Relevant Turnover and Global Turnover Compared

The base on which a penalty is computed has been the most litigated question under Section 27, and the answer has changed twice. Until 2017 penalties were computed on the total turnover of the enterprise. Excel Crop Care Ltd. v. Competition Commission of India, (2017) 8 SCC 47 held that turnover in Section 27(b) meant relevant turnover, being the turnover of the product to which the contravention relates. The amendment of 2023 then redefined turnover in Section 2(y) as global turnover derived from all products and services. Both concepts survive, doing different jobs, and stating the sequence correctly is what most answers on this topic require.

1. The Two Concepts

2. The Sequence

1. Before 2017. Total turnover was used, which produced figures out of all proportion in diversified enterprises: a conglomerate contravening the Act in one product line faced a ceiling computed on everything it sold.
2. Excel Crop Care, 2017. The Supreme Court held that the word turnover must be read as relevant turnover. The reasoning was proportionality: a penalty computed on products having nothing to do with the contravention would be excessive, would offend the principle that the punishment must fit the offence, and could be arbitrary within the meaning of Article 14. The Court also set out a method, namely to determine the relevant turnover, then to consider aggravating and mitigating circumstances, and then to test the result for proportionality.
3. The amendment of 2023. Section 2(y) was substituted so that turnover means global turnover derived from all products and services. Since the decision construed a word that Parliament has since defined differently, relevant turnover is no longer the statutory base.
4. The Guidelines of 2024. The Commission's guidelines on the determination of monetary penalty begin the computation from the turnover or income relating to the products or services to which the contravention relates, adjust for gravity, duration and the aggravating and mitigating factors, and then apply the statutory ceiling. Relevant turnover therefore survives as the starting point for computation, within a ceiling that is global.

3. Why the Base Was Enlarged

Three reasons were given for the amendment. A penalty computed on Indian turnover alone understates the gain where a global enterprise contravenes the Act through a policy applied worldwide, and understates the deterrent required. Attributing turnover to a particular product is contested and manipulable, particularly in digital businesses where revenue is earned on one side of a platform and the conduct occurs on another. And a ceiling expressed in global terms brings India into line with the European practice of computing fines against worldwide turnover. The criticism made is the obvious one: a ceiling of ten per cent of global turnover is a very large number for a multinational, and the guidelines are the only thing standing between that number and the actual penalty.

4. The Practical Calculation

• Step one. Compute global turnover or income under the Determination of Turnover or Income Regulations, 2024, and apply the statutory ceiling of ten per cent of the average for the three preceding financial years, or in a cartel the alternative of three times profit for each year of continuance, whichever is higher.
• Step two. Compute the penalty under the guidelines, beginning from relevant turnover and adjusting for the nature and gravity of the contravention, its duration, and the aggravating and mitigating factors.
• Step three. Check the result against the ceiling, against the ability to pay and against proportionality, and record reasons at each stage, since an unreasoned figure is the commonest ground on which penalties are reduced on appeal.

5. Related Topics and Provisions