Competition Practice Newsletter (Issue 1, 2016)
news and events
Fourth Antitrust Legislative Package now in effect
On 5 January 2016 Federal Law No. 275-FZ On Amendments to Federal Competition Support Law and Some Legislative Acts of the Russian Federation (also known as the Fourth Antitrust Legislative Package) came into force.
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 a 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 has 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; the illegal use of another's trademarks; and
• fewer grounds for unscheduled inspections of small businesses.
The ART DE LEX competition law team has prepared a special bulletin and analysis of the Fourth Antitrust Legislative Package, with detailed description of the changes. Click here to read it.
Amendments to the Competition Protection Law will tighten procedures for establishing state and municipal enterprises
On 21 December 2015 the State Duma held the second reading of the bill On amending the Federal Law "On Protection of Competition" and other legislative acts of the Russian Federation (in order to reduce the administrative burden on small businesses)."
The changes aim to weaken antimonopoly controls over small business while strengthening regulation of the procedures for the creation of state and municipal enterprises by FAS Russia.
The proposed amendments would introduce perpetual "antitrust holidays" for small businesses, which would be exempt from unscheduled site inspections, except in cases with the prior approval of prosecutors and the presence in the enterprise of features of a cartel. The amendments also are expected to increase the threshold asset value from RUB 250 million to RUB 400 million before coordination with FAS Russia is required for acquisitions of shares, rights, or property of state and municipal enterprises.
A new chapter 5.1 in the Federal Law 135-FZ On the Protection of Competition (26 July 2006) (hereinafter, "the Competition Protection Law") will ensure that there is antimonopoly oversight of the creation of state and municipal enterprises. It will require the prior written consent of the antimonopoly body, and will impose liability for violation of procedures for obtaining such consent. In cases of violations, these sanctions could include court-ordered liquidation of the state or municipal enterprise and administrative liability for the enterprise or its manager.
Google challenges FAS Russia ruling on abuse of its dominant position
On 10 December 2015 Google filed a lawsuit in the Moscow Arbitration Court to invalidate the decision of FAS Russia, which found Google guilty of antitrust violations and ordered corrective actions in eight days. FAS Russia was the world's first antimonopoly service to find Google in violation of national antitrust laws.
On 14 September 2015, upon the complaint by the Yandex company, FAS Russia found that Google had abused its dominant position in the market of operating stores for the Android operating system. It found that Google had unlawfully imposed special conditions on the distribution of its Android operating system, such as: the compulsory preset of other Google applications on Android devices; installing the Google search engine in a priority position among the application icons on the device screen; and a ban on the preset of applications by Google's competitors. In particular, Google banned the preset of Yandex services on the Fly, Explay and Prestigio mobile devices.
Google argues that there are no obligations of on the part of manufacturers of Android OS devices to install Google applications. Google cites three examples of such devices -- ZTE, Xiaomi, Gionee -- on which the user can install applications by Google's competitors
Follow this link to read a detailed commentary on the decision by FAS Russia in the Google case.
judicial and administrative practice
The Russian Supreme Court upholds the position of the territorial body of FAS Russia on proving oral agreements by the conduct of the parties
The Decision of the Supreme Court of the Russian Federation on 7 December 2015 refused the request by fourteen insurance companies -- among them Rosgosstrakh, RESO-Garantia PJSC, Guta-Insurance JSC, and Ingosstrakh PJSC -- to transfer their appeals for consideration by the Trial Collegium of Economic Disputes of the Supreme Court.
The courts of appeal and cassation found that the actions of insurance companies violated paragraph 1 of Part 4 of Article 11 of the Competition Protection Law. This was evidenced by:
• an unjustified increase in the number of concluded contracts of voluntary insurance;
• the period during which the growth in the number of contracts occurred; and
• the available commercial benefits for each company.
These examples of the conduct of the parties suggested that these insurance companies entered into an agreement, the implementation of which led to the imposition of insurance contract conditions that were unfavorable for them or irrelevant to the subject matter of the contract.
