Fine must be limited to jurisdiction where product is made: Apple to HC

The Delhi high court on Monday sought responses from the Centre and the Competition Commission of India (CCI) on Apple Inc’s plea challenging recent amendments to the Competition Act that allow penalties to be based on a company’s global turnover.

The amendment, which took effect on March 6, 2024, empowers the CCI to impose fines of up to 10 per cent of the average turnover for the previous three financial years.

These would be imposed on entities found guilty of anti-competitive conduct or abuse of dominance.

Appearing before a Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela, senior advocate Abhishek Manu Singhvi, representing Apple, argued that the provision is unconstitutional and disproportionate.

For multi-product companies, penalties should be limited to the turnover generated by that specific product that is implicated in the alleged violation within India, rather than being calculated on worldwide revenues, Singhvi told the court.

Singhvi also questioned the retrospective application of the amendment, contending that it unfairly affects pending matters.

“My turnover in England does not affect turnover in India.

"My case here started in 2021. This amendment came into force on March 6, 2024. The effect is humongous,” Singhvi said.

The court then asked the government and the CCI to explain how turnover from unrelated products could be included in calculating penalties for a particular market.

“Please tell us, prima facie, if the CCI initiates proceedings in relation to one product, how can you take into account turnover with respect to other products?

"Does it not appear very unreasonable to include other products?” the Bench asked.

Representing the government and the CCI, additional solicitor general Balbir Singh said the commission applies the principle of relevant turnover.

And, global turnover comes into play only when companies withhold financial data.

This provision ensures that even entities without an Indian base can be brought within the CCI’s jurisdiction, he told the court.

“The global turnover concept is applied in cases where an entity has no operational base in India.

"Otherwise, how do you punish them?” Singh said, adding that the objective of the present plea (by Apple) was only meant to stall proceedings.

The court directed the government to file a short affidavit clarifying its position.

Singhvi informed the Bench that Apple would submit its India-specific turnover figures by December 8.

The matter will next be heard on December 16.

According to Apple’s plea, the new penalty framework exposes the company to potential fines of up to $38 billion, which is 10 per cent of its average global revenue over the past three years.

The company argued that such a penalty structure is arbitrary, excessive, and violates the principle of proportionality.

It urged that any fines be calculated solely on the revenue of its India-based business segment.

Before the high court, Apple will be represented by a team from J Sagar Associates led by partner Nisha Kaur Uberoi.

Along with Singh, senior advocate Samar Bansal appeared for the CCI.

The Centre was represented by central government standing counsel (CGSC) Ashish Dixit.