Clipped from: https://www.thehindubusinessline.com/economy/nclat-ruling-confirms-provisional-penalty-imposed-on-google-is-final/article66683484.ece
NCLAT strikes down the word ‘provisional’ used in imposition of penalty in the CCI order
In what is seen as a big relief for Google, the National Company Law Appellate Tribunal (NCLAT) ruling issued on Wednesday in the Android case has confirmed that the provisional penalty of ₹1,338 crore levied by CCI on the tech giant is the final.
Having held that the penalty imposed on Google as final, the NCLAT Bench comprising Ashok Bhushan, Chairperson, and Alok Srivastava, ruled in its 189-page order that the penalty would not be subject to any revision upon Google furnishing any further financial details and supporting documents, as sought by CCI vide its order September 19, 2022.
It maybe recalled that the Competition Commission of India (CCI) had, on October 20 last year in the Android ruling, imposed a provisional penalty on Google, citing non-furnishing of full financial details by Google.
In the wake of Google not providing the full set of financial information as sought by the CCI vide its order dated October 6, 2021 and reiterated in its later order dated October 17, 2021, the CCI had carried out the “best estimation” on the basis of financial statements and information submitted by Google. This approach of CCI— to quantify the monetary penalties on the basis of data presented by Google —has now been endorsed by NCLAT.
In doing so, NCLAT also noted that the CCI had considered the lower of the two figures, from between ₹ 19,904 crores which is the sum total of various segments/heads of Google business in India for FY 2020-2021 and ₹ 16742 Crores, which is its total revenue from entire business from Indian operations for the FY 2020-21. “Thus, in a conservative approach, the CCI has taken the lower of these two figures as turnover for the FY 2020-2021 and imposed a penalty @ 10% of its average ofrelevant turnover for the last three FYs 2018-19, 2019-20 and 2020-2021. We uphold the amount of penalty imposed by CCI on Google”, the NCLAT said in its 189-page order.
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On the issue of “provisional penalty”, the NCLAT Bench noted that once the CCI has derived the “best estimate” of the relevant turnover for the last three preceding financial years, and imposed a penalty of 10 percent of the average of such turnover, there is no need for further revision of this penalty on the basis of financial information or data that may come to light in future and any such further revision will not be in keeping with law.
NCLAT therefore deleted the word ‘provisional’ used in imposition of penalty in the entire CCI Order.
Commenting on the NCLAT ruling on the aspect of “provisional” penalty, a lawyer representing Startups on condition of anonymity said “It is indeed strange that NCLAT has condoned the brazen non-compliance, rather defiance, of regulatory direction to Google to present its full and true financial details, which were critically required to compute the penalities. The ruling by interdicting the pending proces before CCI to gather full details, has virtually incentivized non-compliance and thereby enabled Google to hide its true financials which could have led to massive upward revision in penalty”.
Chandni Chawla, Associate Partner, Phoenix Legal , said “While upholding the provisional penalty levied by CCI on Google as final, the NCLAT has dwelled into the rationale of relevant turnover as provided in the landmark decision of Excel Corp. Care.
The NCLAT has analysed what will be considered to be relevant turnover in case of a “digital platform” such as Google and has observed that in case of OS based mobile devices the revenue streams of different apps cannot be isolated and distinguished but are in fact interwoven and accordingly have held that the entire ecosystem of Google sitting on the Android OS becomes a source of revenue and therefore revenue from all the apps will become relevant turnover”.