India's global turnover penalty law unconstitutional, Apple says before HC
What's the story
Apple has challenged the constitutionality of a provision in the Competition Act, 2002, before the Delhi High Court. The tech giant is contesting Section 27(b), which allows for penalties based on a company's global turnover for three preceding financial years. The challenge comes as part of an ongoing investigation into Apple's App Store policies by the Competition Commission of India (CCI).
Penalty details
Apple's potential penalty and CCI's request
Apple has argued that the expanded definition of 'turnover' could result in a penalty of $38 billion (approximately ₹3.41 lakh crore). This is based on the company's global turnover for the last three fiscal years—FY22, FY23, and FY24. So far, all the CCI has done is ask Apple to provide access to its global financial records.
Legal challenge
Apple's argument against 'global turnover'
In its legal challenge, Apple has argued that the CCI's interpretation of 'turnover' as 'global turnover' is unconstitutional. The tech giant cited a Supreme Court ruling in Excel Crop Judgment where 'turnover' was defined as 'relevant turnover.' This definition only includes the revenue generated from specific infringing products or services linked to alleged anti-competitive conduct, not the entire revenue of an enterprise.
Penalty guidelines
Supreme Court's ruling on penalty calculation
The Supreme Court had laid down a two-step process for calculating penalties under Section 27(b) of the Competition Act. The first step is determining relevant turnover by identifying revenue related only to the contravening products and services. The second step involves deciding an appropriate percentage of penalty on this relevant turnover, based on "nature of the offense and benefit derived from it," not just enterprise size.
Disproportionate penalties
Apple's view on CCI's penalty provisions
Apple has argued that the amended penalty provisions in Section 27(b) of the Competition Act give CCI disproportionate power to impose penalties based on 'global turnover.' This refers to an enterprise's total revenue from all products and services. The tech giant contends that this interpretation goes against a Supreme Court directive and is being misused to target its entire global turnover.