Russia: from the enforcer
Stats-Secretary, Deputy Head
Questions and answers
How long is the head of agency’s term of office?
Maxim Shaskolsky, Head of the FAS, was appointed in November 2020. The duration of employment term either of the Head of the FAS or of his Deputy Heads is not limited.
When is he or she due for reappointment?
There is no reappointment limitation or other specific rules.
Which posts within the organisation are political appointments?
The Head of the FAS, the Stats-Secretary – Deputy Head and the Deputy Heads of the FAS are appointed or released by a decree of the government of the Russian Federation.
What is the agency’s annual budget?
In 2020, the budget of the FAS was 5.8 billion roubles.
How many staff are employed by the agency?
In 2020, there are 3,504 members of staff at the FAS, including 1,189 public servants in the central office and 2,315 in 84 regional offices of the FAS.
To whom does the head of the agency report?
The FAS reports directly to the government of the Russian Federation. The First Vice Chairman of the government of the Russian Federation lends assistance to the FAS in its activity.
Do any industry-specific regulators have competition powers? If so, how do these relate to your agency’s role?
No, the FAS is the only regulator with competition law enforcement powers. It implements antimonopoly control over all industries and sectors of the economy without any exceptions.
Apart from the control over compliance with the antimonopoly legislation, the employees of the FAS carry out the following functions:
- control over compliance with the legislation on advertising;
- control over state aid granting;
- control over compliance with the legislation on public procurements (e.g., in the sphere of defence and security);
- control over anticompetitive actions of state authorities;
- control over compliance with the legislation on foreign investments in the economic entities of strategic importance;
- control over compliance with the legislation on trade; and
- tariff regulation:
- state control in the area of price (tariffs, additional charges, rates) regulation;
- opening and maintenance of the Federal data register of last resort providers and areas of their operation;
- opening and maintenance of the Data register of natural monopolies under the state regulation and control; and
- dispute resolution in the area of tariff regulation on the regional and local markets.
Areas of tariff regulation include heat supply, truck pipeline oil transportation, pipeline gas transmission, railway services, transport terminal, port and airport services, public electric and postal communications services, electricity transmission services, electricity industry operative-dispatch management services, heat power transmission services, inland waterway infrastructure’s utilisation services, radioactive waste disposal services, water supply and drainage services.
Moreover, most of the public servants of the FAS are involved in competition advocacy, including interaction with other state authorities.
May politicians overrule or disregard authority’s decisions? If they have ever exercised this right, describe the most recent example.
No, neither the government nor any politicians have the power to overrule or disregard authority’s decisions. Decisions and rulings of the antimonopoly body may be appealed in court (for claims made by individuals and officials) or commercial court (for claims in the field of business and other economic activity by way of consideration of economic disputes and other cases referred to their competence by the Arbitration Procedure Code and by other federal laws, based on the rules established by the legislation on legal proceedings in arbitration courts), within three months from the date of decision-making or issue of a ruling.
Does the law allow non-competition aims to be considered when your agency takes decisions?
In accordance with Article 1 of the Federal Law of 26 July 2006 No. 135-FZ on Protection of Competition (hereinafter, the Law on Protection of Competition) the aims of the antimonopoly regulation are:
- securing the unity of the economic area;
- free movement of goods;
- freedom of economic activity;
- protection of competition; and
- establishing conditions for effective functioning of the product markets.
These are the aims the FAS is guided by when making decision.
Which body hears appeals against the agency’s decisions? Is there any form of judicial review beyond that mentioned above? If so, which body conducts this? Has any competition decision by the agency been overturned?
Decisions of the FAS can be appealed in courts within three months from the date the decision was made.
Since 2016, decisions of the regional offices in some cases can be appealed to a collegial body of the FAS. In accordance with Article 52 of the Law on Protection of Competition, if decision or ruling of the regional office is appealed to collegial body of the FAS, the acts determined with regard to the case on violation of antimonopoly legislation can be appealed to an arbitration court within one month from the moment when decision of the collegial body of the FAS came into force.
In accordance with the Arbitration Procedure Code, the Supreme Court has the power to review decisions taken by courts of lower instances.
The Constitutional Court is responsible for considering issues regarding the conformity of standards of the legislation of the Russian Federation to the Constitution. For the entire existence of the FAS, there have been seven cases related to the Constitutional Court.
In 2020, thanks to the development of the system of warnings, antimonopoly compliance and a number of other changes in competition legislation, the number of competition law violation cases brought by the FAS continued to decline: 2,395 cases were initiated (for instance, in 2017 – 3,534 cases, in 2018 – 3,223 cases, in 2019 – 3,029 cases), 1,823 decisions were made on the existence of a violation, 316 of them were appealed to the court (17 per cent). 24 of them were declared invalid by the court (8 per cent of appealed decisions and 1 per cent of total number of decisions).
