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Anti-monopoly issues

In addition to setting the general scene on anti-monopoly issues, this chapter of Doing business in Russia defines the scope of application of the Russian Competition Law, outlines what constitutes anti-competitive practices and restriction of competition, and touches upon liability issues.

General approach

General legal and regulatory framework

Anti-monopoly issues are primarily governed by Federal Law No. 135-FZ “On the Protection of Competition” dated 26 July 2006 (the “Competition Law”), while liability for the violations of anti-monopoly regulations is mainly established (in addition to the Competition Law) by the Code on Administrative Offences and the Criminal Code. 

The Federal Anti-monopoly Service (the “FAS”), a Russian executive authority, controls and enforces compliance with anti-monopoly legislation.

Trends

Compliance systems 

In 2020 a law encouraging companies to develop and implement systems that facilitate compliance with anti-monopoly laws came into force. 
The law’s main provisions can be outlined as follows:

  • Setting up an anti-monopoly compliance system is not mandatory. If a company decides to do so, however, it will have to adhere to special requirements for the content of internal documents produced within the company or company group.
  • These internal documents must include requirements, measures and procedures for (i) assessing anti-monopoly risks; (ii) reducing anti-monopoly risks; (iii) monitoring the compliance system; (iv) making the compliance system known to employees; and (v) providing information about the person in charge of the company’s compliance system.
  • Companies may send internal documents of this kind in final or draft form to the FAS to confirm their compliance with anti-monopoly laws.
  • Companies have to post information in Russian on their websites, stating whether an anti-monopoly compliance system has been adopted or applies to that company.

At the same time, the law is silent on whether liability can be mitigated or excluded in case of violations by companies that have implemented a compliance system cleared with the FAS.

Fifth anti-monopoly package

2021 could see the adoption of amendments to the Competition Law, the so-called “fifth anti-monopoly package”. While the associated work is still on-going, changes may cover such issues as digital economy and intellectual property (“IP”). 

Another area that may be affected is merger control. Transactions could additionally be subject to merger clearance based on their transaction value. This is because the traditional criteria (outlined in the relevant section below) do not always reflect the real impact of a transaction in the digital world. Also, more detailed rules on the review of merger clearance notifications (e.g. governing the role of external experts) could be introduced and the timeframe of the review extended. For the time being, it is unclear when, and to what extent, these initiatives are going to be enacted.

Cartels

Practice shows that the Competition Law and the enforcement agenda of the FAS are constantly evolving; the FAS puts a particular emphasis on the fight against cartels, notwithstanding the criminal and cross-border dimensions. Tackling bid rigging also remains a top priority for the competition authority.

Cross-border issues

The role of the Eurasian Economic Commission regarding the analysis of cross-border anti-monopoly violations within the Eurasian Economic Union is expected to increase in the near future.

Scope of application of the Competition Law

The Competition Law applies to: 

  • agreements/actions concluded or carried out in or outside Russia that may in any way influence competition in Russia; and
  • agreements/actions concluded or carried out in or outside Russia, between Russian and/or foreign legal entities/individuals, which are related to:
    • main (fixed) production assets and/or intangible assets located in Russia; 
    • shares or participatory interests in, or control over Russian legal entities; or
    • control over foreign legal entities engaged in business activities in Russia.

The expression “legal entity engaged in business activities in Russia” encompasses all foreign entities that have supplied goods/works/services to the Russian market for an amount exceeding RUB 1bn (EUR 11.1m 1 At the notional exchange rate of RUB 90 = EUR 1, as used for convenience throughout this guide. ) during the calendar year preceding the date of the respective transaction.

Evidently, the scope of application of the Competition Law is very broad. In practice, it may cover almost any agreement and may apply to any company directly or indirectly connected with the Russian market or Russia in general.

Anti-competitive practices and restriction of competition

The Competition Law covers the following types of anti-competitive practices and activities that may lead to a restriction of competition:

  • abuse of a dominant position;
  • cartel agreements and concerted actions;
  • vertical agreements;
  • economic coordination; and
  • unfair competition.

The Competition Law also includes rules on transaction clearance.

Abuse of a dominant position

The general rule is that a company is deemed to be dominant if it has a market share of over 50%. However, in practice, dominance may be established in certain circumstances where a company has a market share of less than 50%.

An undertaking with a market share of less than 35% can be viewed as dominant only in the situation of collective dominance or if the thresholds provided for in the industry specific legislation apply.

