MAJOR ANTITRUST CONFERENCE IN MOSCOW AND BRUSSELS
On 25 October 2019 the XI Annual Conference on Antitrust Regulation in Russia convened in Moscow to review the main events and trends of Russian antitrust law.
The program included discussions of issues such as: the conformity of the powers of the Federal Antimonopoly Service of Russia (FAS Russia) with the tasks of developing competition; new legislation that strengthens the legal liability of cartels; antitrust issues arising from procurement legislation; opinions on the pros and cons of antitrust compliance; and much more.
Yaroslav Kulik, the partner of ART DE LEX, made a presentation as part of the «Cartels 2020» foresight session. The key issues of discussion were topics: the introduction of new criminal and administrative liability for cartels, overcoming presumptions in cartel affairs, the interaction of business and the FAS Russia in the prosecuting cartels.
In addition, within the framework of the Moscow Conference, a visiting international session was held in Brussels on 27-28 October 2019, to cover topics of antitrust law and antitrust practice in the EU countries and their impact on Russian corporations and international business regulation.
HEAD OF FAS RUSSIA SUMS UP HIS AGENCY’S RESULTS FOR 2018
On 16 September 2019, the head of FAS Russia, Igor Artemyev, speaking at the Expanded Meeting of the Board of the Antimonopoly Office, reviewed the results of the work that FAS Russia accomplished in 2018 and outlined new objectives going forward.
In his report, Mr. Artemyev indicated that, at the moment, the “roadmap” for the development of competition was 41.5% complete. He noted the importance of the regional aspects of supporting competition and updating regional “roadmaps.” He discussed the consolidation of the principle of long-term tariff regulation for all naturally monopolistic spheres of control, as well as the introduction of the principle of “tariff in exchange for investments,” which allows economy-stimulating organizations to reduce costs and increase their productivity. He also reviewed the results in the ongoing fight against cartels. Mr. Artemyev reported that, based on evidence developed by FAS Russia, 34 criminal cases have been filed, 15 of which are under Article 178 of the Criminal Code of the Russian Federation.
Among the main problems in the development of competition, Igor Artemyev highlighted issues such as: the nationalization of the financial sector; the uncompetitive provision of natural resources to business entities; the lack of uniform procedures for the sale of state property; the lack of transparency in approving and executing investment programs of natural monopoly entities; and the procurement procedures of state-owned companies. In order to solve these and other problems, Mr. Artemyev set the task of preparing and adopting a new National Plan for 2021–2025, as well as taking measures to decartelize the economy, continue the development of exchange trading, and carry out work on the digitalization of tariff regulation.
FAS RUSSIA PLANS TO FINE COMPLAINANTS WHO DISRUPT PURCHASES
The Deputy Head of FAS Russia, Mikhail Evraev, has announced plans for the antimonopoly service to introduce a fee for unreasonable complaints that disrupt purchases. The introduction of such a fee will reduce the number of tenders suspended due to "professional complainants." These are the unscrupulous organizations or individuals who file complaints about public procurement in order to receive money from bona fide participants and customers in return for withdrawing such complaints The amount of the fee is still being discussed, but it will probably be a share of the initial price of the contract.
Among other possible innovations proposed by FAS Russia is the introduction of new provisions to the Code of Administrative Offenses of the Russian Federation of 30 December 2001, No. 195-FZ, which would expand the liability of banks for violations of Federal Law of 5 April 2013, No. 44-FZ, On the contract system in the field of procurement of goods, works, services to meet state and municipal needs. The legislation also would include the initiative of admitting to large contracts only those qualified procurement participants who have experience in executing of such contracts.
DRAFT AGREEMENT ON MUTUAL RECOGNITION OF BANK GUARANTEES BY EAEU STATES TO BE PREPARED BY EEC IN 2020
As a result of the meeting of the Council of the Eurasian Economic Commission (EEC), it was decided to develop a draft agreement on the mutual recognition of bank guarantees in public procurement until July 1, 2020. The preparation of the draft agreement will be undertaken by the EEC Competition and Antitrust Regulation Unit.
