Third set of antimonopoly measures: prospects and risks for business

The third set of antimonopoly measures, which comes into force on 6 and 7 January, significantly amends antimonopoly legislation, affecting business across the board. The most important new developments include: antimonopoly law institutions and concepts being clarified, not least the criteria for monopolistic high prices and concerted actions; the concept of a cartel being introduced; and the manipulation of the electric power market being prohibited. The grounds for administrative and criminal liability to be imposed are also amended.

The third set of antimonopoly measures comprises Federal Law No. 401-FZ dated 6 December 2011 On amending the Federal Law ‘On the protection of competition’ and separate items of Russian legislation and Federal Law No. 404-FZ dated 6 December 2011 On amending the Russian Code of Administrative Offences.

Main amendments to the Federal Law On the protection of competition:

1. The definition of coordination of economic activity has been clarified (article 4(14) of the Federal Law On the protection of competition – the “Law”). The actions of business entities will amount to coordination if those actions are agreed by a third party which is not part of the same group of persons as they are and moreover does not undertake activity on the product market which is affected by the agreement, or in other words is not a competitor of these economic entities. At the same time, actions undertaken further to vertical agreements may not be classed as coordinating economic activity.

2. It is laid down that an agency agreement is not a vertical agreement (article 4(19) of the Law).

3. The price of goods established on a stock exchange by an economic entity that occupies a dominant position will not be classed as monopolistically high as long as certain conditions listed in the Law are complied with (articles 6(5-8) of the Law).

4. The list of criteria for defining the actions of competitors as concerted has been expanded. Now actions will be classed as concerted only if, among other things, they are known in advance to each of the economic entities that are a party to them as a result of a public announcement made by one of the entities regarding such actions being planned (article 8(1) of the Law).

5. The list of indicators that persons belong to one group has been amended (article 9(1) of the Law). This must be borne in mind when filing a list of a group of persons with the antimonopoly authorities further to the Federal Antimonopoly Service’s Order No. 293 dated 20 November 2006 On confirming the form for filing the list of persons comprising a single group of persons.

6. The list of what constitutes the offences classed as abuse of a dominant position has been expanded (article 10(1) of the Law). Now price manipulation on the electric power markets falls into this category. The prohibition extends to apply to agreements and concerted actions of participants on the electric power market that result in price manipulation (articles 11(2) and (3) of the Law).

7. The concept of a cartel is introduced, and is defined as an agreement between competitors that potentially or actually results in prices being established, a product market being divided up, production being scaled down or terminated, or a refusal to enter into contracts (article 11(1) of the Law).

8. The prohibition on agreements that restrict competition will no longer apply to agreements between economic entities which are part of the same group of persons by reason of their being undercontrol (article 11(7) of the Law), or to agreements to dispose of the results of intellectual activity (article 11(9) of the Law).

9. The prohibitions on concerted actions set out as a separate item (article 11.1. of the Law) will not extend to the actions of economic entities whose aggregate share on a product market is no greater than 20% if at the same time the share of any one of them is no greater than 8% (article 11.1(5) of the Law).

10. A procedure has been established for considering appealsregarding the infringement of a competitive bidding procedure and procedure for concluding contracts (article 18.1. of the Law).

11. It has been enacted that the antimonopoly authority may sendwarnings that infringements of antimonopoly law are not permissible (article 25.7 of the Law), and also warning noticesinstructing the addressee to stop the actions that contain indications of infringing antimonopoly law (article 39.1. of the Law).

Amending the Russian Criminal Code:

Vertical agreements and concerted actions no longer give rise to criminal liability (article 178(1) of the Criminal Code).

Main amendments to the Russian Code of Administrative Offences:

1. The list of circumstances that mitigate administrative liability has been extended (article 4.2 of the Russian Code of Administrative Offences – the “CoAO”). In particular, along with those that already exist, the following will be recognised as mitigating circumstances: when a party voluntarily ceases unlawful behaviour; when a party assists the administrative authority; and when a party voluntarily implements directions before an administrative penalty is imposed.

2. Actions held to constitute an abuse of a dominant position may entail criminal or administrative liability (article 14.31 of the CoAO). If such actions actually lead or could potentially lead to the interests of other persons being infringed but competition is restricted, then fines of a fixed amount between RUB 15,000 and RUB 20,000 may be imposed on an organisation’s officers, and between RUB 300,000 and RUB 1 million on a legal entity. If such actions actually led or potentially could have led to a restriction of competition, then as before, a fine of a fixed amount between RUB 20,000 and RUB 50,000 may be imposed on an organisation’s officers or they may be disqualified for up to three years, while legal entities face a so-called “turnover-based fine” of up to 15% of their revenues.

3. The notes to article 14.31 of the CoAO have established additional aggravating circumstances that must be taken into account when a penalty is imposed for an administrative offence stipulated by articles 14.31, 14.31.1, 14.31.2 or 14.33, and these are:

- an offence has been committed that lasted for more than one year;
- damage of more than RUB 1 million has been caused or income of more than RUB 5 million has been generated; 
- the offence has been committed by two or more persons fr om the same group of persons.

4. Administrative liability has been established for manipulating prices on the electric power market (article 14.31.2 of the CoAO). It has been laid down that liability will entail fines between RUB 20,000 and RUB 50,000 for an organisation’s officers, and between RUB 500,000 and RUB 1 million for a legal entity. In the event of repeat offending, officers may also be disqualified for between one and three years.

5. The notes to article 14.32 of the CoAO have established additional mitigating and aggravating circumstances for an administrative offence under that article and these must be taken into account when a penalty is imposed for an administrative offence. The following are recognised as mitigating circumstances: 
- the offender is not the prime mover behind the agreement or the concerted actions and/or received binding instructions to take part in them; 
- the offender has not begun performing the agreement.

The following are recognised as aggravating circumstances:

-  the offender is not the prime mover behind the agreement or the concerted actions; 
-  the offender compelled other persons to commit offences or to continue to be involved in the agreement or concerted actions.

6.  For the purpose of applying the sanctions stipulated by articles 14.31, 14.31.1, 14.31.2, 14.32 and 14.33 of the CoAO, an administrative fine settlement procedure has been established, depending on whether there are any mitigating or aggravating circumstances (see note 4 to article 14.31 of the CoAO).

7. There is provision for liability under administrative law if a personfails to file (or improperly files) applications, notification and information with the authority responsible for control over the making of foreign investments (article 19.8.2 of the CoAO).