Between 2013 and 2015, the Rostov territorial authority of FAS Russia (Rostov OFAS) received more than a thousand public complaints against insurance companies in the Rostov region, specifically against the oral imposition of other insurance products on car owners when the insurance contract was signed.
The decision of the Rostov OFAS was based on an analysis of the behavior of the insurance companies, which proved the existence the unlawful oral agreements, even though they could not be documented. This case is precedent for law enforcement officials to testify about the conclusion of anti-competitive agreements, based on statistical data from the antitrust authority.
FAS Russia finds major foreign carriers guilty of unlawful concerted actions
At the end of December 2015, FAS Russia found a substantial number foreign carriers guilty of violations of Clause 1, Part 1, Article 11.1 of the Competition Protection Law. The affected companies include: A.P. Moller-Maersk A/S (Denmark); CMA CGM SA (France); Hyundai Merchant Marine Co., LTD (Korea); Orient Overseas Container Line Limited (Hong Kong); and Evergreen Marine Corp. (Taiwan) Ltd (Taiwan).
The antimonopoly body found that companies aligned the amount of premium rates each time after the publication, on the Internet site of one of the carriers, of information on the establishment of allowances for freight rates. This led to a steady increase in the prices of these surcharges, as well as an increase in the cost of goods for domestic consumers.
The companies' behavior constituted prohibited concerted actions that led to the establishment of premiums on the freight rates in the market for container transportation in routes connecting South East Asia, the Far East, and the Russian Federation in 2012 and 2013.
A special feature of this case is that the organizations that FAS Russia found guilty all are foreign entities. This case is another example of the application of the Competition Protection Law to foreign companies doing business throughout the Russian Federation.
The Russian Supreme Court upholds a record private lawsuit by Biotec against Teva Pharmaceutical Industries
A Decision by the judicial chamber on economic disputes of the Supreme Court of the Russian Federation on 7 December 2015 annulled the decision of the court of cassation, which had annulled the decision of the lower courts as to whether Biotec, a regional pharmaceutical production and distribution company, could recover damages from the Israeli company Teva Pharmaceutical Industries Limited, which occupies a dominant position in the market for the drug Copaxone.
The court of first instance and the appellate court had ruled that Biotec had established grounds for the recovery of slightly more than RUB 408.3 million from Teva.
In December 2013 FAS Russia found that Teva had violated Clause 5, Part 1, Article 10 of the Competition Protection Law by its economically and technologically unjustified refusal to conclude a contract with Biotec for distribution and delivery of Copaxone.
Another important finding of the Supreme Court was that the court confirmed the legal position of the FAS of Moscow District, that the provisions of Paragraph 4, Article 10 of the Competition Protection Law, concerning the withdrawal of an action for the implementation of exclusive rights to intellectual property, do not apply to cases of abuse of dominant position by an economically and technologically unjustified refusal to deliver the goods.
noteworthy foreign cases
The European Court annuls price-fixing fines against 14 airlines
The European Antitrust Tribunal has annulled fines of about 799 million euros, which the European Commission had imposed on a number of airlines involved in a cartel.
The airlines, which include Air France-KLM, British Airways, and Japan Airlines, were found guilty in 2010 of an unlawful cartel agreement for a procedure for establishing freight prices, in particular the price of fuel surcharges and safety allowances.
Yandex joins the EU investigation against Google
Yandex has made independent claims to the European Commission in connection with the antitrust investigation against Google. Yandex therefore has joined the Fair Search alliance, which includes Microsoft, Nokia, Oracle, Expedia, TripAdvisor, and others.
The European Commission officially announced in April 2015, after three years of preliminary inquiries, the start of the formal investigation. Google is accused of violating European antitrust laws by restricting market entry by other mobile applications developers using Android platforms.
A further investigation against Google might be initiated in the United States by the U.S. Federal Trade Commission.
