The European, Middle Eastern and African Antitrust Review 2018

Russia: Federal Antimonopoly Service

14 August 2017

Head

First results of the antimonopoly reform

The Russian Law on Protection of Competition was adopted in 2006. During the past 10 years, there have been a number of amendments to the law. The most recent - the so-called ‘fourth antimonopoly package' - was adopted in 2016 and enabled liberalisation of the legislation, as well as a reduction in the administrative burden upon businesses.

With the entry into force, in 2016, of amendments to the Law on Protection of Competition, businesses in Russia have experienced many positive changes, one of the most prominent of which was further shift to preventive control. The Federal Antimonopoly Service (FAS) extended the institution of warnings and cautions almost on all Articles of the Law, which provide severe sanctions, which resulted in 55% reduction in the case load. In 2015, the FAS initiated and considered more than 9,000 cases. In 2016, there were only 4,000 cases. The number of warnings and admonitions almost doubled; last year, the FAS issued more than 5,000 warnings, 77% of which were executed. This was one of the reasons for a decrease in number of proceedings initiated by the antimonopoly body.

The provision on the possibility to define the dominant position of a business entity with less than 35% share on a particular commodity market, with the exception of collective dominance, as well as maintenance of the Register of business entities with over 35% market share, was abolished.

Furthermore, within the framework of development of new provisions of the Law on Protection of Competition, the FAS adopted an order that made important additions to the Procedure for analysing the state of competition in the commodity market. The new version of the Procedure establishes an obligatory analysis of the state of competition within the necessary limits for those categories of cases on violation of the antimonopoly legislation, for which such an analysis was not required earlier.

The amendments that came into force allowed a reduction of the burden on the judicial system. Thus, within FAS's Central Office structure a collegial body was formed that is empowered to review the decisions and orders of the regional offices. Over the past year, the FAS committee considered several dozen acts of regional offices. During the course of 2016, it prepared seven clarifications, which were widely discussed with the business community and played an important role in the formation of judicial practice. This enabled common approaches to the enforcement of antimonopoly legislation.

Another important event in 2016 was the review of the judicial practice of the Supreme Court of the Russian Federation on the application of the Law on Protection of Competition. It reflected key points for antimonopoly regulation. This is, in fact, a major document summarising the practice over the past few years (a previous, similar document was prepared by the Supreme Court of Arbitration in 2008).

Throughout the time of the antimonopoly reform in Russia, there were policy documents showing the direction of antimonopoly regulation development. An enormous number of government acts were issued, primarily concerning the rules of non-discriminatory access in such sectors as energy and other areas of natural monopolies; in more than 200 federal acts, antimonopoly norms were introduced, in particular such fundamental laws as the law on bioresources the law on mineral resources and the law on land (with chapters on antimonopoly regulation for each). The Action Plan (road map) titled ‘Development of Competition and Improvement of Antimonopoly Policy', implemented in 2015, was approved.

At a regional level, positive changes have also taken place in recent years. The Russian government approved the Standard for the Development of Competition in which specific parameters were set - for example, what the percentage of private preschool institutions, schools and companies carrying passenger transport in cities should be in 2018.

In 2016, the FAS developed a draft Decree of the President of the Russian Federation, which establishes the promotion of competition in Russia as a priority for the activities of authorities at all levels, and which approves the National Competition Development Plan for 2017-2018. The National Plan significantly contributes to the reduction of the share of the public sector in the economy and the development of support for small and medium-sized businesses. It defines the goals and principles of the pro-competitive policy; the tasks of the authorities to achieve them; and specific activities and instructions. Among them is an order to the government to approve plans for the development of competition in industries, and to indicate the expected results of such development. For instance, the measures taken in health care will enable improved availability of medicines and a reduction prices for them.

In the agro-industrial sector, there are plans to increase the share of Russian elite seeds and animal-breeding in the domestic market, which will reduce this market's dependence on foreign breeding resources. In addition, there should be an increase in competition on a global scale. The actions set forth in the National Competition Development Plan form the Russia's offerings to the world market for modern agricultural technologies.

The document provides, inter alia, the development of certain draft federal laws, including among others:

  • prohibition of the creation of unitary enterprises in competitive markets and the liquidation, as of 1 February 2018, of the organisational and legal form of a unitary enterprise;
  • specific features of the management of reorganised unitary enterprises by the sectoral authorities;
  • the prohibition of direct or indirect acquisition by the state and municipal entities of shares of business entities operating in commodity markets in a competitive environment;
  • the obligation of legal entities that receive state and/or municipal preferences to purchase goods, works and services from small business entities up to a certain amount;
  • the possibility (within the interests of national security, and the protection of life and the health of citizens) to allow the use of an invention, utility model or industrial design without the consent of the patent holder, but with prompt notification and paying him or commensurate compensation (compulsory licensing); and
  • legal regulation of the system of internal compliance with the requirements of the antimonopoly legislation (antimonopoly compliance).

Key achievements

The FAS pays a particular attention to the digital economy. In 2016, the FAS found violations in the Google's actions which resulted in prohibition of pre-installation of other developers' competing applications. The FAS's decision on violation of the antimonopoly legislation by Google and Prescription for the company to correct its market activity and to pay a 438 million rouble fine were confirmed by courts of two instances and took legal effect. In the beginning of 2017, the FAS reached a settlement with Google; the company paid the fine in full.

Furthermore, the FAS initiated two proceedings against Apple. One of them concerned coordination of economic activity of the largest Apple products resellers in Russia. The FAS found that the company violated the antimonopoly legislation. The second case related to repairing Apple products. The FAS found that Apple does not supply necessary spare parts for repair, resulting in the infringement of consumers' rights.

In the end of 2016, the FAS initiated proceedings on abuse of dominant position by Microsoft.

