Competition Practice Newsletter (Issue 1, 2014)
FAS clarifies procedures for foreign investment
The Federal Antimonopoly Service of the Russian Federation (FAS) has posted the Instructions for the application of the Federal Law N57-FZ “On the Procedure for Foreign Investment in Companies Strategically Important for the Defense and National Security of the Russian Federation” (29 April 2008) (the Strategic Companies Investment Law) on its official website.
The FAS Instructions provide answers to the most frequently debated issues in the practice of the Strategic Companies Investment Law. Notably, the antimonopoly agency directs that foreign states, international organizations and their subsidiaries are required to obtain an advance approval from the FAS prior to a transaction that directly or indirectly acquires more than 25% of the shares of Russian enterprises in business sectors that are not otherwise subject to the scope of the law.
In 2012, the FAS placed an overview of the administration of the Law on Strategic Companies Investment Law on its website. According to the statistics, 53 applications by foreign investors were filed in 2012, 23 of which were sent for further consideration. 18 motions were returned, and 4 motions were withdrawn by the applicants with intent to repudiate the transaction.
Association of European Business publishes the Code of Automaker Conduct
The Association of European Business (AEB) has published its Code of Automaker Conduct in the automobile market and aftermarket on its official website. On 6 December 2013, Igor Artemev, the Head of the FAS, presented the Code in a press conference on the development of automobile market.
The Code of Automaker Conduct was drafted in collaboration with AEB, FAS, and the Ministry of Industry and Trade of Russia. Its purpose is to regulate the issues in business interactions between market participants in automobile industry. The Code specifies the fundamental principles of cooperation among automakers, distributors, car dealers, and independent service centers. It was reviewed by FAS in August 2013.
ART DE LEX competition lawyers recognize the development of the Code as one of the most significant events in 2013, which demonstrates the increased role of self-regulation in Russia.
Russian State Duma reduces the notification requirements for economic concentration agreements
On 17 December 2013 Russian State Duma unanimously adopted legislation to amend the notification requirements of Federal Law N135-FZ “On the Protection of Competition” (26 July 2006).
The legislation modernizes Russian competition law by eliminating the notification requirements for a number of agreements (actions) on economic concentration. The modified law removes previous requirements that commercial organizations must notify the antimonopoly agency about their M&A transactions, share deals, and asset deals, if the aggregate asset value or aggregate revenues from the sale of products for the calendar year preceding the year of transaction exceeded RUB 400 million rubles. For financial organizations the previous threshold for notification has been from RUB 100 million to RUB 3 billion, depending on the type of rendered services.
According to the FAS database, the number of notification letters has dropped by 94% in the part six years: from 17,610 in 2008 to 999 in 2013.
Igor Artemev, the Head of the FAS, believes that the modified legislation will significantly alleviate the administrative burden on mid-sized businesses and help the antimonopoly authorities to concentrate on large transactions with the greatest effect on competition.
Pollock cartel case referred to law enforcement agencies
On 13 December 2013 the case arising from a competition-restrictive agreement by fishing companies in Far Eastern region was referred by the FAS to law enforcement agencies to commence criminal proceedings under Article 178 of the Criminal Code of the Russian Federation.
Notably, the total sum of penalties imposed on cartel participants under the Article 11 of the Competition Law was RUB 118 million in 2013. Nineteen companies including the Pollock Catchers Association, Nakhodka Active Marine Fishery Base OJSC, Tralflot OJSC, Sovgavanryba LLC, Vostokrybprom LLC, and other fishing companies were found to have violated Article 11. The antimonopoly agency ruled that the cartel participants were all Russian residents, however many of them were controlled by foreign companies.