Has the authority ever blocked a proposed merger? If yes, please provide the most recent instances.
In 2020, 1,019 pre-merger and 133 post-merger notifications were submitted to the FAS. Of these, 23 pre-merger notifications were blocked.
The FAS makes a decision to block a proposed merger in exceptional cases and on the grounds provided for in Paragraphs 5, 6 of Part 2 of Article 33 of the Law on Protection of Competition.
For instance, the FAS denies approval if one of the following conditions is met:
- the transaction or actions lead or can lead to restricting competition (particularly, as a result of developing or strengthening dominance of a applicant or dominance of a person that will be formed as a result of exercising the notified transaction, other action);
- if examining the submitted documents, the antimonopoly authority finds that the information, contained in them and important for decision-making, is unreliable;
- if an applicant failed to provide available information, requested by the antimonopoly authority, in the absence of which a decision on restricting competition or absence of restricting competition cannot be made on a notification in question.
In addition, a decision to deny an approval can be made if a transaction is not allowable and the obligations that can be imposed by an injunction are not commensurable with the adverse consequences that can emerge following a notified action or a transaction, particularly, if the obligations proposed by the parties are not sufficient or the parities failed to fulfil prerequisites under Part 6 Article 33 of the Law on Protection of Competition.
The FAS can also deny an approval if an applicant submitted evidence confirming that a planned transaction/action can be allowed, however, according to evaluation made by the antimonopoly authority, the submitted evidence contains insufficient grounds to recognise that an action or a transaction can be allowed under Part 1 Article 13 of the Law on Protection of Competition.
An absolute reason to refuse approving an action or a transaction is also non-conformance to the requirements of the Federal Law of 29 April 2008 No. 57-FZ on the Procedures for Foreign Investments in the Business Entities of Strategic Importance for Russian National Defence and State Security, that is, in case of disapproval by the Government Commission for control over foreign investments, particularly, if this decision is made through applying to transaction a procedure under Article 6 of the Federal Law of 9 July 1999 No. 160-FZ on Foreign Investments in the Russian Federation.
Has the authority ever imposed conditions on a proposed merger? If yes, please provide the most recent instances.
Behavioural and structural remedies apply to transactions as a result of occurrence of a dominant position or competition restriction, including in the related markets in cases when the performance of such remedies allows for the avoidance of negative consequences (Paragraph 2 of Part 1 of Article 23 of the Law on Protection of Competition). In 2020, the FAS issued 48 decisions with remedies on pre-merger notifications.
In 2020, the FAS conditionally approved the transaction between telecoms operators on the conclusion of an agreement on joint activities to obtain the technical feasibility of deploying 5G communication networks on the territory of the Russian Federation and ordered them to maintain non-discriminatory access to radio frequencies for all representatives of the industry.
In particular, the telecoms operators participating in the transaction have to develop and agree with the FAS the conditions for the use of infrastructure and sharing of radio frequencies, as well as conditions for the provision of infrastructure for MVNOs (mobile virtual network operator).
The FAS believes that access to the released radio frequency spectrum for the construction of 5G networks and the subsequent provision of mobile radiotelephone communication services on 5G networks is an opportunity to provide new generation communication services on the territory of the Russian Federation.
Has the authority conducted a Phase II investigation in any of its merger filings? If yes, please provide the most recent instances.
In 2020, the FAS opened a Phase II investigation in 289 merger filings.
Merger filings should be provided to the FAS together with information and documents as required by the Law on Protection of Competition. All documents should be provided in hard copy or in electronic form. If the package of documents is not complete, it may be returned to the applicant.
Since the merger filing, the FAS has 1 month to consider it. If there are factors that indicate that competition can be restricted or limited, the authority can extend the period for consideration of the application for two more months (in general, the examination takes three months). If the agency issues preliminary conditions to the merging companies, the companies are given nine months for their implementation. Then the FAS issues a final decision on whether to approve a transaction, including a ruling aimed at ensuring competition where appropriate.
For example, an in-depth market analysis was carried out by the FAS as part of the consideration of the Philip Morris/KT&G transaction.
In 2020, the FAS considered the conclusion of a joint venture agreement between Philip Morris products S.A. and Korean company KT&G Corporation regarding the joint sale of innovative nicotine-containing products (heated tobacco products and devices for their consumption) under the KT&G brands in the Russian Federation.
