A company that violates antitrust law can suffer a variety of negative consequences, from public sanctions to private claims. The main financial sanction that is imposed by the public authorities is an administrative fine. The fine can range from 1 to 15% of a company’s annual turnover in the affected market (0.3 to 3% for price-regulated markets and the so-called mono-product companies) arid, in case of collusion relating to public tenders, from 10 to 50% of the starting price of the affected tender. One common feature of all such fines is that they are issued pursuant to the Code of Administrative Offences, and the Code expressly provides that administrative liability is fault-based. This means that a company may be held administratively liable — and be ordered to pay a fine — only if the unlawful conduct (anticompetitive behaviour in this instance) was the fault of the company. Simply put, without fault there is no liability for anticompetitive behaviour.
So when is a company deemed to be at fault? The answer to this question can also be found in the Code which stipulates that a company is considered to be at fault if it fails to take all measures within its powers to prevent unlawful conduct. In other words, a company is held administratively liable
not because unlawful conduct has occurred — this would be the outcome under a strict liability regime — but because a company did not do enough to prevent its occurrence. By establishing this principle the legislator recognises that there is a limit to what a company can do to ensure compliant behaviour and that it is unjust to hold a company liable for things that it could not prevent despite its best efforts. As a result, the existence of appropriate compliance measures operates as a complete substantive defence that relieves a company from any administrative liability.
But the Code goes even further by adding important procedural safeguards. It specifically requires the authorities to identify the circumstances which, in their view, justify a conclusion that a company was at fault and hence should be held liable. In doing so, the authorities must resolve all reasonable doubts in the company’s favour. The Code also requires the authorities to consider all relevant mitigating circumstances when determining the amount of a fine. This means that preventive measures that were taken in good faith but for some reason fell short of a complete defence can be reflected in an appropriate reduction in the fine, to ensure the proportionality of the exacted punishment to the degree that the company is at fault. Lastly, the Code stipulates that the authorities’ failure to observe these principles can be grounds for setting aside their decision as to liability in court.
All these principles have been validated by the highest Russian courts. The Constitutional Court has repeatedly stated that the fault requirement is intended to exclude liability for companies that are not blameworthy, and that it applies to all regulatory areas unless the legislator stipulates a direct and unequivocal exception. Lower courts are beginning to catch on to this, although occasionally they struggle with distinguishing between a “tick-the-box” compliance regime and a legitimate and substantive compliance programme. This, however; seems to be a temporary problem, with the courts’ jurisprudence clearly heading toward recognising compliance as a defence, provided companies can demonstrate that their efforts were genuine and commensurate to the risks they were designed to address. A telling illustration of how this works in practice, albeit in another area of law, is a recent case where a compliance defence was successfully pleaded by a company facing charges of corruption, the defence being made on the basis of the company’s anti-bribery policies and programmes.
No one would argue that back in 2001, when the legislator included all these principles in the Code of Administrative Offences, it purposely had corporate compliance in mind. However, even though perhaps more by accident than by design, these legal principles codified years ago offer a remarkably suitable foundation for incentivising corporate compliance in 2015 — whether that be antitrust, an-tibribery or anything else. These principles provide the necessary incentive by means of allowing for complete relief from administrative liability, thus in themselves justifying the management time and costs associated with the development, maintenance and implementation of an effective compliance programme. They also provide the necessary flexibility — a company can devise a compliance programme that best suits its individual business, which can be particularly important for multinational companies striving to ensure that their compliance programmes are manageable across various jurisdictions.
Consequently, the proposal currently under consideration by the Federal Antimonopoly Service to amend the Code of Administrative Offences to make an antitrust compliance programme grounds for a reduction in the fine to the statutory minimum (e.g. 1% of a company’s annual turnover in the affected market), is not altogether welcome. Firstly, because it marks a substantial departure from the current regulatory regime which stipulates a complete relief from liability. Secondly, because the FAS takes the decision as to whether the antitrust compliance programme of the company is fit for its purpose and whether the company has done everything possible to implement that programme, threatening the flexibility afforded by current legislation.
As the saying goes “If it ain’t broke, don’t fix it”, and we hope that the FAS comes to the same conclusion in time.
This article was first published in AEB Business Quarterly I Autumn 2015 – Health & Pharmaceuticals I