Delhi HC Gives Govt and CCI One Week to Defend Global Turnover-Based Penalties on Apple

The Union government and the Competition Commission of India (CCI) were served notices by the Delhi High Court on 1 December, asking them to submit an affidavit explaining the reasoning behind levying fines based on a company's worldwide turnover rather than its revenue in India within a week.

Apple Inc. challenged recent changes to the Competition Act that permit penalties to be calculated based on a company's worldwide turnover in a plea that was being heard by the court. On the CCI's request that Apple provide its financial information by December 8th, a bench made up of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela declined to issue an order. Additionally, it said it did not desire to offer any opinion at this time and refrained from commenting on Apple's request for protection from possible coercive actions by the regulator. The next hearing on the case is probably scheduled on December 16.

What Exactly is the Case?

As part of its ongoing inquiry into Apple's App Store payment practices, the CCI had requested that the business submit its financial accounts by December 8th. NGOs, Indian startups, and Match Group—the company behind Tinder, Hinge, and OkCupid—filed complaints saying that Apple misused its power by forcing developers to utilise its in-app payment system and pay commissions of up to 30% between 2021 and 2022.

These allegations are the basis for the investigation. Apple has refuted the CCI's judgement of prima facie evidence of abuse. Apple sought protection from any coercive measures while its constitutional challenge to the global turnover penalty framework was being resolved, fearing that it would be subject to penalty action under the modified terms. Apple cautioned in its plea that if found guilty, the revised statute could subject the company to a penalty of around $38 billion. The 2024 Monetary Penalty Guidelines and the 2023 revision to Section 27(b) of the Competition Act, which permit fines of up to 10% of the average worldwide revenue of the previous three fiscal years, have been contested by the corporation.

Apple contended that it was "arbitrary" and "grossly disproportionate" to use global revenue to punish misconduct that was exclusive to India, particularly since the accused behaviour only affected a small portion of its global company. Due to the possibility that fines might be based on turnover from years prior to the amendment's implementation, Apple also expressed concerns regarding the retrospective effects. It claimed that the action went against the 2017 Excel Crop Care decision of the Supreme Court, which maintained that fines ought to be determined by relevant turnover rather than total worldwide sales.

Case Likely to Become a Test Case for Future Referrals

The petition might end up serving as a trial for how India handles big, international tech companies under its new penal system. Future CCI measures and the regulation of Big Tech in one of the fastest-growing digital markets in the world could be influenced by the case's conclusion. Since the Competition Act required the regulator to first identify the relevant product market and relevant geographical market before computing any penalties, the CCI contended that concerns about severe fines based on worldwide turnover were exaggerated.

Global turnover, according to Singh, is only utilised as a last resort when a business is unable to supply enough data to calculate the pertinent turnover. Singh responded that the provision was required to guarantee that companies with no turnover in India or those operating from outside India could still be brought under the CCI's jurisdiction when the bench questioned how penalties based on global turnover could be justified when the alleged abuse only involved one of many products.