The FAS determined that emergence of a new product in the market will encourage other participants to create their products with better consumer properties. However, when making a decision, the FAS also took into account the fact that Philip Morris is one of the largest companies in the market for both tobacco and innovative nicotine-containing products in the world and in Russia. Thus, the increase in the company's market power had to be compensated by the restrictions imposed by the antimonopoly authority.
The transaction was approved with behavioral remedies to companies aimed at ensuring competition in the market, including: submission to the FAS information on the volumes of production/import and sales of innovative nicotine-containing products in the Russian Federation; the obligation not to renew the agreement on joint activities and distribution agreement after the expiration of their five-year term without obtaining the prior consent of the FAS; the obligation to develop and agree with the FAS respective commercial policy; and during the initial period of the contracts (three years), in the event of an increase or decrease by more than 30 per cent during each year in the territory of the Russian Federation of wholesale prices for innovative nicotine-containing products to provide the FAS with an economic analysis of the reasons for such a change no later than 30 calendar days after the end of the corresponding year.
Has the authority ever pursued a company based outside your jurisdiction for a cartel offence? If yes, please provide the most recent instances.
According to Part 2 of Article 3 of the Law on Protection of Competition:
The sphere of application of the Law on Protection of Competition is applicable to any agreements and deals concluded between the Russian and (or) foreign persons or organisations outside the Russian Federation, as well as to their actions, provided such agreements or deals or actions influence considerably competition environment in Russia.
One of the best examples in cross-border cases is the decision made in 2015 by the FAS regarding the anticompetitive agreement the largest liner shipping companies A.P. Moller-Maersk A/S (Denmark), CMA CGM SA (France), Hyundai Merchant Marine Co. LTD (Korea), Orient Overseas Container Line Limited (Hong Kong) and Evergreen Marine Corp Ltd (Taiwan).
The FAS Russia found them to have violated the ban on concerted actions, which led to the setting of surcharges to the freight rates in the market of liner container transportation on the Asia-Russian Federation route in 2012–2013. The geographical boundaries of the commodity market covered 12 states.
The FAS established that in 2012–2013, information about mark-ups to freight rates was published on a website of one of the carriers, after which other market participants fixed the same mark-ups. Such concerted actions are prohibited for competitors, whose consolidated share of a relevant market exceeds 20 per cent and the market share of each entity exceeds 8 per cent. No Russian company is included in the "top 50" marine liner container operators. Therefore, domestic participants of international economic activities fully depend on the quality and the costs of services supplied by foreign companies. Sudden changes in prices increase the prime costs of goods for domestic consumers.
The shipping companies filed a lawsuit to invalidate and abolish the FAS decision. However, on 7 September 2016, the Moscow Arbitration Court supported a decision of the antimonopoly body regarding international container lines.
In 2017, the FAS reached a settlement with companies, within the framework of which the carriers stopped the violation and undertook obligations, the execution of which will enable fair conditions for consumers of liner shipping services.
Do you operate an immunity and leniency programme? Whom should potential applicants contact?
Yes, the legal basis for leniency programme is set out in Article 14.32 of the Code of Administrative Offences of the Russian Federation. A person who voluntarily reports to the FAS or its regional office on the conclusion of an agreement or about exercising concerted actions prohibited by the antimonopoly legislation is relieved from administrative liability for administrative violations specified in Parts 1 and 3 of Article 14.32 of the Code of Administrative Offences of the Russian Federation, provided the following conditions are met:
- at the time of the person filing an application, an antimonopoly body did not already have relevant information and documents about the committed administrative offence;
- the person refuses to participate or further participate in the agreements or to exercise or further exercise concerted actions; and
- the information and documents presented are sufficient to establish the administrative violation.
The FAS’s website contains information on how a person is released from an administrative liability if the person voluntarily applies to the competition authority, as well as the contact details to report a cartel. Confidentiality of information is ensured by the FAS in accordance with the current legislation of the Russian Federation.
The legislation of the Russian Federation also oversees the mitigation of administrative liability. Companies that could not apply for leniency may use the mitigation mechanism.
Currently, the leniency programme and the mitigation mechanisms tend to be the most effective instruments in combating cartels and other anticompetitive agreements. In accordance with the FAS Order dated 26 September 2008 No. 369, the Deputy Head of the FAS and the Head of the Anti-Cartel Department are in charge of receiving claims (applications) on facts of concerted actions or other anticompetitive behaviour in accordance with the antimonopoly legislation of the Russian Federation. Heads of the Departments of the FAS and of its regional offices should immediately inform mentioned persons if they have received such applications. The Anti-Cartel Department of the FAS exercises the reception, registration and storage of applications. Receipt of such an application is recorded in a special register. Applicants submitting a request receive a copy of their statement and a unique registration number confirming the receipt. If the applicant has informed the FAS that the information provided is a commercial secret, such information is marked "For internal use only". Disclosure of such information for other parties is possible only by Court Order.
