Competition Practice Newsletter (Issue 3, 2015)
NEWS AND EVENTS
President Putin signs Fourth Antitrust Legislative Package into law
On 5 October 2015, Russian President Vladimir Putin signed Federal Law No. 275-FZ On Amendments to Federal Competition Support Law and Some Legislative Acts of the Russian Federation.
The Federal Antimonopoly Service (FAS Russia) developed this legislation as part of the "road map" for the development of a modern system competition and antimonopoly regulations. It improves the efficiency and effectiveness of FAS Russia functions, while also loosening administrative constraints on business.
Innovations include:
• abolition of the register of enterprise entities having more than 35% share in a particular product market, to be replaced by a requirement that the antimonopoly authority must prove an actual dominant market position in each case;
• the possibility that the Russian Government will issue rules for non-discriminatory access by dominant enterprises in some particular markets, even if the competition authority had repeatedly found an abuse of dominant position;
• improvement of administrative procedures in cases of violation of the antimonopoly laws, including, inter alia, publication of the preliminary conclusions of the investigation by the competition authority;
• regulations for the FAS Russia Appeals Board, will review appeals from decisions by the territorial bodies of FAS Russia, in order to improve the uniformity of administrative practice;
• a significant expansion of cautions and warnings about possible violations of antimonopoly law;
• the introduction of a procedure for coordinating joint ventures;
• more detailed regulation of unfair competition in areas such as: discrediting or disparaging of competitors; dissemination of false, inaccurate, or distorted information; and the illegal use of another's trademarks; and
fewer grounds for unscheduled inspections of small businesses.
FAS Russia assumes the powers of the disbanded Federal Tariff Service
On 21 July 2015, President Putin signed Decree No 373, On some issues of state administration and the control in the sphere of antimonopoly and tariff regulation, which abolished the Federal Tariff Service (FTS Russia), in order to improve governance and control of antimonopoly and tariff regulation by federal executive agencies.
Based on Government Decree No. 941 (4 September 2014), FAS Russia is now the legal successor to the Federal Tariff Service, and assumes the obligations of FTS Russia to enforce judicial decisions. A collegiate body of 12 people, approved by the Russian Government, will determine tariffs and their limits with respect to natural monopolies. It will include five representatives of FAS Russia, two representatives of the Russian Ministry of Economic Development, one representative each from Ministry of Energy of Russia, Ministry of Communications Russia, Russian Ministry of Transport, Russian Ministry of Construction, and Russian Ministry of Industry and Trade. The Head of FAS Russia. Igor Artemyev, will head this body.
Decisions by this board, which will be by majority vote, will be issued in the form of orders of the Federal Antimonopoly Service.
The new structure therefore combines within FAS Russia the functions both of establishing tariffs for natural monopolies and monitoring their compliance with antitrust laws. Experts are closely watching how this will work in practice, and they expect that these changes will raise fundamental and practical challenges for FAS Russia.
FAS Russia develops a Standard for Procurement Activities
Following the enactment of Federal Law 223-FZ On Procurement of Goods, Works and Services of Certain Kinds of Legal Entities (18 July 2011) (the “Procurement Law”), FAS Russia held discussions with representatives of major customers in 2014 and 2015. These consultations have resulted in a Standard for Procurement Activities.
The Standard reflects the basic regulations and problems in procurements, including responses to antimonopoly and unfair competition complaints against the customers’ operations. It aims at optimizing and unifying the procurement activities of certain types of legal entities and contains information about bidding procedures under the Procurement Law.
The Standard establishes a closed list of procurement procedures designed to ensure greater confidence in the transparency and integrity of the procurement process. In electronic procurements, the Standard requires that the procurement be managed on a website that is not affiliated with the customer. If a connection between representatives of customer and potential supplier is detected, the Standard recommends the replacement of members of the procurement commission who might have a conflict of interest.