A company with a revenue below RUB 400m (EUR 4.4m) cannot be declared dominant if certain other conditions set forth by the Competition Law are met (this exemption is mainly relevant for small and medium enterprises).

Dominance of a market is, in itself, not a violation. However, abuse of the dominant position gives rise to liability. 

The actions of a dominant entity can be qualified as abuse if they harm the interests of market players or an unlimited number of consumers.

In addition to the prohibitions outlined below in the Cartel agreements and concerted actions section, dominant entities are prohibited from:

  • fixing or maintaining “monopolistically” high or low prices;
  • establishing different prices for the same commodity without technological or economic substantiation; and
  • establishing discriminatory conditions.

Cartel agreements and concerted actions

In brief, the following arrangements are expressly prohibited by the Competition Law as agreements (cartels) and concerted actions between competing market players: 

  • fixing or maintaining prices/tariffs, discounts, bonus payments or surcharges;
  • increasing, reducing or maintaining prices during auctions;
  • dividing markets by:
    • territory; 
    • volume of sales or purchases; 
    • assortment of goods/works/services sold; or 
    • range of sellers or purchasers/ customers;
  • refusing to enter into contracts with certain sellers or purchasers; and
  • reducing or terminating the production of goods/works/services.

Vertical agreements

If the parties to an agreement are in a seller-purchaser relationship, such a “vertical agreement” must not contain any provisions that lead to a restriction of competition in general and, specifically, must not:

  • establish resale prices for goods/works/services, except for maximum resale prices; or
  • prohibit the purchaser from selling competing products.

Economic coordination

The Competition Law also prohibits any economic coordination exercised by one business entity (the “Coordinator”) over the activities of other business entities if:

  • the Coordinator does not belong to the same group as the entities it coordinates; 
  • the Coordinator is not active in the market where it coordinates the business of these other business entities; and
  • the coordination results in any of the prohibitions outlined in the Cartel agreements and concerted actions or Vertical agreements sections above.

Restriction of competition in general

Agreements in general must not lead to a restriction of competition in the market. In particular, they must not lead to:

  • different prices being set for the same product (work, service) without economic or technological justification;
  • the imposition of unfavourable terms upon a contracting party;
  • the obstruction of other business entities’ access to (or withdrawal from) a certain market; and
  • the establishment of membership conditions in professional or other associations, if these conditions lead to or may lead to a restriction of competition.

As a general rule, the restrictions outlined in the Cartel agreements and concerted actions, Vertical agreements, Economic coordination and Restriction of competition in general sections above do not apply to agreements or actions between business entities that are part of one group of companies if these entities are controlled by the same company/individual. 

Unfair competition

Unfair competition is not permitted under Russian competition legislation. In particular, unfair competition includes:

  • the distribution of false or incorrect information which may cause damage to a business entity, or impair its reputation (disparagement);
  • the provision of misleading information in respect of a commodity’s:
    • nature; 
    • manner and place of production;
    • consumer characteristics; 
    • quality and quantity; or 
    • manufacturers;
  • the incorrect comparison of the commodities produced by a business entity with those produced or sold by other business entities;
  • an unfair acquisition and use of exclusive rights to the means of individualisation of a legal entity, goods, works or services; 
  • the sale, exchange or other placement into circulation of a commodity in breach of IP rights, except for the means of individualisation of a competitor; 
  • the creation of confusion with a competitor’s business or products; and
  • the unlawful receipt, use and disclosure of commercial secrets, official secrets or other information protected by law.

The above restrictions are closely linked to further restrictions introduced by Federal Law No. 38-FZ “On Advertising” dated 13 March 2006 (the “Advertising Law”) (Please see the Advertising issues chapter).

The FAS is also entrusted with monitoring compliance with the Advertising Law and may hold business entities liable for violating it.

Transaction clearance

Transactions subject to clearance

The following transactions may require pre-transaction approval from the FAS:

  • the establishment of a Russian company if (i) its charter capital is paid up by shares and/or tangible or intangible assets of another company; and (ii) the new company, as a result, acquires:
    • more than 25% of voting shares in a Russian joint-stock company;
    • more than 1/3 of the participatory interests in the charter capital of a Russian limited liability company; or
    • more than 20% of the balance sheet value of the main production and intangible assets of the company which owns the assets (and whose assets are located in Russia);
  • the reorganisation (in the form of a merger or accession);
  • the conclusion of agreements between competitors on joint activities in the Russian Federation, including those on joint ventures;
  • the acquisition of more than 25%, 50% or 75% of the voting shares in a Russian joint-stock company;
  • the acquisition of more than 1/3, 50% or 2/3 of the participatory interests in the charter capital of a Russian limited liability company;
  • the acquisition of control over a Russian company;
  • the acquisition of more than 50% of the shares/participatory interests or control over a foreign “legal entity engaged in business activities in Russia”; and
  • the acquisition of the right to own, use or possess the main production and intangible assets of a company if the book value of the acquired assets located in Russia exceeds the following percentages of the total book value of the seller’s main production and intangible assets:
    • 20% for companies operating on commodity markets; or
    • 10% for companies operating on financial markets.