In 2020, 222 leniency applications for cartels were submitted to the FAS, 114 of which were first-in leniency applications.
What discounts are available to companies that cooperate with cartel investigations?
In accordance with Article 4.2 of the Code of Administrative Offences of the Russian Federation, the following are deemed as circumstances mitigating administrative liability:
- repentance by the person that has committed an administrative offence;
- voluntary termination of wrongful behaviour by the person that has committed an administrative offence;
- voluntary provision of information about an administrative offence by the person that has committed the administrative offence to a body empowered to carry out proceedings in a case of the administrative offence;
- assistance of the person that has committed an administrative offence rendered to a body empowered to carry out proceedings in a case of the administrative offence in establishing the circumstances that are to be established in the case of the administrative offence;
- prevention of harmful circumstances of an administrative offence by the person that has committed the administrative offence;
- voluntary compensation by the person that has committed an administrative offence for inflicted damage or voluntary elimination of inflicted harm;
- voluntary performance by the person that has committed an administrative offence (before the issuance of a decision in a case of the administrative offence) of an order for elimination of committed offence issued by a body responsible for state control (supervision);
- commission of an administrative offence in the state of strong mental agitation (heat of passion) or in grave personal or family circumstances;
- commission of an administrative offence by a minor; and
- commission of an administrative offence by a pregnant woman or a woman having an infant.
Depending on the number of mitigating actions by the company, the competition authority may reduce the amount of the fine for the company. Currently fines for participation in cartel under the Code of Administrative Offences of the Russian Federation are from 3% to 15% of proceeds from the sale of goods (work, services) or of expenses for the purchase of goods (work, services) in the market where an administrative offence was committed, but not less than 100 thousand roubles.
Is there a criminal enforcement track? If so, who is responsible for it? Does the authority conduct criminal investigations and prosecutions for cartel activity? If not, is there another authority in the country that does?
Both administrative and criminal liability is applied for violations of the antimonopoly legislation.
Criminal liability is based on Article 178 of the Criminal Code of the Russian Federation. In accordance with the Russian legislation, criminal liability is stipulated only for individuals and cannot not be applied to legal entities.
The authority that performs criminal prosecution is the Ministry of Interior Affairs of the Russian Federation (the MIA). The interaction of the FAS with the MIA can be conducted in three ways:
- After the decision on violation of the antimonopoly legislation has been issued, the FAS sends materials, the decision and the case file to the MIA for an initiation of a criminal case.
- The MIA sends materials to the FAS in which there are signs of violation of the antimonopoly legislation, the FAS initiates an investigation, and if a violation is recognised, it sends a decision on the case to the MIA for inclusion in the criminal case file.
- Authorities conducting operational investigative activities transfer materials with signs of violation of the antimonopoly legislation to the investigating authorities for a decision in accordance with Articles 144 (Procedure for examining a crime report) and 145 (Decisions made following the examination of a crime report) of the Code of Criminal Procedure. Copies of the materials of the pre-investigation check are sent to the FAS with the request to give an expert opinion. Further, the investigator (detective) initiates a criminal case, taking into account the opinion of the FAS. At the same time, the FAS initiates a case on violation of the antimonopoly legislation. If there has been a violation, the materials of the case and the decision of the FAS are transferred to the investigator (detective) to be attached to the criminal case.
In accordance with Article 178 of the Criminal Code, the penalty for restricting competition by entering economic entities into cartels, if those actions have inflicted heavy damage (10 million roubles) or resulted in gaining income on a large-scale (> 50 million roubles), involves three years’ imprisonment.
The penalty for the same actions:
- exercised by a person, abusing his/her position;
- associated with liquidating or damaging somebody else's property, or the threat of its liquidation or damaging, in the absence of the elements of extortion;
- inflicting especially heavy damage (30 million roubles) or resulted in gaining income on especially large scale (250 million roubles),
involves 6 years imprisonment.
The penalty for the above-mentioned actions committed with violence or a threat of violence involves seven years’ imprisonment.
In 2020, the FAS transferred materials of 167 cases to the MIA, 107 of which concerned Article 178 of the Criminal Code.
Based on materials of the FAS, there were 30 criminal proceedings initiated in 2020, including 21 in accordance with Article 178 of the Criminal Code. However, FAS does not have information on the actual number of individuals imprisoned.
