Competition Practice Newsletter (Issue 3, 2016)
news and events
Presidium of the Supreme Court of the Russian Federation approves a new judicial review of competition protection cases
On 16 March 2016, the Presidium of the Supreme Court of the Russian Federation approved the Review on the Jurisprudence Arising in Cases of Protection of Competition and Cases of Administrative Offenses in this Area. The Presidium prepared this review of judicial practice in disputes arising from antimonopoly legislation, based on the experience and practices of the arbitration courts.
Stay tuned for comments by ART DE LEX about this Review.
FAS Russia develops a mechanism for the compulsory transfer of a license to an invention
Draft amendments to the Civil Code, prepared by the Federal Antimonopoly Service (FAS Russia), would legalize the forced transfer of licenses for the use of inventions.
Patent owners often abandon the production or supply of socially necessary goods, such as drugs. This creates a shortage of such products on the market. The forced transfer of licenses is designed to solve this problem. It will affect only those patent holders who abuse their dominant position by restricting production and creating a shortage in the market.
Under the proposed legislation, a compulsory license transfer would require a court decision. FAS Russia, or a company to which the holder had wrongfully refused to provide a license, would apply to the court for the grant of a compulsory license transfer.
According to ART DE LEX partner Yaroslav Kulik, FAS Russia's proposal is closely linked to the FAS Russia initiative to exclude from the Federal Competition Protection Law the so-called "immunity" for intellectual property relations. "Immunity," under Article 10 of that law, currently means that actions to implement exclusive intellectual property rights are not reviewable for possible competition law violations.
Patent owners usually are not manufacturers; so the ban on an economically or technologically unjustified reduction or cessation of the production of goods usually does not apply them. To establish a claim for a forced sale of a license, one must first show that the patent owner’s action or inaction violated antimonopoly legislation. This is why FAS Russia proposes to delete the "immunity" provisions in Article 10 of the Competition Protection Law.
If FAS Russia recognizes the patent for socially necessary goods as being economically and technologically reasonable to license, and finds that the refusal to license the rights would create a product shortage, then it could petition a court to order the transfer of the license. The Supreme Court also allows the party that is allegedly harmed by the refusal of a license for a patent pertaining to socially necessary goods to bring an action; so, in theory at least, the proposed legislation would make it possible to obtain a compulsory license transfer without the participation of FAS Russia.
Government Decree permits in absentia actions on applications by foreign investors
In accordance with Government Decree 46 of 30 January 2016, On Amendments to Paragraph 9 of the Regulation about the Government Commission on Monitoring Foreign Investment in the Russian Federation, the Government Commission on Monitoring Foreign Investment in the Russian Federation has acquired the right to take decisions in absentia on applications by foreign investors.
Such a decision must be adopted unanimously by the Commission members participating in the vote; otherwise the decision must be taken at a Commission meeting Government Commission, as prescribed by the Regulation.
The federal law governing administrative appeals mechanism in the construction sector enters into force
On 10 January 2016 Federal Law 250-FZ of 13 July 2015, On Amendments to the Federal Law “On Protection of Competition" and some legislative acts of the Russian Federation, went into effect, expanding the powers of FAS Russia in the construction sector. FAS Russia is now empowered to deal with complaints pursuant to Article 18.1 of the Competition Protection Law, arising from acts or omissions of: an auction organizer; an operator of an electronic platform, tender or auction commission; and an authorized body or organization engaged in network operation in the construction industry.
Economic entities may file a complaint with FAS Russia no later than three months from the date of the contested action. The complaint shall be considered within seven days. If in the course of consideration of the complaint, the Commission establishes other violations of antimonopoly law, the decision would be based on all the violations.
When violations are identified, the antimonopoly service may issue binding orders to eliminate them
These amendments will allow competition authorities to control the administrative procedures related to the issuance of building permits and connections to utility networks. They also will give business entities operating in the construction sector an effective mechanism to protect their rights and interests, thereby promoting equal access to the market.
FAS Russia receives authority to control rates for municipal solid waste disposal
FAS Russia now has the authority to regulate solid municipal waste tariffs, including the terms of compliance with disclosure standards, as a result of Government Decree 78 of 5 February 2016, On Amending Resolution of the Russian Government dated 27 June 2013 № 543 "On State Control (Supervision) in the Field of State Regulated Prices (Tariffs), as well as Change and Invalidation of Certain Russian Government Acts."
Decree 78 was issued pursuant to amendments to Federal Law 458-FZ of 2 December 2014, On Amendments to the Federal Law "On Production and Consumption Waste," which entered into force on 1 January 2016 and established a new mechanism for the management of municipal solid waste. The collection, removal, disposal, and recycling of municipal solid waste now will be conducted by regional operators, selected on a competitive basis. These contractors also will transport waste to landfills and will receive more information about the sources and quantities of municipal solid waste.
