The Supreme Court has upheld an order by the Competition Appellate Tribunal (Compat) that penalties imposed by the Competition Commission of India (CCI) on companies should be only on the turnover relevant to a case in dispute, not their overall turnover.
The apex court's decision came on Monday on an appeal by CCI against Compat reducing the penalty it had imposed on Excel Crop, United Phosphorus and Sandhya Organic Chemicals, for an anti-competitive agreement between them that raised the cost of procurement of Aluminium Phosphide tablets by Food Corporation of India.
CCI had imposed a penalty of nine per cent of the average three-years' turnover of each of these companies. This amounted to Rs 63.9 crore on Excel, Rs 252.44 crore on United Phosphorus and Rs 1.57 crore on Sandhya Organic. While Compat upheld the charge against the companies, it decided the competition regulator had wrongly calculated the penalties on the basis of overall turnover.
Excel and United Phosphorus had contended they were multi-product companies and penalties on the basis of annual turnover was unreasonable. Sandhya Organic was not a multi-product entity but Compat reduced the penalty on it to a tenth of what CCI had imposed.
A leading lawyer said, "This decision will impact other cases where companies have questioned the penalty on them. Among these could be the penalty imposed on cement companies." Recently, CCI imposed heavy fines on 11 major cement makers, some of which have appealed to Compat.
In another case, CCI had imposed a penalty on automobile companies Toyota, Nissan and Ford, among others, of two per cent of their average three-years' turnover, for anti-competitive practises on spare parts. Compat reduced the penalty to two per cent of the three-years turnover from only spare parts, not overall.
- CCI had imposed a penalty of nine per cent of the average three-years’ turnover of each of the three companies
- This amounted to Rs 63.9 crore on Excel, Rs 252.44 crore on United Phosphorus and Rs 1.57 crore on Sandhya Organic
- Recently, CCI imposed heavy fines on 11 major cement makers, some of which have appealed to Compat
- SC order can have bearing on future CCI orders as well as appeals that are pending, say lawyers