Apple contests India's antitrust penalty law

NEW DELHI, Nov 26: Apple is challenging India’s new antitrust penalty law under which the U.S. company could potentially face a fine of up to $38 billion, a court filing at the Delhi High Court, seen by Reuters, shows.

The challenge is the first against India’s antitrust penalty law that since last year allows the Competition Commission of India (CCI) to use global turnover when calculating the penalties it imposes on companies for abusing their market dominance.

Since 2022, Tinder-owner Match (MTCH.O) and Indian startups have been locked in an antitrust battle with Apple at the CCI, where investigators last year issued a report saying the U.S. smartphone company had engaged in “abusive conduct” on the apps market of its iPhone Operating System, iOS.

Apple denied all wrongdoing, and the CCI is yet to make a final decision in the case, including about any penalty.

The company is asking judges to declare as illegal the 2024 law that allowed the CCI to use global turnover, not just that in India, when calculating penalties, according to its 545-page court filing, which is not public.

Apple’s “maximum penalty exposure” at the rate of 10% of its average global turnover derived from all of its services globally for three fiscal years to 2024 could be around $38 billion, it said in the filing.

Such a “penalty based on global turnover…would be manifestly arbitrary, unconstitutional, grossly disproportionate, unjust,” it added.

Apple and the CCI did not respond to requests for comment.

Companies also risk fines of as much as 10% of their global turnover for antitrust violations in the European Union.

RETROSPECTIVE IMPOSITION

Apple cited the CCI’s use of the new rules for the first time on November 10 in an unrelated case, where they were retrospectively applied to a violation by the affected company a decade earlier.

Apple has “no choice but to bring this constitutional challenge now to avoid retrospective imposition of penalty against them,” it argued.

The company has maintained it is a small player compared to Google’s Android, which is the dominant player in the Indian market.

Apple’s smartphone base has, however, become four times larger in the last five years in India, according to Counterpoint Research.

APPLE CITES STATIONERY, TOYS EXAMPLE

The CCI found last year that Apple was not permitting any third-party payment processor to provide services for in-app purchases, where the fee could be up to 30%.

In a private submission to the CCI, reported by Reuters in October, Apple opponent Match argued a fine based on global turnover could “act as a significant deterrent against recidivism”.

In its court filing, Apple argued India should only impose a penalty based on the Indian revenue of the specific unit which violates antitrust law, giving an example of a toy seller running a stationery business.

It would be arbitrary and disproportionate to levy a penalty on the stationery business’s total turnover of 20,000 rupees, when the contravention is only in relation to the toy business that earns 100 rupees, it said.

Apple’s plea will be heard on December 3.

“Amended law is clear that CCI can consider global turnover,” said Gautam Shahi, a competition law partner at Indian law firm Dua Associates. “It will be difficult to convince the court to interfere with clearly laid down legislative policy.”