Qualcomm is suspected of unfair competition
On 8 December 2015, the European Commission brought charges against the American corporation Qualcomm, the world's largest supplier of chips for wireless modems. Evidence suggests that Qualcomm sold products at a lower price to its largest customer, conditioned on the customer's agreement not to buy products from Qualcomm's competitors. Qualcomm has four months to answer these charges.
If these "exclusive supply" and unfair pricing charges are confirmed, Qualcomm could be fined up to 10% of its annual revenue. The EU antitrust regulators also could require Qualcomm to change its business procedures.
Currently, the Fair Trade Commission in South Korea and antitrust authorities in Taiwan are accusing Qualcomm of violating those countries' antitrust laws. The charges in both countries arise from Qualcomm's practice of attaching unlawful conditions to its licensing of its patents.
legislative and regulatory projects
The ART DE LEX Competition Law team is following these pending legislative and regulatory projects:
FAS Russia Draft Order On amendments to the administrative regulation of the Federal Antimonopoly Service on execution of state functions to establish the dominant position of economic entity in the consideration of applications, materials, cases of violation of antitrust laws and the implementation of state control over economic concentration. Implementing the Fourth Antitrust Legislative Package, this regulation affirms the exclusion of the jurisdiction of FAS Russia over the register of economic entities (excluding financial organizations) with a market share for certain goods of more than 35%, or a dominant market position with respect to certain goods.
FAS Russia Draft Order On amendments to the administrative regulation of the Federal Antimonopoly Service on execution of state function on the excitation and the consideration of the cases of violations of the antimonopoly legislation of the Russian Federation. Implementing the Fourth Antitrust Legislative Package, this regulation changes the administrative regulations of FAS Russia Order 339 of 25 May 2012, concerning the origination and consideration of antimonopoly cases, including:
• alerting to violations of paragraphs 6 and 8 of Part 1 of Article 10, Articles 14.1 - 14.3, 14.7, 14.8 and 15 of the Federal Law 135-FZ On Protection of Competition (26 July 2006) (the "Competition Protection Law")
• the contents of decisions in the case of violation of the antimonopoly legislation;
• conclusions about the circumstances of the case;
• the possibility of signing actions with a qualified electronic signature;
• the use of video-conferencing;
• conducting open and closed meetings to consider antimonopoly cases and announcement of the conclusions about the circumstances of the case;
• the grounds for compulsory continuances in antimonopoly cases;
• the grounds for termination of an antimonopoly case and procedures to enter into the circumstances of such cases; and
• the timing of the appeal decisions and orders by the FAS Russia internal appellate bodies.
FAS Russia Draft Order On amendments to the administrative regulation of the Federal Antimonopoly Service on execution of state function on complaints against actions (inaction) of the customer, authorized body, an authorized institution, a specialized organization, the Commission on the implementation of the procurement, its members, the official contract service, contract manager, the operator of an electronic platform in determining the suppliers (contractors, performers) for state and municipal needs, approved by order of the Federal Antimonopoly Service of Russia 727/14 of 19 November 2014. This draft regulation was developed in connection with the abolition of the Federal Service for Defense Contracts and the adoption of the Federal Law 216-FZ On Amendments to Certain Legislative Acts of the Russian Federation in connection with adoption of the Federal Law "On the State Corporation for Space Activities Roskosmos" (13 July 2015).
FAS Russia Draft 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.
FAS Russia Draft Order On amendments to the procedure for analyzing the state of competition in the commodity market.
FAS Russia Draft Order On the annulment of the order of FAS Russia from 26.03.2008 № 95 "On approval of the register of economic entities having a market share of certain goods in the amount of more than 35 percent."
FAS Russia Draft Order On approval of the direction of caution about the inadmissibility of actions that could lead to a violation of antitrust laws.
FAS Russia Draft Order On the approval of the revision of the rules of collegial bodies of the Federal Antimonopoly Service of decisions and (or) regional regulations antitrust authorities for violations of antitrust laws.
FAS Russia Draft Order On approval of lists of subjects of natural monopolies in the transport terminals, ports and airports, government regulation which the Federal Antimonopoly Service of Russia.