Apple has launched a legal battle against Indian authorities over a controversial amendment to the country's competition law that could see the tech giant facing a staggering $38 billion penalty. The company filed a 545-page petition with the Delhi High Court on November 26, challenging the constitutional validity of provisions that allow penalties based on global turnover.
The Legal Battle Over Penalty Calculations
At the heart of Apple's legal challenge is the amended Section 27(b) of India's Competition Act, which was revised in 2023. The new provisions permit the Competition Commission of India (CCI) to calculate penalties using a company's worldwide revenue rather than just its India-specific earnings. This represents a dramatic shift from previous practice and significantly increases potential liabilities for multinational corporations.
The CCI's 2024 monetary penalty guidelines outline a multi-step approach to calculating fines. Typically, the regulator begins with relevant turnover - revenue from the specific product or business vertical where anti-competitive conduct allegedly occurred. The base penalty can reach up to 30% of this amount, with adjustments for aggravating or mitigating circumstances.
However, in cases involving digital markets where India-specific revenues are difficult to isolate or represent a tiny fraction of global earnings, the CCI can invoke the statutory maximum of up to 10% of the company's average global turnover from the previous three financial years.
Historical Context and Legal Evolution
The amendment marks a significant departure from previous legal interpretations. Originally, the Competition Act didn't explicitly define "relevant turnover," leading the CCI to initially interpret 'turnover' as total turnover. This approach resulted in substantial fines, such as the 2012 case where Excel Crop Care was fined 9% of its total turnover.
In 2017, the Supreme Court ruled that penalties should ordinarily be linked to relevant turnover. However, this principle proved challenging to apply in digital markets where revenue from specific products or services is often intertwined with broader business operations.
The 2023 amendment and subsequent 2024 guidelines were specifically designed to address this challenge, effectively reversing the practical effect of the Excel Crop Care precedent. Deterrence was a major driving factor behind these changes, as penalties based solely on India revenue often resulted in modest fines that failed to prevent misconduct by deep-pocketed global corporations.
Global Comparisons and Indian Specifics
India's approach finds parallels in European Union law, which also allows for fines of up to 10% of global turnover. However, the European Commission typically begins with relevant market turnover and applies adjustments. For instance, the EC's 2018 €4.34-billion fine against Google in the Android case was calculated based on revenue from Google's search services on Android devices within the European Economic Area.
Similarly, when the EC fined Apple €1.84 billion in 2024 for restrictions affecting music-streaming apps, the amount represented just 0.5% of Apple's global turnover, well below the 10% cap.
The crucial difference lies in the revenue proportions. Apple's Europe revenue amounted to $101.33 billion in FY24, while its India revenue was approximately $8 billion from April 2023 to March 2024. This disparity makes global turnover-based penalties particularly significant in the Indian context.
Apple's Legal Arguments and Immediate Concerns
Apple's petition argues that relying on worldwide revenue for India-specific conduct is "arbitrary" and "grossly disproportionate", especially when alleged misconduct involves only a small portion of its global business. The company also raises concerns about retrospective impact, as the law uses average turnover from the preceding three years even for conduct predating the amendment.
Critically, Apple contends that the amendment conflicts with the Supreme Court's Excel Crop Care judgment, which held that penalties should ordinarily be based on relevant turnover. The company asserts that the new provisions "purport to reverse the letter and spirit" of that ruling.
The timing of Apple's challenge is directly linked to the ongoing CCI investigation into the company's App Store practices. Between 2021 and 2022, several entities including NGOs, Indian startups, and Match Group (owner of dating app Tinder) approached the CCI, accusing Apple of abusing its dominance by mandating use of its in-app payment system and charging commissions up to 30%.
Broader Implications for Big Tech and Indian Market
The outcome of this case will have far-reaching consequences beyond Apple. Any multinational firm whose conduct in India can be construed as 'abuse' under competition law now faces penalties far exceeding what could be derived from India revenue alone.
According to Supreme Court advocate B. Shravanth Shanker, even a partial victory for Apple could give other tech companies like Meta, Google, and Amazon powerful grounds to challenge the CCI's penalty computations. However, if Apple loses, the CCI could begin imposing penalties based on global turnover, substantially increasing financial risks for Big Tech operations in India.
Indian startups and developers have long argued that dominant platforms impose restrictive practices affecting earnings and competition. The case's outcome will directly impact these companies and shape India's regulatory approach to digital markets.
As Delhi High Court advocate Ekta Rai noted, "For global tech companies, this case is a signal of how serious India is about policing digital markets." If the government's position is upheld, India joins the 'high-regulation, high-stakes' club alongside the EU. If Apple succeeds in narrowing the law's application, Big Tech will still view India as strict but with judicial oversight ensuring proportional penalties.
The Delhi High Court is scheduled to hear Apple's petition on December 3. This case will determine whether India's strengthened antitrust penalty framework can withstand constitutional scrutiny, with global technology companies, investors, and regulators closely watching the outcome that could redefine digital market regulation in one of the world's fastest-growing economies.
