Apple trying to scuttle probe: CCI tells Delhi High Court; defends law on global turnover-based penalties

The Delhi High Court on Monday issued notice to Central government and the Competition Commission of India (CCI) on a plea filed by tech giant Apple challenging the law allowing penalties on the "global turnover" of companies for anti-competitive practises [Apple Inc & Anr v. Union of India & Anr]..A Division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela directed the government and CCI to file their responses in a week and posted the case for further hearing on December 16."Issue notice. Let affidavit in reply be filed by the respondents in a week. Rejoinder to be filed by the petitioners. On December 16, the matter will be placed high on board," the Bench directed..During the hearing today, the Court sought to know from the government how penalties on global turnover could be justified even if the abuse of dominant position is with respect to one of the many products. "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.Senior Advocate Balbir Singh, appearing for CCI, said that the same is necessary so that an entity with no turnover in India can also be brought under the CCI net."The object of this is the global turnover concept has been taken in those circumstances where you don't have a base in India, how do you punish them?" he said.He also claimed that Apple has filed the present plea to scuttle the CCI probe against it..Apple moved the Court challenging Section 27(b) of the Competition Act, 2002, as well as the Competition Commission of India (Determination of Turnover or Income) Regulations, 2024 and the Competition Commission of India (Determination of Monetary Penalty) Guidelines, 2024. These provisions allow CCI to penalise an enterprise or a group of enterprises up to 10% of the average of its global turnover or income of the last three years for abuse of dominant position or for entering into anti-competitive agreements. Apple has also challenged the March 3, 2025, order of the CCI asking the firm to furnish its financial statements for the financial years 2022, 2023 and 2024. The company told the High Court that it could be penalised for nearly US$38 billion if Indian law allowing the CCI to impose penalties on the "global turnover" of companies is upheld..The CCI has been dealing with a case against Apple regarding allegations of anti-competitive conduct in the market for the App Store. Apple has said that it is challenging the law at this stage because the CCI had passed an order in March this year asking the company to submit its audited financial statement for the financial years 2022, 2023 and 2024. In a case decided on November 10, the Commission imposed retrospective penalties on a different entity. Apple then filed the present petition contending that the imposition of similar fines on it would be “manifestly arbitrary, unconstitutional, grossly disproportionate, unjust and totally unwarranted”..The company argued that the effect of the amended penalty provision is that the turnover generated from all products or services of the enterprise can be aggregated for the computation of the penalty, instead of the turnover generated from the affected relevant product or services. It stated these penalty provisions are “patently unconstitutional and an impermissible legislative abrogation” as they purport to alter the scope of the penalty provision by way of an ‘explanation’, but in effect, expand the limits of the main section.According to the petition, the law violates the Supreme Court’s 2017 judgment in the Excel Crop case, which interpreted that the term turnover to mean “turnover generated from the particular infringing good/service related to the alleged contravention by an enterprise (and not the total turnover from all products and services of such enterprise)”..Senior Advocate Abhishek Manu Singhvi, appearing for Apple, contended while penalty on a particular product for dominant position can be allowed, imposing penalty on global turnover will have a "humongous effect"."The idea is usually, in a market, there are multi-product companies and the companies may have a dominant position with respect to product A. Usually, you can be penalised with respect to that product. If the sale is ₹100 Rupees, you can be penalised a portion of that. That will be affected for turnover across Indian but never for global turnover. My turnover in England does not affect turnover in India. My case here starts in 2021. This amendment is made effective from March 6, 2024. The effect is humongous," Singhvi said. He referred to the 2017 judgment of the Supreme Court in Excel Corp case."You cannot remove the basis of that judgment by adding an explanation. The Supreme Court said that the penalty cannot be disproportionate. It is part of Article 14 now. In the judgment, the Supreme Court said that if we adopt the criteria of total turnover, it would bring "shocking results". It has simply been changed by the explanation. Section 27 remains the same, but they have substantively changed it by adding an explanation, saying you can be fined for global turnover," Singhvi argued. The relevant turnover (for imposing penalty) should be the Indian turnover of the infringing product, he said..The Court then asked the CCI how the imposition of a penalty on all products can be justified for the abuse of the dominant position of one product."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.Senior Advocate Balbir Singh, appearing for CCI, said:"For major tech companies, a fine of US$ 200 million or US$ 300 million doesn't matter... If there is someone sitting outside India, how would their practices have an impact on India? Apple has approached the court at this time to scuttle the proceedings before the CCI," he said.He also said that at times, the infringing company would have no turnover in India."There was a shortfall in law and the object of this is the global turnover concept has been taken into account in those circumstances where you don't have a base in India, how do you punish them? We are following the relevant turnover concept, but the global turnover concept is for a very different reason where you don't have a presence in India," Singh said."So, you could have said that," the Court said. "We have," Singh said, referring to the guidelines..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 Central government was represented through Central Government Standing Counsel (CGSC) Ashish Dixit. .Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.