |
| Steps for calculation | Illustration |
| Step 1: The CCI would ascertain ‘relevant turnover’ of an enterprise.
‘Relevant turnover’ is turnover derived ‘directly or indirectly’ from the sale of goods and services to which the contravention relates. Notes:
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X’s average turnover for the past 3 preceding years is INR 100,000 while the average turnover generated from the infringing products/ services is INR 80,000.
Under the Penalty Guidelines, the ‘relevant turnover’ would be INR 80,000.
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| Step 2: The CCI would compute the ‘base penalty amount’ which can be up to 30% of the ‘relevant turnover’, considering factors like nature and gravity of the contravention; nature of the industry; its implications on economy; and any other factor which CCI deems appropriate. | The CCI, after looking at the nature of the contravention and other factors, can arrive at a maximum base penalty amount of INR 24,000. |
Step 3: The CCI may further adjust the ‘base penalty amount’ determined in the step above based on the following factors:
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Based on the factors mentioned in Para. 3(2) of the Penalty Guidelines, CCI will take further consider aggravating and mitigating factors in the instant case to adjust the penalty.
Let’s assume that this was X’s first violation and it has put in place an internal compliance program to make sure this does not happen again. The CCI can consider these mitigating factors and adjust the penalty amount to INR 20,000. |
| Step 4: If the amount determined in the above step exceeds the ‘legal maximum’, then CCI will adjust it to reduce it to the legal maximum.
‘Legal maximum’ is the ceiling for any monetary penalty determined under the Penalty Guidelines and cannot exceed the maximum amount of penalty envisaged under the Act i.e., in context of Section 27(b) of the Act, 10% of the global turnover of an enterprise. |
The penalty calculated above (INR 20,000) is higher than the legal maximum in the present case (i.e., INR 10, being 10% of the total turnover of the entity). The CCI will adjust it downwards and bring it to the legal maximum.
Therefore, the final penalty that the CCI may impose on X would not exceed INR 10,000. |
| Step 5: Under the Penalty Guidelines, after calculating the penalty based on the factors enumerated under Para. 3(1) and (2), if the CCI is of the opinion that the determined penalty would not result in sufficient deterrence, it may increase the penalty up to the ‘legal maximum’. However, the Penalty Guidelines do not provide any factors that it would consider to measure the deterrent effect. | For example, if a contravening enterprise ‘Y’, global turnover is INR 1000 and relevant turnover is INR 100. The legal maximum in the present case is INR 100. Under Para. 3(1) of the Penalty Guidelines, the CCI may begin with a penalty base of INR 30 and post adjustments under Para. 3(2), it considers that adjusted penalty amount is not sufficient, it could raise the penalty to up to legal maximum i.e. INR 100. |
The above methodology also applies to cartel cases except that base amount would be based on profit after tax instead of “relevant turnover”.
Previously, the CCI’s approach was usually to direct an enterprise to submit its financial statements for 3 years, prior to the receipt of the DG Report. However, under the Penalty Guidelines, now the CCI can request an enterprise to submit financial statements for the 3 years preceding the contravention. While the Penalty Guidelines are not clear, it should logically mean 3 years preceding the final order of the CCI establishing the contravention and not 3 years preceding the act of contravention.
The average income of the individual would be determined by looking at the gross total income from the individual’s income tax return (ITR) while excluding (1) income from house property and (2) income from capital gains. These returns would be considered for the same period as the enterprise employing the individual. Where the ITR is not available for an individual, the average income would be based on the total income certified by a CA, along with an affidavit by the individual.
The Penalty Guidelines also provide for factors to be considered by the CCI while imposing a penalty in other situations contemplated under the Act:
| Penalty | Factors provided by the Penalty Guidelines |
| Penalty imposed on individuals. |
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| Penalty imposed for gun-jumping or not submitting information under Section 20(1) of the Act. |
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| Non-compliance with the CCI’s order. |
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| Failure to comply with the directions of the CCI and the DG. | |
| Making a false statement or omission to furnish material information. | |
| Contraventions related to submission of information. |
| ELP COMMENTS |
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The Penalty Guidelines are certainly a welcome step in providing some clarity on the CCI’s approach towards penalty computation. The CCI has, till now, been following the ‘relevant turnover’ approach towards penalty computation, according to the Supreme Court’s judgment in the Excel Crop Care case, under which the penalty was capped at 10% of the ‘relevant turnover’. The amended Act has enhanced the powers of the CCI as it can now look at the global turnover based on the entire portfolio of products of a company. This may in some cases drastically enhance the potential monetary liability in case of infringements.
On March 7, 2024, the MCA issued two notifications revising the (1) asset and turnover thresholds under Section 5 of the Act for notifying a transaction to the CCI, and (2) asset and turnover threshold for claiming de-minimis exemption, respectively. The revised thresholds are captured below:
| Revised thresholds for de-minimis exemption* | ||
| Target | Assets (in India) | Turnover (in India) |
| INR 450 Crores (~ USD 54 million) | INR 1250 Crores (~ USD 150 million) | |
| Revised jurisdictional thresholds* | |||
| Assets | Turnover | ||
| Enterprise Level | India | > INR 2500 crores (~ USD 301 million) | > INR 7500 crores (~ USD 902 million) |
| Worldwide with India leg | > USD 1.25 billion and;
at least INR 1250 crores (~USD 150 million) in India |
> USD 3.75 billion and;
at least INR 3750 crores (~USD 451 million) in India |
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| OR | |||
| Group Level | India | > INR 10000 crores (~USD 1.2 billion) | > INR 30000 crores (~USD 3.6 billion) |
| Worldwide with India leg | > USD 5 billion and;
at least INR 1250 crores (~USD 150 million) in India |
> USD 15 billion and;
at least INR 3750 crores (~USD 451 million) in India |
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We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:
Ravisekhar Nair, Partner, Email – ravisekharnair@elp-in.com
Parthsarathi Jha, Partner, Email – parthjha@elp-in.com
Abhay Joshi, Partner, Email – abhayjoshi@elp-in.com
Aayushi Sharma, Senior Associate, Email – aayushisharma@elp-in.com
Bhaavi Agrawal, Associate, Email – bhaaviagrawal@elp-in.com
Pavan Kalyan, Associate, Email -pavankalyan@elp-in.com
Raagini Agarwal, Associate, Email – raaginiagarwal@elp-in.com
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