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CS Executive · Economic, Commercial and Intellectual Property Laws · Competition Law

Four Indian steel producers form a cartel that is held to contravene section 3. Over a three-year continuance of the agreement, one member's profit was Rs 20 crore each year and its turnover was Rs 100 crore each year. Under the proviso to section 27(b), what is the maximum penalty the Commission may impose on this member for each year of continuance?

The maximum penalty is Rs 60 crore for each year. For cartels, section 27(b) allows up to three times profit or ten per cent of turnover for each year, whichever is higher. Three times Rs 20 crore is Rs 60 crore, which exceeds ten per cent of Rs 100 crore, that is Rs 10 crore.

  1. ARs 60 crore, being three times profit, which is higher than ten per cent of turnoverCorrect
  2. BRs 10 crore, being ten per cent of turnover
  3. CRs 20 crore, being one times annual profit
  4. DRs 30 crore, being the average of the two measures

Explanation

For cartels, the penalty may be up to three times profit for each year or ten per cent of turnover for each year, whichever is higher. Three times profit is 3 x 20 = Rs 60 crore. Ten per cent of turnover is Rs 10 crore. The higher figure is Rs 60 crore. Choosing Rs 10 crore applies the general rule and ignores the cartel proviso.

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