India's retrospective antitrust fines put MAAG giants on edge

The CCI is currently probing big tech companies including Meta, Amazon, Apple and Google.

World’s largest technology companies are facing concerns of retrospective penalties from India’s anti-trust regulator as the older investigations drag on, said people privy to the matter. The Competition Commission of India (CCI) is currently probing Meta, Google, Meta, Amazon and Apple, who put together are popularly referred by the Wall-Street as MAAG,  amongst others for violations that happened between 2019-2023.

However, penalty guidelines were changed by CCI in 2024 wherein the formula for computation of penalty was tweaked to include global turnover instead of relevant turnover. As a result, the quantum of penalty could be 5-10 times higher under the new rules than the older rules.  These tech companies are concerned CCI may use the new formula to determine penalties.

Apple has already contested this retrospective penalty while other technology giants are exploring options including filing a request with CCI during hearings to use the old formula of penalty.

“Any retrospective imposition of penalty on the Petitioners in terms of the Impugned Amended Penalty Provisions by the Respondent Commission would be manifestly arbitrary, irrational and grossly disproportionate, rendering the same to be ultra vires the provisions of Article 14 and Article 21 of the Constitution of India.” Apple said in its petition dated November 20.

Emails sent to CCI, Google, Meta, Amazon and Amazon remained unanswered.

Until 2024, CCI penalty could be upto 10% of the relevant turnover, however new rules allow CCI to impose penalty upto 10% on global turnover of the company. For instance, say if CCI finds Indian Google Play Store  is violation of rules, companies want penalty to be calculated on  India playstore business revenue. But CCI rules now allow the regulator to impose penalty on the total global turnover of Google Play store.

Apple claimed in its petition if CCI imposed penalty on Apple’s global turnover, the fine could be as high as $38 billion.

“As a general matter, retrospective application of a substantive provision which affects rights and liabilities of a party is not allowed. While the matter is sub-judice and it may not be appropriate to comment on merits, the key question that the court would decide is whether the CCI’s attempt to apply the amended penalty provisions along with the penalty guidelines in a case instituted prior to such amendment is retrospective in nature. The decision could also affect the CCI’s application of the new penalty provisions to some cases since 2024. “ said Pranjal Prateek, Partner at Khaitan & Co.

“In the Indian competition law space, Apple’s challenge is a first of its kind in respect of the new penalty provisions and therefore, it will be interesting and important to carefully observe proceedings and the outcome in this case.” Said Abhay Joshi, partner, Economic Laws Practice. “The new penalty provisions create no distinction based on period of violation and confer discretion upon the CCI’s to determine penalty based on the global turnover.” Joshi added.

Supreme Court’s Excel Verdict

Prior to these 2024 amendments, the Supreme Court’s 2017 verdict in the Excel Corp case has served as a precedent. In that verdict, the Supreme Court had opined while calculating penalty, CCI should take into account relevant turnover not total turnover. In other words, the companies should be penalized based on the turnover in the business segment where the violation happened.

“The (Apple’s) appeal has called on the court to decide the question whether by adding certain explanation to the provision and without altering the provision itself, could the legislature substantially alter the effect of a Supreme Court judgment. The settled position in this regard is that if the legislature wishes to reverse the judgment of court in relation to a provision, the basis of  the provision must be amended.” Prateek added.