In 2020, conviction in a criminal case initiated in 2018 by the Main Investigations Directorate of the Main Directorate of the Ministry of the Interior of the Russian Federation in Novosibirsk Region under Paragraph "c" of Part 2 of Article 178 of the Criminal Code of the Russian Federation confirmed conclusion and implementation of a cartel agreement between Company Fito and Terra at 437 auctions in electronic form for the supply of medicines and medical devices for the needs of the National Medical Research Center named after academician Meshalkin, which resulted in deriving revenue in the amount of more than 576 million roubles. The directors of these companies were sentenced to two years of suspended imprisonment on a probation period of two years and a fine of 500,000 roubles.
Are there any plans to reform the competition law?
In order to protect and develop competition modern antimonopoly regulation should take into account the specific nature of the digital economy. In this regard, the FAS developed a draft law on the digital economy and antimonopoly regulation in digital markets – the so-called "fifth antimonopoly package".
The draft law introduces new approaches to controlling economic concentration as well as defines new concepts, including "network effects", in the presence of which an economic entity can be recognised as dominant with a market share of more than 35 per cent and revenue for the past calendar year exceeding 400 million roubles.
Such amendments would not prevent digital platforms from operating, but subject to their dominance would establish a prohibition on discrimination against customers, as well as on monopolistically high prices for the services provided. The mechanisms will apply only to those companies that have a substantial turnover and can have an impact on the market.
Other proposed legal changes include:
- establishment of antimonopoly requirements for agreements and actions for provision or disposal of exclusive rights to the results of intellectual activity or means of individualisation of a legal entity, goods, works or services;
- development of legislation in the field of procurement;
- implementation of measures aimed at balanced approach to state participation in the economy to comply with the interests of consumers;
- development of legislation in the field of state regulation of prices based on principles of digitalisation, long-termness, standardisation and economically justified tariffs; and
- improving mechanisms for monitoring foreign investments in strategic sectors of the economy.
The FAS has developed and submitted to the government of the Russian Federation a draft National Competition Development Plan of the Russian Federation for 2021–2025, which sets objectives and key indicators for the development of competition, as well as measures for the implementation of the main directions of state policy of the development of competition in priority areas of the economy: agro-industrial complex, information technologies, housing and communal services (including heat supply, water supply, wastewater disposal), financial markets, natural resources, electricity, transport, education, healthcare (including the markets of medicine, medical devices and medical services), funeral services, energy (gas, steam coal, oil, oil products), chemical and petrochemical industry, construction, trade, social services, timber complex and production sector.
When did the last review of the law occur?
The main goals and objectives of the FAS Russia in 2020 were related to the implementation of the National Competition Development Plan of the Russian Federation for 2018–2020, approved by the Decree of the President of the Russian Federation of 21 December 2017 No. 618.
As part of the implementation of the National Plan, the government of the Russian Federation has developed a comprehensive roadmap for the development of competition for 2018–2020.
At the end of 2020, a number of competition laws were implemented:
- Federal Law of 1 March 2020 No. 33-FZ, which recognises authority of the FAS to issue an opinion on compliance or non-compliance of the internal act of the company with requirements of antimonopoly legislation;
- Order of 13 October 2020 No. 2648-r, which provides for a change in tariffs for transportation of oil and oil products in 2021–2030 on the principle of "inflation minus", allowing consumers to predict changes in the long-term;
- Governmental Decree of 31 October 2020 No. 1771, which created a mechanism for reregistering prices in the event of shortage of medicines associated with unreasonably low unregistered price, as well as its subsequent revision based on transparent indicative parameters, including prices in reference countries; and
- Governmental Decree of 20 July 2020 No. 1076 on Amendments to the Decree No. 637 on State Regulation of Tariffs for Public Telecommunications and Public Postal Services, which excluded from the list of services publicly available electronic and postal communications, a legal norm was introduced for a long-term state regulation period of at least five years.
Has the authority conducted a dawn raid?
To ensure compliance with the antimonopoly legislation, an antimonopoly body can carry out scheduled and unscheduled (dawn raids) inspections.
The FAS has the power to carry out the following activities in the framework of the investigation:
- require documents, explanations in written or oral form and different information including commercial, official or internal data protected by law;
- request information from individuals and legal entities;
- perform electronic or computer search;
- conduct planned and unplanned inspections (dawn raids) of legal entities;
- explore the territory, premises, documents and objects of the entity; and
- involve specialists or experts with special knowledge when necessary.
These measures do not require court permission. During dawn raids, the FAS may examine documents and explore the territories and premises only of legal entities. Personal belongings may be inspected only by law enforcement agencies. If necessary, the FAS has the right to apply to law enforcement authorities for additional investigative actions that are beyond its powers.