The agreement will provide equal conditions for participants in public procurement by the member states of the Eurasian Economic Union. The EEC Council also appealed to the Government of the Russian Federation with a request to amend the legislation of the Russian Federation at the time of development of the draft Agreement, providing for the use of bank guarantees of the Eurasian Development Bank and the Interstate Bank after they receive a credit rating from Russian rating agencies. This will prevent the restriction of the rights of representatives of business of the Union states wishing to participate in purchases in the Russian Federation.
JUDICIAL AND ADMINISTRATIVE PRACTICE
FAS RUSSIA'S PRECEDENTIAL DECISION ON 2014 BIDDING COMPLAINT
In 2014, Ekspertcentr LLC (the Tender Organizer) announced an auction for the sale of the bankrupt property – OMO-63 CJSC (the Auction). Three bids were submitted; however, due to a number of court proceedings, the Tender
The organizer decided to suspend the auction. One of the participants in the Auction demanded the return of the deposit of 2.4 million rubles but was able to get only 5,000 rubles, since Ekspertcentr LLC was declared bankrupt, and the general director of the company was prosecuted.
On 12 July 2019, a message about the auction was posted in the Unified Federal Register of Bankruptcy Information of Ekspertcentr LLC. A participant who previously could not recover his deposit complained about the actions of the Tender and the electronic platform Organizer. According to the complaint, the Tender Organizer limited the rights of potential participants to participate in the Auction, providing such an opportunity only for persons who had previously filed an application form for participation in the Auction and paid the deposit in 2014. At the same time, the funds deposited to participate in the Auction at the time it was held were not fully returned, but this did not prevent the Tender Organizer from considering the partial return of the deposit as a basis for refusing the applicant access to participate in the Auction.
By its decision, the FAS Russia Commission recognized the complaint as substantiated and issued an order canceling the results of the Auction and setting new dates for accepting application forms and making a deposit. Representatives of the antimonopoly service noted that restricting bidding in 2019 exclusively to bidders who submitted application forms five years ago limits competition and the rights of potential bidders interested in acquiring property put up for auction. Moreover, the actions of the bidder do not contribute to the most proportionate satisfaction of the requirements of the debtor’s creditors.
ANTITRUST PROCEEDINGS AGAINST SUPERJOB AND RABOTA.RU HAVE BEEN TERMINATED
FAS Russia terminated the proceedings against the job search services Superjob (Superjob LLC) and Rabota.ru (LLC RDV-Soft) due to the lack of corpus delicti in their actions. Antitrust proceedings against HeadHunter (Headhunter LLC) are ongoing.
At the same time, these Internet resources occupy a collective dominant position in the commodity market of services for ensuring the information interaction of applicants, employers, and recruitment agencies in the Internet telecommunication network. Federal Competition Protection Law (On Protection of Competition, dated 26 July 2006, No. 135-FZ) prohibits dominant entities from creating obstacles to other business entities from entering the market.
FIRST CARTEL BETWEEN EAEU CROSS-BORDER MARKET PARTICIPANTS DETECTED
At the end of 2017, the Ministry of National Economy of the Republic of Kazakhstan appealed to the EEC with a statement about possible signs of a violation by the company Delrus CJSC of the rules of competition in the cross-border market. In July 2018, the EEC filed a case in connection with this appeal.
During an investigation conducted by the EEC Antimonopoly Regulation Department, it was found that, using a dominant position in the market for technical maintenance of medical equipment, Delrus CJSC and Delrus RK MLP concluded an anticompetitive agreement on market division according to the territorial principle. In particular, its anticompetitive effects were evidenced by the refusal of the Russian company Delrus CJSC to provide calibration services for Fibroskan ultrasonic sensors to Kazakhstani consumers, in favor of a competitor from Kazakhstan, if it was possible to provide such a service. It was also found that the companies corresponded and redirected customers to the service provider in accordance with the geographical principle of the service territories.
Based on the results of the case investigation, the EEC Board recognized the actions of Delrus CJSC and Delrus RK MLP as a violation of subparagraph 3 of clause 3 of Article 76 of the EAEU Agreement, The conclusion and implementation of the agreement between Delrus RK MLP and Delrus CJSC led to the territorial division of market services for the calibration of ultrasonic sensors to the Fibroskan device. Based on the decision of the Board, the general directors of Delrus CJSC and Delrus RK MLP were fined about 500 thousand rubles.
