{"id":242635,"date":"2023-05-16T21:20:29","date_gmt":"2023-05-16T15:50:29","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=242635"},"modified":"2023-05-16T21:20:29","modified_gmt":"2023-05-16T15:50:29","slug":"basis-for-penalty-in-competition-law","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/basis-for-penalty-in-competition-law\/","title":{"rendered":"Basis for penalty in competition law"},"content":{"rendered":"\n

Source-<\/strong> The post is based on the article \u201cBasis for penalty in competition law\u201d published in the \u201cBusiness Standard\u201d on 16th May 2023.<\/p>\n

Syllabus: <\/strong>GS3- Indian economy<\/p>\n

Relevance<\/strong>– Regulation issues related to the economy<\/p>\n

News- <\/strong>The Competition (Amendment) Act, 2023 was introduced recently<\/p>\n

What are some facts about the Competition Act, 2002?<\/strong><\/h2>\n

The Competition Act, 2002, aims to defend the economy from anti-competitive practices<\/strong>.<\/p>\n

It empowers the Competition Commission of India to impose penalties <\/strong>for anti-competitive practices and abuse of dominant position.<\/p>\n

The CCI has the authority to impose a penalty of up to 10% of the average turnover for the three preceding financial year<\/strong>s. The Act defines \u201cturnover\u201d to include the value of goods or services sold. <\/strong><\/p>\n

What was the ruling of the apex court in In Re: Excel Crop Care Limited case related to calculation of turnover?<\/strong><\/h2>\n

The CCI imposed a penalty at 9% of the total turnover<\/strong>. CCI statute was not clear whether the turnover was related to the product or the person.<\/p>\n

An appeal in this matter was filed in apex court in 2017. It adopted \u201crelevant\u201d turnover<\/strong> for imposing a penalty. It clarified that \u201crelevant\u201d turnover<\/strong> was the person\u2019s turnover pertaining to products and services affected by the violation of law. <\/strong><\/p>\n

For this purpose, it relied on two principles: (i) strict interpretation<\/strong> \u2014 if two interpretations are possible \u2014 one that leans in favour of the infringer should be adopted.<\/p>\n

(ii) Punishment should be proportionate to the harm<\/strong> caused by the infringer.<\/p>\n

What are some provisions of the Competition (Amendment) Act, 2023?<\/strong><\/h2>\n

The Competition (Amendment) Act, 2023 defines turnover for purposes of penalty as \u201cglobal\u201d turnover.<\/strong> It is the turnover derived from all the products and services by the person concerned.<\/strong><\/p>\n

It mandates the CCI to publish guidelines<\/strong> to determine an appropriate amount of penalty<\/strong> for violating the provisions of the Act.<\/p>\n

It further mandates the CCI to consider these guidelines for imposing penalties and provide reasons in the case of any divergence from them.<\/p>\n

The amended law does not enable more than one interpretation. So, there is no need to use the principle of strict interpretation. <\/strong><\/p>\n

It provides three levers to ensure proportionality<\/strong>– (1) The penalty can vary from zero to 10% of the global turnover, depending on the gravity of the Violations<\/strong>.<\/p>\n

(2) The guidelines shall guide determining the appropriate amount of penalty<\/strong>.<\/p>\n

(3) The order shall give reasons for awarding a penalty different from the one specified in the guidelines. <\/strong><\/p>\n

What are the advantages of Global turnover as compared to relevant turnover?<\/strong><\/h2>\n

There are situations where it is difficult to use relevant turnover <\/strong>for imposing a penalty. An example is the hub-and-spoke agreement.<\/p>\n

A hub is typically not engaged in the same line of business<\/strong> as the spoke. Since its relevant turnover is nil, the penalty based on such turnover would be nil. IT encourages the hub to contravene the law with impunity. <\/strong><\/p>\n

Determining relevant turnover is often complex and imprecise<\/strong>. An example is the abuse of dominance in health insurance.<\/p>\n

The infringer would argue for a narrower definition of the product.<\/strong> The competition authority would take the opposite view. This will only add to litigation. <\/strong><\/p>\n

Why does global turnover make eminent sense for determining penalties?<\/strong><\/h2>\n

Enforcement<\/strong> is an important aspect<\/strong> of any law. The effectiveness of enforcement<\/strong> depends on the probability of conviction<\/strong> of the violator of the law and the level of sanction or punishment. <\/strong><\/p>\n

A higher probability of conviction<\/strong> can assure compliance even at a lower level of sanction <\/strong>and vice versa. However, the probability of conviction is less in economic legislation like competition law because it relies on the rule of reason. <\/strong><\/p>\n

Therefore, the level of sanction<\/strong> must be higher. So, use of global turnover<\/strong> is justified for imposing penalties.<\/p>\n

Competition law addresses market failure arising from market power. If a person abuses market power to, it triggers a process of resource reallocation<\/strong>. This trigger settles down after moving resources across products and sectors.<\/p>\n

It kills several enterprises, and possibly creates new ones. This yields a new equilibrium<\/strong>, which is different from the initial equilibrium.<\/strong><\/p>\n

The difference is the misallocation of resources. So, the entire economy suffer<\/strong>s. Thus, the impact of the abuse is not limited to the products or services underlying the contravention.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source- The post is based on the article \u201cBasis for penalty in competition law\u201d published in the \u201cBusiness Standard\u201d on 16th May 2023. Syllabus: GS3- Indian economy Relevance– Regulation issues related to the economy News- The Competition (Amendment) Act, 2023 was introduced recently What are some facts about the Competition Act, 2002? The Competition Act,… Continue reading Basis for penalty in competition law<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216],"class_list":["post-242635","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":1700796338,"cached_date":1701598586},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/242635","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=242635"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/242635\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=242635"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=242635"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=242635"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}