Intragroup transactions

If an intragroup transaction qualifies as being made between legal entities/individuals that belong to the same “group of persons” under article 9(1)(1) of the Competition Law (i.e. a company and an individual/legal entity holding more than 50% of the voting shares or the participatory interests in that company), then it is exempt from the merger control requirements of the Competition Law.

Regarding intragroup transactions which (i) are made between parties that are not under direct control arrangements and (ii) exceed the thresholds stated below, there is uncertainty as to whether the exemption applies. Therefore, applicants may consider relying on article 31 of the Competition Law, which provides for a specific clearance procedure for intragroup transactions that would normally require pre-transaction approval. This procedure allows applicants to make a prior disclosure of the group structure to the FAS and then notify the FAS of the transaction once completed (rather than going through pre-transaction clearance). 

Thresholds

The thresholds set out below only apply to companies operating on the commodity markets. For those operating on financial markets, the requirements are different 2 The threshold triggering the need for obtaining prior consent from the FAS for transactions involving credit institutions was lowered in 2020. (Please see the Banking sector chapter for information on thresholds for banks (credit institutions)).

PRE-TRANSACTION CLEARANCE THRESHOLDS
Agreements on joint activities in the Russian Federation among competitors
Aggregate worldwide value of assets of the groups of companies involved> RUB 7bn (EUR 77.8m)
OR
Aggregate worldwide revenue of the groups of companies involved from the sale of goods, works and services during the last calendar year> RUB 10bn (EUR 111.1m)
All other transactions To assess the assets of the target’s group, the assets of the seller and its group are not taken into account when, as a result of the transaction in question, the seller and its group will no longer have any rights over the target.
Aggregate worldwide value of assets of the acquirer’s group and the target’s group of companies> RUB 7bn (EUR 77.8m)andAggregate worldwide value of assets of the target’s group of companies> RUB 400m (EUR 4.4m)
OR
Aggregate worldwide revenue of the acquirer’s group and the target’s group of companies from the sale of goods, works and services during the last calendar year> RUB 10bn (EUR 111.1m)andAggregate worldwide asset value of the target’s group of companies> RUB 400m (EUR 4.4m)

Liability

General remarks

Individuals and legal entities may be subject to administrative and criminal liability for non-compliance with anti-monopoly legislation. 
Liability may include:

  • mandatory directions issued by the FAS to cease a violation and/or transfer to the state budget all revenue received as a result of the violation of anti-monopoly legislation (under the Competition Law);
  • fixed fines or fines calculated on the basis of revenue (up to 15% of the revenue gained over the period of the violation of anti-monopoly legislation) and/or disqualification of company officials (under the Code on Administrative Offences); and
  • fines and/or disqualification of company officials and, for the more serious anti-monopoly violations, up to seven years’ imprisonment for company officials (under the Criminal Code).

Specific remarks

Prohibited agreements and leniency

As mentioned above, cartels and concerted actions which violate anti-monopoly regulations are strictly prohibited and may lead to severe sanctions being imposed.

However, the Code on Administrative Offences provides for a “leniency programme”, i.e. a limited opportunity for companies that have participated in illegal anti-competitive agreements or actions to avoid penalties (the “Leniency Programme”). 

To obtain total immunity under the Leniency Programme, a participant to an anti-competitive agreement (cartel) must: (i) be the first to inform the FAS of the anti-competitive agreement (cartel)’s existence; (ii) submit sufficient information and/or documents to the FAS to allow an administrative violation to be identified; (iii) fully cooperate with the FAS throughout its investigation; and (iv) cease any involvement in the cartel or other infringement immediately. It is only possible to benefit from the Leniency Programme if the FAS is not aware of the reported infringement.

Collective applications for the Leniency Programme are not accepted. 

It is also possible for the FAS to set the minimum amount of administrative fines against those who were the second or third to voluntarily report the conclusion of an anti-competitive agreement (cartel) to the competition authority.