Competition Practice Newsletter (Issue 4, 2014)
Competition law enforcement exclusions for certain scientific and technical agreements extended for 5 years
On 13 May 2014, the Government Decree 385 of 20 April 2014, On allowability of agreements between economic entities, went into effect. The Decree extends the exclusions for certain “exclusive” agreements on joint scientific research and sharing of scientific or technical results for an additional 5 years. It also establishes criteria for good behavior of economic entities that cooperate to prevent the violations of Russian antimonopoly law.
Alexei Sushkevich, the Analysis Management Head of the Federal Antimonopoly Service, explained that the general exclusions have been clarified to allow "exclusive dealing” in scientific and technological agreements. This is commonly used in the business world, and, Mr. Sushkevich pointed out, does not limit competition, but actually stimulates it.
Customers to be subject to administrative liability for violation of procurement law
On 17 May 2014, amendments to the Administrative Offenses Code of the Russian Federation came into effect. These amendments stipulate the liability of customers for violations of the Federal Law On Procurement of Goods, Works and Services by Certain Types of Legal Entities. They were developed by the Federal Antimonopoly Service in order to execute paragraph 16 of the action plan for the realization of that law.
The amendments will prescribe administrative penalties in areas not previously covered by the Administrative Offenses Code. These include:
- A failure to meet the time limit for the disclosure of procurement information on the unified information system, which is required by the legislation, will result in an administrative penalty to public officials in amount of RUB 15,000 for public officials and RUB 50,000 for legal entities.
- An evaluation or rejection of procurement applications on grounds of non-compliance with requirements that were not in the procurement documentation will result in an administrative penalty of RUB 50,000 for public officials and RUB 300,000 for legal entities.
- A failure to disclose information about the procurement via the official website result in an administrative penalty of RUB 50,000 for public officials and RUB 500,000 for legal entities.
Russian Government confirms an action plan to improve competition in airport services
Government Ordinance 759-r of 6 May 2014 outlines actions aimed at the speedy development of increased competition in airport services in Russia.
The goals of the Ordinance are to reduce the price of airport services, passenger fares, and freight and mail rates, as well as to state regulation of services rendered by holders of natural monopolies. The approved plan also contains the actions to: alter the import customs duties on airport equipment; an analysis of competition status in airports; and the evenual implementation of airport infrastructure investment projects through public-private partnerships.
The action plan also provides for the monitoring of the accessibility to services by natural monopoly holders, including the availability of information about their activities, and the development of suggestions for their improvement.
Supreme Arbitrazh Court upholds FAS revocation of Kurumoch duty-free license
On 15 April 2014, the Presidium of the Supreme Arbitrazh Court decreed in case А40-169152/2012 that the Federal Antimonopoly Service (FAS) had acted lawfully in actions against the Ministry of Economic Development, Investments and Trade of Samar Oblast (Samar MEDIT), with regard to the revocation of a duty-free trade license at Kurumoch International Airport.
Samar MEDIT had rejected declarations by the duty free shop, AeroTradeService LLC, on alcohol retail sales in Samar Oblast on the grounds that the declarations did not include a registered supplier license number and its date of issue. Samar MEDIT then suspended the alcohol retail license of AeroTradeService in the Kurumoch International Airport for failure to meet licensing requirements. FAS ruled that such actions by Samar MEDIT were unlawful.
The Arbitrazh Court of Moscow and the Ninth Arbitrazh Court of Appeals upheld the FAS action as lawful and reasonable; and the Federal Arbitrazh Court of Moscow District overturned the judgments by the courts of first and second instances, finding that there was insufficient evidence of an unlawful restriction of competition. The Supreme Arbitrazh Court Presidium disagreed and annulled the decree by the court of cassation, holding that the actions by FAS were reasonable in response to unlawful impediments to economic activities.
Total penalties in Norwegian salmon cartel case reach RUB 241 million
The Federal Antimonopoly Service continues to impose turnover-based fines on companies that violated the Federal Competition Law by conluding a cartel agreement. A regular penalty of more than RUB 15 million has been assessed against ProfiBusiness LLC.
FAS has already imposed fines on a number of companies that deliver Norwegian salmon to Russia, the heaviest penalty so far being the more than RUB 198 million assessed against Russian Sea Group OJSC.
ATAK and ASHAN fail to convince Moscow Arbitrazh Court in discriminative conditions cases
In its decision in case А40-149833/2013, the Moscow Arbitrazh Court rejected the company’s contentions and upheld FAS findings that ATAK LLC had violated paragraph 2, part 1, of Article 14 of Federal Law 381, On Basic Principles of State Regulation of Trading in the Russian Federation, ("the Trading Law").
Meanwhile, ASHAN LLC initiated a civil case against FAS arising from an FAS instruction with respect to a similar alleged violation. ASHAN was found guilty of creating discriminative conditions for dairy product suppliers, in violation of paragraph 1 of part 1 of Article 13 of the Trading Law. The Arbitrazh Court of Moscow, on 6 May 2014, in case А40-149833/2013, ruled that ASHAN’s contentions were unreasonable and designed merely to avoid liability.
Roliz LLC ruled to be subject to advance approval requirements for strategic investments by “foreign” investors
December 2013, the Federal Antimonopoly Service held Roliz LLC liable under part 1 of Article 19.8.2 of the Administrative Offenses Code and imposed a fine of RUB 500,000. The Arbitrazh court of Primorsky Krai, in case А51-1349/2014, has upheld the FAS action arising from the failure of Roliz to observe advance approval requirements for foreign investments in Russia.
The FAS had ruled that the acquisition by Roliz LLC of a 100% stake in Vostochny bereg CJSC, which was a “company of strategic importance” was subject to Federal Law 57-FZ of 29 April 2009, On Procedures for Foreign Investments into Commercial Entities having Strategic Importance for Securing National Defense and Security (the “Strategic Investment Law”). Roliz therefore was subject to advance filing and approval by FAS, as required by Article 8 of that law.
FAS pressed the point that the person who controls the company has a status of “foreign investor” since he is a Russian national and Norwegian subject at the same time. The term “foreign investor,” as used in the Strategic Investment Law, should be defined with reference to Article 2 of the Federal Law 160-FZ of 7 September 1999, On Foreign Investments in the Russian Federation. That law defines a foreign investor as a foreigner whose civil capacity as such is defined in accordance with that person’s nationality law and who are permitted by his or her home country’s laws to invest in Russia.