Changes to India’s antitrust law will allow the regulator to impose much larger penalties and require companies to pay part of the dues before an order can be appealed, a move some analysts say signals protectionism.
Parliament this month permitted the Competition Commission of India to levy penalties for anti-competitive behavior and abuse of dominance based on global turnover of the firm, where earlier the up to 10% penalty was on the turnover of the affected business in India. It also said any party challenging a CCI order must first pay 25% of the penalty as deposit.
This will penalize global companies more and could include revenue from products and services not covered under anti-competitive conduct. “This provision strikes at the heart of the proportionality principle upheld by the Supreme Court,” said Avaantika Kakkar, partner and head of the competition practice at Mumbai-based law firm Cyril Amarchand Mangaldas. “It is likely to be the subject of judicial scrutiny in the future.”
Given the sizable penalties ordered by CCI – from 67 billion rupees on an alleged cement cartel to 22 billion rupees on Google – and chronic judicial delays, the deposit precondition is “a steep ask, will result in denial of right of appeal and block capital for firms,” said Nisha Kaur Uberoi, partner and national competition head at Trilegal in Mumbai.
Until now, no deposit amount had been codified in India though courts have often directed similar actions. Among other major jurisdictions, the European Union requires full penalty to be paid but admission of an appeal is not contingent on that. India’s competition regulator has issued no penalty guidelines yet.
India’s income tax law too requires a deposit of 20% before appeal. The requirement of a deposit assumes the action of the tax administration is correct, said Mukesh Butani, a partner at Delhi-based BMR Legal Advocates. The Department of Revenue loses 65% of cases once they are appealed, last available government data show.
Combined with the power to scrutinize a larger set of local and international M&A deals within shorter timelines, the recent changes broaden the sweep of the country’s competition law at a time when the antitrust regulator is hamstrung by the lack of a chairperson and quorum to pass orders.
The CCI will have to build capacity very quickly, said Kaur Uberoi. The changes will come into effect when notified in the government gazette.
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