Procedures for OTC transactions registration are changed
On 28 July 2015 Prime Minister Dmitry Medvedev signed a Government Decree On Amendments to the Regulation on the provision of information about the awarded not on organized trading contracts, which commitments provide for transfer of ownership of goods, admitted to organized bidding, as well as the maintenance of the register of contracts and provision of information from the register.
This decree, developed by FAS Russia, amends Government Decree No. 62 On the registration of pink sheet transactions and includes requirements governing the procedure itself (23 July 2013) with respect to the exchange of information in such transactions.
FAS Russia opens cartel case arising from bidding during the procurement of deicing reagents
On 14 September 2015, FAS Russia initiated a case against Track Technologies LLC and Bashkhimprom LLC, alleging a violation of paragraph 2 of Part 1 of Article 11 of the Federal Competition Protection Law (Federal Law 135-FZ of 26 July 2006).
The companies allegedly colluded during the electronic auctions for the supply of deicing reagents to the city of Moscow in the amount of about RUB 6 billion. The investigation will be in close cooperation with the Central Investigation Department of the Investigative Committee of the Russian Federation.
Previously, in spring 2014, FAS Russia determined that the Moscow Government violated Art. 15 of the Competition Protection Law, which resulted in the publication of regulation to limit the access of enterprise entities to the commodity market. In that case, the Volgograd Magnesium Plant, represented the ART DE LEX lawyers, furnished evidence to FAS Russia of other competition law violations. The new case is a continuation of a large investigation of violations of antitrust laws in this market, which has seriously lacked transparency it its procurement processes.
FAS Russia suspects nine fishing companies in collusion to allocate catch quotas in the fishing zone of Morocco
As part of its ongoing investigation of cartel activities in the Russian fishing industry, on 20 July 2015 FAS Russia filed a case against nine fishing companies for an alleged violation of paragraph 3 of Part 1 of Article 11 of the Competition Protection Law. The respondents are: the Murmansk Trawling Fleet OJSC; Taurus CJSC; Phoenix CJSC; Eridan CJSC; Sterlets CJSC; Transko LLC; Westrybflot CJSC; Alliance Marine LLC; and Atlantick Vale LLC.
The companies are suspected of illegal collusion to distribute among themselves the catch quotas in the Atlantic fishing zone of the Kingdom of Morocco, which could lead or has led to unlawful control of products, the staff of sellers, and buyers in that market.
The Russian Association of Fishermen, fishing in areas of the western coast of Africa, has also been named as a defendant, and is alleged to have coordinated the cartel participants, in violation of Part 5 of Article 11 of Competition Protection Law.
FAS Russia has previously determined that the Federal Agency for Russian Fisheries had violated Article 15 of the Competition Protection Law by unlawfully distributing catch quotas in the same zone.
FAS Russia begins an audit of online taxi services
The Auto Owners Federation of Russia has filed a complaint to FAS Russia against the owners of the online services Uber, GetTaxi and Yandex Taxi. The general nature of the complaint arises from allegedly misleading price competition in the practice of online services to charge minimal rates, but to add booking fee services of up to 30%.
In some other European countries, Uber and GetTaxi are also under investigation, caused by a strong wave of indignation from traditional taxi drivers, who accuse these companies’ innovative approaches as constituting unlawful dumping and unfair competition practices.
FAS Russia has requested Uber, GetTaxi and Yandex Taxi to clarify their business models, working arrangements with carriers, and compensation to drivers, and interactions with taxi stations.
COMPETITION LITIGATION AND ADMINISTRATIVE DISPUTES
Court of Appeal upholds the overturning of RUB 2.2 billion fine in the Russian Railways case
On 7 September 2015, the Ninth Arbitration Court of Appeal rejected the appeal of FAS Russia and upheld the findings of the Arbitration Court of Moscow, which invalidated the fines that FAS Russia had imposed against rolling stock operators, Russian Railways JSC and the Administration of the Kemerovo region.