In 2020, the FAS conducted 41 dawn raids (number of separate cases in which dawn raids were carried out, not the total number of companies raided).
During the pandemic, for a while the FAS suspended the appointments and inspections to ease the precarious situation in which enterprises found itself. The only exception were inspections and dawn raids initiated on the signs of violations of laws related to protecting the life and health of citizens, legislation on public procurement and legislation on state defense orders.
Has the authority imposed penalties on officers or directors of companies for offences committed by the company? If yes, please provide the most recent instances.
Yes, the FAS has the right to bring officials and business executives to administrative liability:
- by failing to obey the lawful request of the antimonopoly authority, officials can be fined between 2,000 and 4,000 roubles (Article 19.4 of the Code of Administrative Offences of the Russian Federation);
- by preventing the lawful activities of the antimonopoly authority from conducting inspections or by evading such inspections, officials can be fined between 2,000 and 4,000 roubles (Part 1 of Article 19.4.1 of the Code of Administrative Offences of the Russian Federation);
- actions (inaction), provided by the Part 1 of Article 19.4.1 of the Code of Administrative Offences of the Russian Federation, that make the completion of the inspection impossible, are punished by a fine on officials of between 5,000 and 10,000 roubles (Part 2 of Article 19.4.1 of the Code of Administrative Offences of the Russian Federation);
- repeatedly committing an administrative offence under Part 2 of Article 19.4.1 of the Code of Administrative Offences of the Russian Federation, entails the imposition of a penalty on officials of between 10,000 and 20,000 roubles or disqualification for a period of from six months to one year (Part 3 of Article 19.4.1 of the Code of Administrative Offences of the Russian Federation);
- in case of default in due time of the legal requirements (for example, regulations, submission, decision) of the antimonopoly body, officials may be fined between 18,000 and 20,000 roubles or disqualified for up to three years (Article 19.5 of the Code of Administrative Offences of the Russian Federation);
- in case of failure to submit or the late submission to the antimonopoly body of any data provided by the antimonopoly legislation of the Russian Federation, including the failure to present data at the request of the antimonopoly authority, as well as the deliberate submission to the antimonopoly authority of any false data, citizens may be penalised between 1,500 and 2,500 roubles, and officials may be fined between 10,000 and 15,000 roubles (Part 5 of Article 19.8 of the Code of Administrative Offences of the Russian Federation);
- failure to pay the administrative fine within the time limit fixed by the Code of Administrative Offences of the Russian Federation shall result in the imposition of double the amount of the unpaid administrative fine (but not less than 1,000 roubles), an administrative arrest for a period of up to 15 days, or compulsory work for a period of up to 50 hours (Part 1 of Article 20.25 of the Code of Administrative Offences of the Russian Federation); and
- in case of recognition the company’s participation in the cartel, officials may be fined (Article 14.32 of the Code of Administrative Offences of the Russian Federation) between 20,000 and 50,000 roubles or disqualified for up to three years.
What are the pre-merger notification thresholds, if any, for the buyer and seller involved in a merger?
Under Article 27 of the Law on Protection of Competition, the following actions shall only be performed with the antimonopoly body’s prior consent:
- merger of commercial organisations (with the exception of financial organisations), if the aggregate value of the assets thereof (assets of their group of persons) in accordance with the accounting balance sheets as at the latest reporting date preceding the date of submission of the petitions (hereinafter – latest balance sheet, in case of submission of a notice, shall be deemed to be the accounting balance sheet as at the latest reporting date preceding the date of merging the commercial organisations) exceeds 7 billion roubles or if the aggregate revenues from sale of commodities of such organisations (their group of persons) for the calendar year preceding the merger exceed 10 billion roubles;
- merger of one or several commercial organisations (with the exception of financial organisations) with another commercial organisation (with the exception of a financial organisation), if the aggregate value of the assets thereof (assets of their groups of persons) in accordance with their latest balance sheets exceeds 7 billion roubles or if the aggregate revenues from the sale of commodities of such organisations (their group of persons) from the calendar year preceding the consolidation year exceed 10 billion roubles;
- merger of financial organisations or merger of one or several financial organisations with another financial organisation, if the aggregate value of the assets thereof, in accordance with their latest balance sheets, exceeds the amount established by the government of the Russian Federation in coordination with the Central Bank;
- establishment of commercial organisation if the charter capital is paid by stocks (shares) or property that are the main production-related assets or intangible assets of another commercial organisation (with the exception of a financial organisation), in particular, on the basis of an act of transfer or dividing balance sheets, and in relation to those stocks (shares) or property, the newly established commercial organisation shall acquire the rights stipulated by Article 28 of the Law on Protection of Competition and the aggregate value of the assets in accordance with the latest balance sheets of the founders of the commercial organisation (their groups of persons) and persons (their groups of persons), whose stocks (shares) or property are contributed to the charter capital, exceeds 7 billion roubles or if the aggregate revenues of the founders of the commercial organisation (their groups of persons) and persons (their groups of persons), whose stocks (shares) or property are contributed to the charter capital, from selling goods in the last calendar year exceed 10 billion roubles;
