Reducing competition risk level
In March 2020, a provision under competition law entered into force to govern the internal antitrust compliance framework of companies.(1) The concept of the provision derives from similar frameworks utilised by both international companies, which used to enforce their antitrust compliance policies in their Russian subsidiaries, and large Russian companies, which had to comply with foreign capital market requirements to obtain foreign financing.
Given the generalised and vague wording of the provision, the Federal Antitrust Service (FAS) recently provided recommendations and best practices for implementing an antitrust compliance framework within a company.(2)
According to the FAS, an antitrust compliance framework is a set of documented measures that a company uses to manage and mitigate antitrust risks. While a standard internal competition policy is essential, this document alone cannot constitute a comprehensive and efficient antitrust compliance system. The required measures differ for various industries and business models, but the general recommendation is for the compliance framework to comprise:
- requirements and instruments for conducting risk assessments on daily commercial activities;
- measures aimed at mitigation of apparent antitrust risks;
- measures aimed at supervising and improving the internal antitrust compliance framework;
- procedures to familiarise a company's employees with the relevant policies and regulations; and
- the appointment of an officer responsible for implementing and maintaining an effective antitrust compliance framework in a company.
Despite the statutory provision, implementing such a framework is voluntary and thus the absence of one does not constitute a violation. If such a framework is introduced, a company may voluntarily apply for FAS certification. This may be advisable in the interest of good corporate governance, but successful certification does not provide any statutory benefits. Similarly, refusal to apply for certification will not entail any penalties.
Reducing competition risk level
From a practical perspective, the implementation of an antitrust compliance system may be a prudent step for companies that are of particular interest to the FAS, namely:
- natural monopolies;
- companies holding dominant positions in a specific market;
- companies with considerable market share (10% to 25%) participating in agreements that contain exclusivity provisions or provisions governing joint business operations; and
- companies operating in strategic, social or "sensitive" industries (eg, food and drug retail chains, medical equipment and services, oil and gas, and utilities).
Provided that the recommended antitrust compliance measures are in place, the types of companies identified above may effectively disclose and prevent potential violations of competition law, in addition to reducing their exposure to FAS audits. The FAS carries out audits once every three years for companies that it considers to be a medium-level competition risk, and once every five years for those considered to be a moderate-level competition risk. A compliance framework is one of the prerequisites to reduce the competition risk level from medium to moderate, or from moderate to low. Companies considered a low-level risk are not subject to FAS audits.
In the case of a violation of competition law, an antitrust compliance framework may serve as a valid reason for the FAS to relieve a company of imposed fines. Fines may be calculated based on a percentage of the company's yearly revenue or be equal to all proceeds derived from activities in breach of competition law. Therefore, in order to receive a fine reduction, a company must prove that its antitrust compliance setup is real and effective. The importance of this was evident in a recent case in which the Supreme Court dismissed the appeal of a large national energy company for relief from fines. The Court stated in its decision that the company's antitrust compliance measures existed only on paper and had not been effective in preventing breaches of its procurement procedure.(3)
For further information on this topic please contact Alexey Nikitin and Anton Borisyuk at Borenius Attorneys Ltd by telephone (+7 812 335 22 20) or email ([email protected] and [email protected]). The Borenius Attorneys Ltd website can be accessed at www.borenius.ru/en/.
(1) Federal law dated 26 July 2006 No. 135-FZ "On protection of competition".
(2) Recommendations of FAS of Russia dated 2 July 2021 No. 20 "On internal measures procuring compliance with competition legislation".
(3) Resolution of the Russian Supreme Court dated 19 April 2021 No. 305-ЭС21-4401 for the case No. A40-3569/2020.