Apple Case: Spotlight on India’s ‘Global Turnover’ Penalty Law

Apple’s petition before the Delhi High Court has brought renewed attention to the Competition Commission of India’s (CCI) global turnover-based penalty framework for antitrust violations.[1]

The framework, which became operational in March 2024, allows the CCI to consider an enterprise’s global turnover at the very first stage of calculating penalties when it is not feasible to determine the “relevant turnover”, that is, turnover derived from the sale of products and/or provision of services to which the contravention relates. The amended law also caps the penalty at 10% of the average of global turnover (derived from all products and services) for the last three preceding financial years.

The rationale behind allowing global turnover to be considered at the starting point is to address situations where determining relevant turnover is not feasible. One example is where the entity is not present in the relevant market, resulting in a nil relevant turnover.

App Store Antitrust Probe

Apple has been under investigation since December 2021, when the CCI ordered a probe into its App Store practices after forming a prima facie view of possible violations of competition law. The complaints focused on Apple’s guidelines that require app developers to use Apple’s in-app payment solution for the distribution of paid digital content and to pay a 30% commission.

It has been reported that the investigation has concluded and that the director general’s report has been sent to Apple. Anticipating penalty action, Apple filed the current writ petition in November. The company is reported to be facing a potential penalty of nearly $38 billion under the amended law.

Provisions Challenged

The California-based tech giant has challenged the 2023 amendment to Section 27(b) of the Competition Act, 2002, and the CCI (Determination of Monetary Penalty) Guidelines, 2024. Both came into force on March 6, 2024. Let us take a look at the penalty framework applicable to antitrust violations.

Statutory Cap on Penalty

Any enterprise that is found, after inquiry, to be party to an anticompetitive agreement or guilty of abusing its dominant position is exposed to penalties under Section 27(b). As per the 2023 amendment, the penalty imposed under said provision cannot exceed 10% of the average of global turnover (derived from all products and services) for the last three preceding financial years. The methodology for calculating this penalty is provided under the 2024 Guidelines.

Calculating Penalty

Step 1: The enterprise’s average relevant turnover is calculated. If determining the relevant turnover is not feasible, the global turnover derived from all products and services is considered.

Step 2: The base penalty amount of up to 30% of the average relevant turnover (or average global turnover as per Step 1) is determined, having due regard to the nature and gravity of the contravention and other specified factors.

Step 3: This base amount is then adjusted, after considering aggravating factors such as repeated contraventions, mitigating factors such as the extent of cooperation during investigation/proceedings, and any other factor deemed appropriate by the CCI.

Step 4: Penalty arrived at after following the above steps is subject to the statutory cap.

Step 5: A further increase is permitted if the amount determined is insufficient to create deterrence, subject to the statutory cap.

Timeline of Key Developments

• Prior to 2017: Penalties were capped at 10% of the average of the turnover for the last three preceding financial years. The law did not clarify whether turnover meant relevant, total, or global turnover.
• Supreme Court’s 2017 Ruling in Excel Crop Care Case: The Court held that penalties must be based on relevant turnover. It prescribed a two-step approach for calculating penalties and set the cap at 10% of the entity’s relevant turnover.
• 2024 Onwards: The law now allows the CCI to consider global turnover at the first stage of penalty determination if it is not feasible to determine the relevant turnover, and caps penalties at 10% of the average of the global turnover for the last three preceding financial years.

Coming Back to Apple’s Plea

Apple argues that penalties based on global turnover are manifestly arbitrary, unconstitutional, grossly disproportionate, and unjust. It has also raised concerns about retrospective application, citing a separate instance where the new framework was invoked in relation to an alleged violation that occurred a decade earlier.

The matter will be heard next on December 16, and the outcome will have significant implications for the penalty framework under Indian competition law.

References:

[1] Apple Inc. and Anr. v. Union of India and Anr. [WP(C) 17934/2025]