As a whole, 2016 has been highly efficient for the FAS with regard to combating unfair practices of large international companies. For instance, Russian courts supported the FAS's decision on violation of the antimonopoly legislation by the five largest liner shipping companies that performed prohibited concerted actions, which resulted in fixing mark-ups to freight rates on the market of liner container carriage, thus violating the antimonopoly law of the Russian Federation. In the beginning of 2017, the FAS reached a settlement with companies, within the framework of which the carriers stopped the violation and undertook obligations that will enable fair conditions for consumers of liner shipping services. Currently, the FAS, together with the market participants, is devising the Guidelines to determine the common conduct rules and principles on the market of liner marine transportation.

An important achievement was reduction of prices for pharmaceuticals in Russia. The FAS carried out an international comparative analysis of medicinal drug prices. The authority published a list of 66 pharmaceuticals, whose prices in other countries were lower than the upper limit of ex-works prices registered in the Russian Federation. As a result of various measures taken by the FAS, prices of 124 expensive vital and essential medicines were lowered to a minimum (by between 21% and 88%, with an average of 50%). The budget savings will exceed 5 billion roubles per year.

The FAS completed implementation of the Fair Roaming Principles in Russia and some other countries, resulting in significant reduction of inter-operator rates and subscription tariffs in roaming; special offers to reduce payments in roaming were presented to subscribers.

In 2016, the authority exposed the most wide-scale cartel in Russia. The FAS made a decision on a cartel case opened in the course of competitive bidding for supplying military uniforms and gear for the needs of the Russian Ministry of Internal Affairs, the Federal Security Service and the Federal Customs Service. A total of 118 legal entities were brought in the case as respondents. The FAS established that cartel participants were involved in 18 open electronic auctions for the total sum exceeding 3.5 billion roubles, and 90 companies were found guilty. Some cartel participants simultaneously managed three or four legal entities and put them at auctions to create a veneer of competition. The courts supported the FAS decision, and cartel members paid big administrative fines.

Advocacy

The FAS continued to improve its performance as one of the most open Russian authorities. The Authority worked out the concept of the new information policy, aimed at improving awareness of different groups of stakeholders (regulatory bodies, courts, business, citizens, academic community, etc) on functions and principles of the FAS's activity. Within the framework of the concept's implementation, the Authority conducts the analysis of global and regional competition systems; cooperates with relevant international publishing houses, embassies, trade missions of Russia in other countries; makes efforts to expend the presence in the internet, and so on.

The FAS updated its official website in English and Russian, created English-language webpages on Wikipedia and Facebook, and launched a weekly, English-language digest of news. There was a 27.4% increase in the publication of documents in the Base of Decisions compared to 2015, and 231 video reports on the FAS's activity were posted on the internet (there were 87 in 2015). A podcasts featuring weekly news, international practice reviews, commentary from speakers on relevant topics and interviews was launched and is now available on the FAS's website. Video lectures on the specifics of antimonopoly regulation, with contributions from the FAS's representatives, have also been posted on the portal for LF Academy, the new online legal education project. A number of meetings with business representatives held at Russia-based chambers of commerce of foreign countries. Workshops for representatives of the competition authorities of Kazakhstan and Belarus were organised, covering issues of detection and investigation of cartels, the carrying-out of an analysis of commodity markets, etc.

In 2016, the FAS continued actively working on the promotion of its initiatives at an international level. This includes projects within the framework of UNCTAD; active participation in sessions of the OECD competition committee and the OECD global forum on competition, ICN working groups; and traditional cooperation within the framework of the CIS and the EEU.

In 2016, nine international agreements and memoranda of understanding (MoUs) were signed with foreign competition authorities in order to develop antimonopoly regulation.

With regard to competition advocacy, it should be noted that the FAS's policy is aimed at strengthening the capacity of competition agencies all over the world. In particular, an example of successful international consolidation of such format is cooperation of antimonopoly bodies within the framework of the BRICS countries.

Since the first conference of the BRIC (later BRICS) competition authorities was held in Kazan (Russia) in 2009, the authority has come a long way to develop an effective dialogue between competition authorities of all five countries, at the level of both senior officials and experts.

At the same time, there is room for significant improvements in the field of competition, particularly with regard to creating the necessary expertise in practical interaction of ‘the five' format and developing working mechanisms of multi-sided collaboration.

An effective way to realise this potential is to gradually transform interaction of the BRICS competition authorities into a full-fledged mechanism of strategic and ongoing engagement in the key issues of competition policy and enforcement.

In order to achieve these outcomes, in the framework of the International Legal Forum in St Petersburg, the heads of the BRICS competition authorities signed an MoU for cooperation in the field of competition law and policy on 19 May 2016.

In addition to traditional forms of cooperation, such as consultations and exchange of non-confidential information, the MoU provides the possibility to establish joint working groups on research of competition issues in the socially important economic sectors of mutual interest of the BRICS countries. So far, working groups on pharmaceuticals, food and automotive industry have been established.

Moreover, on 19 April 2016, the Code of Good Practices in the Pharmaceutical Industry, which was developed by the Association of European Businesses jointly with the FAS, was adopted.

The Code includes a number of progressive points that clarify certain legislative provisions. It is aimed at improving transparency in business and the homogeneity of approaches acceptable for business. The document is a result of dialogue between business and regulators; it aims at improving mutual understanding and cooperation. At the moment, there are 13 largest pharmaceutical companies that acceded to the Code.

The Code will prevent inflated prices of medicines; unreasonable denials in supply; violation of the antimonopoly legislation; and corruption. In order to improve transparency and openness in the sphere, it provides an obligation to publish requirements and documents containing procedures of contractors' selections and the conditions of interaction with them.

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