Since the treatment of municipal solid waste was included in the list of public services, the prices for the collection of garbage and waste management are established in accordance with the tariffs. Thus, the tariffs for the regional operators will be approved by regulatory authorities. In order to prevent abuse, FAS Russia will control the legitimacy and validity of the establishment of, and changes to, the maximum authorized tariffs, as well as compliance with the disclosure standards and requirements set by the regulators.
judicial and administrative practice
The Supreme Court of the Russian Federation recognizes limits to FAS Russia’s oversight of enforcement proceedings not affecting competition
By its decision of 22 January 2016 in case number A50-19907/2014, the Board on Economic Disputes of the Supreme Court of the Russian Federation found that the Federal Antimonopoly Service has exceeded its jurisdiction in a case arising from the arrest of a retailer’s property by bailiffs enforcing a civil judgment.
The case arose from a dispute between the Office of the Federal Bailiff Service (OFBS) in the Perm region and the Office of the Federal Antimonopoly Service of the Perm Region (OFAS Perm), concerning an unscheduled audit made by territorial antimonopoly body at the request of the retailer. The retailer complained that the actions of OFBS to arrest its property contributed to the displacement of its trade network in the market, in violation of Article 16 of the Competition Protection Law, which prohibits competition-restricting agreements or concerted actions by the federal executive bodies. OFAS Perm agreed.
OFBS appealed to the court to invalidate the OFAS Perm audit and determination against the bailiffs’ actions. The Board on Economic Disputes agreed that OFAS Perm had exceeded its authority, because the enforcement proceedings are a continuation of civil proceedings that do not affect competition. Therefore, the bailiffs’ arrest of property in this case was not subject to review by OFAS Perm for compliance with competition law.
The Arbitration Court of Moscow upholds FAS Russia's decision in the Google case
On 15 March 2016, the Moscow Arbitration Court rejected petitions by Google Inc. and Google Ireland Limited in their lawsuit to set aside decisions and orders of FAS Russia against the two companies.
FAS Russia had determined that the two Google companies had violated Part 1, Article 10, of the Competition Protection Law, by abusing their dominant position in the market for applications for Google’s Android operating systems. These alleged violations included imposing special conditions on counterparties-producers of mobile applications, such as: a mandatory preset of the Google Play applications store and other Google applications; the Google search engine; location of icons for Google applications in the priority areas of the screen; and a ban on preset applications from Google competitors. In particular, Google Inc. banned the preset of the Yandex, Fly, Explay and Prestigio mobile services. FAS Russia decided that these actions violated the Competition Protection Law and issued an order against them.
The Moscow Arbitration Court found no grounds to review the FAS Russia decision and action and upheld them completely.
For information about FAS Russia’s action against Google, see our newsletter of 20 July 2015.
noteworthy foreign cases
U.S. Supreme Court rejects Apple’s appeal in its e-book collusion case
On 7 March 2016, in Apple v. United States (Docket 15-565) the U.S. Supreme Court declined, without comment, to review Apple’s appeal of an appellate court determination that Apple had conspired with publishers to inflate the prices of electronic books. Apple must now pay the $450 million settlement that it previously agreed to pay if it lost the case. $400 million of this amount will be paid to buyers who paid inflated prices for e-books.
Additional information about the proceedings against Apple in the lower U.S. Federal courts, and its settlement agreement, can be found in our newsletter of 31 December 2014.
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 Work Order of the Collegial Bodies of the Federal Antimonopoly Service
According to the draft, collegial bodies would have the power:
• to review materials, study and generalize the practice of the antimonopoly authorities, clarify application of antimonopoly legislation; and
• to review decisions and requirements of the territorial offices of FAS Russia in cases of violation of the antimonopoly legislation, if such decisions or requirements violate uniformity in the application of the antitrust laws.
Draft Federal Law On Amendments to Article 16 of the Federal Law “On Advertising”
This draft legislation envisages an increase in percentage of the volume of advertising permitted in print media not specialized in advertising messages, from the current 40% to up to 45%.
Draft FAS Russia Order On Approval of Rules for the Use of Port Dues in Sea Ports of the Russian Federation
This draft order would establish specific rules for paying port dues by Russian fishing fleet vessels, and would clarify the rules for charging separate fees. It would introduce a security charge for vessels calling at and leaving a port, as well as for ships transiting the designated waters of a port.
Draft Executive Order of the Russian Government On Amendments to the Decree of the Russian Federal Government dated 31 October 2013 № 2019-r “On the List of Goods, Works and Services, in the Case of Procurement of which the Customer is Oobliged to Hold an Auction in Electronic Form"