Shouldn’t be forced to participate in ‘unconstitutional penalty regime’ before CCI: Apple to Delhi High Court

Tech giant Apple Inc, which is facing a probe by anti-trust regulator CCI over allegations of abusing its position on its app store, has told the Delhi High Court that it should not be forced to participate in an “unconstitutional penalty regime” that permits penalties based on a company’s global turnover for indulging in anti-competitive practices.

In a rejoinder filed in its litigation with the regulator, Apple said permitting it to approach the appellate forum, i.e. The National Company Law Appellate Tribunal, once any such “unjust” penalty is imposed on it by the Competition Commission of India (CCI) would mean that “constitutional harm” was already done.

The US-based company assured that its intention or purpose was not to delay or stall the ongoing proceedings before the CCI but when the “source” of power itself was under challenge, it could not be compelled to first suffer the consequences. Rebutting CCI’s allegations of delay, Apple also said the record reflected its “continual co-operation and timely engagement” in the investigation process. In December, Apple had filed a petition challenging the amendment to the Competition Act, 2002, which allows CCI to impose penalties based on a company’s global turnover.

It also challenged the direction to furnish the firm’s audited financial statements for several years. In its rejoinder, Apple said it “embraced” competition as it pushed it to deliver the best, most innovative products and services for their users, and it always acted in compliance with applicable laws. It asserted that its “maximum penalty exposure”, according to the amended law, could be approximately $38 billion, which was “manifestly arbitrary, irrational and grossly disproportionate”, rendering the same to be ultra vires the provisions of Article 14 and Article 21 of the Constitution.

“(While the company) believe(s) that there is no basis for the imposition of any penalty against them. However, the petitioners have no choice but to bring this constitutional challenge now to avoid the entirely unjust outcome of the retrospective imposition of a penalty against them based on global turnover derived from all products/ services,” the rejoinder said.

“Forcing the petitioners to wait until the proceedings are completed under an unconstitutional penalty regime, and only thereafter permitting them to approach the appellate forum after making a significant pre-deposit, would mean that the constitutional harm would already be complete before any effective judicial review is available,” stated the document. Apple, in its petition, has said the effect of amended penalty provisions was that the turnover generated from all products or services of the enterprise could be aggregated for computation of the penalty, instead of the turnover generated from the affected “relevant product or services” of the enterprise. It said that after the amendment, the global turnover of an enterprise, generated from territories outside the jurisdiction of the CCI, could be considered for the computation of the penalty.

The plea said the amended provision empowered the CCI to fine firms found guilty of abuse of dominance or anti-competitive conduct up to 10 per cent of its average turnover of the preceding three financial years.

Apple stated that its maximum penalty exposure, that is, 10 per cent of its average global turnover derived from all of its products or services globally for financial years 2022 to 2024, could be around $38 billion.