The Federal Antimonopoly Service had determined in September 2013 that Russian Railways and 16 other operators had violated Article 16 of the Competition Protection Law by concluding anti-competitive agreements for the provisioning of rolling stock companies to export coal from the Kuzbass Region. FAS Russia imposed RUB 2.2 billion in fines.
Please click here for additional background information and commentary this case. ART DE LEX lawyers represented two of the successful parties in the case, Ferrotrans LLC and New Forwarding Company PLC.
FAS Russia finds that Google abused its dominant position
On 14 September 2015, FAS Russia found the American technology giant, Google, had abused its dominant position in the market for pre-installed application stores for the Android operating system.
FAS Russia was the first antimonopoly service to find a violation of national antitrust laws by Google.
FAS Russia established that Google and its Irish subsidiary had required mobile device manufacturers that use the Android operating system to pre-install Google applications, such as its search service, in a priority position on the home page of their devices. This resulted in an effective ban of applications by third-party developers.
Several other antitrust investigations are proceeding against Google in Europe. Since 30 November 2010 the European Commission has been investigating complaints, such as an alleged unfair advantage that Google builds into the Google search service, which favors affiliated companies and service providers in the sale of goods, hotel bookings, and airline tickets. The Commission has also been investigating complaints, similar to the Russian one, about the compulsory inclusion of Google services in the Android mobile operating system. The penalties against Google could reach US$ 7 billion, which would be 10% of Google’s revenues in Europe from the products and services under investigation.
Arbitration Court of Moscow approves disqualification of government official for antitrust violations
On 9 September 2015 the Arbitration Court of the Moscow Region set a new precedent by granting the application of the Moscow Regional Office of FAS Russia to disqualify the former head of Solnechnogorsk municipal district of the Moscow Region for six months in response to the in connection with the systematic violation of local government antitrust laws. This case arose from the previously authorized disposal of land in the Solnechnogorsk district of the Moscow Region to third parties without bidding
Previously, similar violations had resulted only in fines.
NOTEWORTHY FOREIGN CASES
EU Antimonopoly Service initiates proceedings against major US film studios and media companies
On 23 July 2015, the European Commission filed antitrust charges against six major US film studios: Disney, NBC Universal, Paramount Pictures, Sony, Twentieth Century Fox and Warner Bros, as well as the British broadcaster Sky.
The European Commission suspects these companies of an anticompetitive agreement to prohibit paid video broadcasts from outside the United Kingdom and Ireland. Hollywood studios and the largest producers of television rights sell the content for each European country individually; so the broadcast of some programs are restricted on a geographical basis. This violates European legislation aimed at creating a single market for digital services.
The investigation by the EU Commission also could affect media companies with similar practices in other countries, such as: Sky Deutschland, Sky Italia, Canal Plus French and the Spanish DTS Distribuidora de Television Digital SA. However, proceedings against these companies have not been initiated yet.
LEGISLATIVE AND REGULATORY PROJECTS
The ART DE LEX Competition Law team is following these pending legislative and regulatory projects:
• Draft FAS Russia Order On the approval of the Guidelines for the establishment of prices (tariffs) and (or) limit (minimum and (or) maximum) levels of prices (tariffs) for electric energy (power) produced by operating on the basis of renewable energy qualified generating facilities and purchased in order to compensate for losses in electric networks
• Draft FAS Russia Order On amendments to FAS Russia Order 383/14 “On approval of the official regulations of the central office of FAS Russia” (6 September 2014)
• Draft FAS Russia Order On amendments to the Administrative Regulation of the Federal Antimonopoly Service on execution of state function for the verification of compliance with the antitrust laws of the Russian Federation, approved by Order of the Federal Antimonopoly Service on May 25, 2012 No. 340"
Draft FAS Russia Order On coordination of the central apparatus of the Federal Antimonopoly Service of Russia and the regional offices of FAS Russia in monitoring procurement in accordance with the Federal Law 44-FZ "On the contract system in the procurement of goods, works, services for state and municipal needs (4 May 2013)"