THE U.S. FEDERAL TRADE COMMISSION AND THE BRICS ANTIMONOPOLY CENTER REPORT ON COMPETITION IN THE DIGITAL ERA
On 24 September 2019, officials of the Federal Trade Commission (FTC) testified before the U.S. Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights. In its testimony, the FTC addressed how U.S. antitrust laws apply to acquisitions of nascent or potential competitors by digital platforms. The testimony noted that many sectors of the economy have experienced significant disruption, which has resulted from the widespread use of technology to support new and evolving business models. The FTC report describes the basics of antitrust analysis that the FTC can use to prevent competitive harm in technology markets, in particular in controlling acquisitions.
In addition, on 18 September 2019, the BRICS Antimonopoly Center presented the draft academic report The Digital Era of Competition: BRICS Perspective (BRICS Report). The report engages with one of the most crucial questions of our time, the public governance of the digital economy, in particular focusing on the new forms of competitive interaction in the era of digital capitalism. New questions emerge from the transition from the old to the new economy, and they require ‘outside of the box thinking’ in order to inform policymakers and help to broaden the current narratives. The main task pursued by the compilers of the BRICS Report was a comprehensive study of the problems that the digital economy poses to the antitrust authorities, as well as the development of new theoretical and practical recommendations that the antitrust authorities of the BRICS countries should take into account in their work to ensure compliance with antitrust laws.
PROPOSED LEGISLATION AND REGULATIONS
DRAFT AMENDMENTS TO THE FEDERAL COMPETITION PROTECTION LAW
The Draft Law proposes to establish the institution of antitrust compliance in the Competition Protection Law, namely, to introduce the concept of “an internal system to ensure compliance with the requirements of antitrust law.” The bill will establish the procedure for organizing antitrust compliance programs by entities, as well as determine the basic requirements for the content of internal actions to establish competition law compliance policies and procedures.
The Draft Law provides that an entity will have the right to send a draft plan for an internal compliance system to the competition authority for review to confirm its adequacy to comply with the requirements of antitrust legislation.
The competition authority will be authorized to give an opinion on the draft plan’s compliance or non-compliance with the requirements of antitrust legislation. The bill is being prepared now for consideration on the first reading in the State Duma of the Russian Federation.
DRAFT AMENDMENTS TO THE FEDERAL LAW ON PROCUREMENT GOODS, WORKS, AND SERVICES BY DIFFERENT TYPES OF ENTITIES
The State Duma of the Russian Federation adopted on the first reading a bill that proposes to make closed purchases within the framework of the state defense order (SDO) without placing SDO implementation information in the part of the unified information system that covers purchases for the creation, modernization, supply, repair, service and the disposal of weapons, military and special equipment, as well as the development, production and supply of space technology and space infrastructure facilities.
In the context of international sanctions against the Russian Federation and the defense industry of Russia, it is necessary to place restrictions on the publication of some procurement information within the framework of the state defense order, including in the procurement plan, including from state customers and SDO executors. The placement of public defense information in public sources, given the assignment of identifiers of the state contract, could allow the collection and reproduction of the terms of reference for the constituent elements, which could pose risks to the interests of national security and defense of the Russian Federation.
DRAFT FEDERAL LAWS STRENGTHEN POSSIBLE CRIMINAL LIABILITY FOR UNLAWFUL RESTRICTION OF COMPETITION
Three draft laws – On Amending the Criminal Code of the Russian Federation and the Criminal Procedure Code of the Russian Federation, On Amending the Federal Law ”On Protecting Competition” and Certain Legislative Acts of the Russian Federation, and On Amending the Administrative Code of the Russian Federation – were submitted to the Government of the Russian Federation pursuant to instructions of the President.
The draft laws criminalize agreements restricting competition between customers and bidders, increase criminal liability for collusion in tenders, as well as for participation in the cartel by shareholders and members of collegial bodies and directors of companies. The income from the cartel, at which criminal liability sets in, will be doubled – up to 100 million rubles and the amount of major damage – from the current level of 10 million to 20 million rubles.
The proposed legislation would introduce create a register of cartel participants who would be prohibited from participation in public procurement. The amendments also would establish a “double fine” for the repeated formations of cartels by a violator. To reinforce awareness, the bills also stipulate that when a customer places a procurement notice, it must include a warning about potential administrative and criminal liability for violation of the requirements of the antitrust laws.