- establishment of commercial organisation if the charter capital is paid by stocks (shares) or assets of a financial organisation (except monetary funds) or if newly established commercial organisation acquires such stocks (shares) or assets of a financial organisation, and with regard to such stocks (shares) acquired the rights provided for by Article 29 of the Law on Protection of Competition, and the value of the assets in accordance with the latest balance sheet of the financial organisation whose stocks (shares) or assets are being contributed to the charter capital exceeds the amount established by the government of the Russian Federation in coordination with the Central Bank;
- merger of financial organisation with commercial organisation (with the exception of financial organisation), if the asset value of the financial organisation in accordance with the latest balance sheet exceeds the value established by the government of the Russian Federation in coordination with the Central Bank;
- merger of commercial organisation (with the exception of financial organisation) with financial organisation if the asset value of the financial organisation in accordance with the latest balance sheet exceeds the value established by the government of the Russian Federation in coordination with the Central Bank; and
- joint venture agreement performed by the economic entities and competitors in the territory of the Russian Federation if the aggregate value of the assets thereof (assets of their groups of persons) in accordance with their latest balance sheets exceeds 7 billion roubles or if the aggregate revenues from the sale of commodities of such economic entities (their group of persons) from the calendar year preceding the agreement exceed 10 billion roubles.
The requirement for obtaining the antimonopoly body’s prior consent for exercising actions shall not apply if actions specified in this article are performed by members of the same group of persons on the grounds specified in Paragraph 1 of Part 1 of Article 9 of the Law on Protection of Competition, or if transactions specified in Part 1 of this article are completed in compliance with conditions specified in Article 31 of the Law on Protection of Competition, or the performance of such actions are stipulated by decrees of the President of the Russian Federation or acts of the government of the Russian Federation.
Every year the number of transactions subject to FAS control is decreasing due to amendments to the competition legislation aimed at elimination of unnecessary administrative burden to legal entities. In 2005, the FAS received around 6,000 pre-merger and 44,000 post-merger notifications. After changes to the antimonopoly law as well as abolishing notifying merger control (30 January 2014) the figures fell considerably. In 2015, the FAS considered 1,793 pre-merger and 165 post-merger notifications. In 2020, the FAS considered only 1,019 pre-merger notifications and 133 post-merger notifications.
Are there any restrictions on investments that involve less than a majority stake in the business?
There are no restrictions for investments provided by the Law on Protection of Competition. The legal regulations for foreign investments within the territory of the Russian Federation are carried out as provided for by other federal laws, regulatory acts and international agreements of the Russian Federation.
Legislation on foreign investments is constantly being improved, new initiatives are being developed to amend its provisions, as well as work is carried out to prepare guidelines on certain issues of its application.
The Federal Law No. 57-FZ of 29 April 2008 on the Procedures for Foreign Investments in the Business Entities of Strategic Importance for Russian National Defence and State Security sets up special rules on acquiring shares in the economic entities of strategic importance. The law divides foreign investors into two groups: public foreign investors (foreign states, international organisations and entities under their control) and private investors (any other entities). Public investors are banned to acquire controlling stake in Russian strategic company and must seek government approval to acquire a minority stake of more than 25 per cent of voting rights in strategic company and of 5 per cent in a company using federal subsoil or extracting (catching) aquatic biological resources.
Russian strategic entity is considered "under control" of a foreign investor if the latter has the right, directly or indirectly, inclusive on the contractual basis, to:
- manage more than 50 per cent of voting rights of the entity (or less than 50 per cent when the proportion of voting rights held by investor and other shareholders permits investor to determine decisions of the entity);
- determine decisions taken by the entity, including terms and conditions of conducting its business activity;
- appoint the CEO or more than 50 per cent of the collective executive body or the other managing body of the entity (board of directors, supervisory council, among others);
- act as the managing company of the entity.
Russian strategic entity using federal subsoil or extracting (catching) aquatic biological resources is considered "under control" of foreign investor if the latter has the right, directly or indirectly, inclusive on the contractual basis, to:
- manage more than 25 per cent of voting rights of the entity;
- determine decisions taken by the entity, including terms and conditions of conducting its business activity;
- appoint the CEO or more than 10 per cent of the collective executive body or the other managing body of the entity (board of directors, supervisory council, among others); and
- act as the managing company of the entity.
Foreign investments in the strategic enterprises are considered by the special Commission on Monitoring Foreign Investment under the government of the Russian Federation. The Commission considers and gives a preliminary approval of deals entailing the imposition of control over strategic legal entities by a foreign investor or a group of private individuals and legal entities comprising a foreign investor.
The Head of the government of the Russian Federation is the Head of the Commission. The Head of the FAS is a member and a secretary at the Commission and reports on its meetings.
The FAS is empowered to make proposals on matters requiring consideration at a meeting of the Commission and to provide information and analytical support of the Commission’s activity.
In 2020, the Commission considered 11 deals on foreign investments into strategic enterprises, 10 of which were approved (two of them had remedies), with one being blocked.
Russia: from the enforcer's competition economists
Questions and answers
How many economists do you employ?
By the end of 2020, 504 employees at FAS have a degree in economics. Additionally, many employees undertook special professional courses, inter alia, in economics.
Do you have a separate economics unit, or ‘bureau’?
The Commission for the Analysis of Product Markets (hereinafter ‘Commission’) exercises the functions of an ‘economic bureau’.
Every two years, the Commission approves the working plan for the analysis of product markets, including socially significant markets at the suggestion of FAS’s departments. Such analysis is necessary for the prevention of antimonopoly legislation violations.
The purpose of analysing product markets is to evaluate the state of competition (to define relevant product and geographical markets, to calculate market shares, to identify any barriers to entry and expansion, etc.) and to identify any competition-related problems and develop appropriate solutions. The analysis is preceded by the development of methodological recommendations. Upon the completion of the analysis, the Commission reviews all the relevant materials.
In addition to the Commission, there are other collegial bodies at FAS, which to a certain degree perform economic functions.
Namely, there are expert councils, which are the advisory bodies for the key markets. Expert councils comprise market players, the representatives of non-profit associations and public authorities. This increases the objectiveness and transparency of FAS’ decisions.
The most important issues, including those related to methodology, analysis and generalisation of enforcement practices, and competition policy of the regions of the Russian Federation, are discussed at the Methodological Council.
The Methodological Council annually reviews the Report on the State of Competition, which provides the information on the key achievements of FAS, on the implementation and effectiveness of its measures, and the data on existing problems in relation to the development of competition in various industries and regions, as well as the proposed solutions for such problems. Methodological Council also analyses and generalises the best and the worst regional practices jointly with regional and federal public authorities.
Do you have a chief economist?
Andrey Tsyganov, the Deputy Head of FAS is the Chair of the Commission for the Analysis of Product Markets and the Methodological Council.
To whom does the chief economist report?
In accordance with the Order of FAS on the approval of exemplary official regulations of federal civil servants at the Central Office, the heads and deputy heads of the Regional Offices of FAS, the Deputy Head of FAS reports to the Head of FAS and the Presidium of FAS.
Does the chief economist have the power to hire his or her own staff?
Pursuant to article 13 of the Federal Law on Civil Service, each employee of FAS is appointed by the order of the Head of FAS.
Members of the Commission for the Analysis of Product Markets and the Methodological Council are also appointed by the order of the Head of FAS.
How many economists have a PhD?
24 employees of FAS have a PhD in economics.
Does the agency include a specialist economist on every case team? If not, why not?
As prescribed by article 40 of the Federal Law on Protection of Competition, FAS shall create a commission for the consideration of each case on the violation of antimonopoly legislation. Generally, each commission includes at least one specialist economist.
Is the economics unit a ‘second pair of eyes’ during cases – is it one of the agency’s checks and balances? If not, why not?
According to article 45(5.1) of the Federal Law on Protection of Competition, FAS is obliged to conduct an economic analysis in every case concerning the violation of antimonopoly legislation.
The work of the economists from the departments of FAS’s Central and Regional Offices is of paramount importance throughout the consideration of each case. In its turn, the Commission for the Analysis of Product Markets develops working plans for FAS on the analysis of product markets for a two years period and considers methodological recommendations for market investigations based on the existing analytical experience.
How much economic work is outsourced? What type of work is outsourced?
In accordance with article 42.1 of the Federal Law on Protection of Competition, the commission for the consideration of each case has a right to approach the experts with specialised knowledge on the issues pertaining to the case in question. Such experts shall not be the persons involved in the case.
Thus, the analysis of some issues identified by the commission for the consideration of each case is outsourced. The types of outsourced research and developments are annually determined by FAS’ internal documents.