On 5 January 2016, a set of amendments to Russian Federal Law ‘On Protection of Competition’ (hereafter referred to as the Law) and related laws will come into force. Other amendments to antitrust regulations are also due to be introduced.
The Fourth Antimonopoly Package in Russia: Due to come into force in January 2016
On 5 January 2016, a set of amendments to Russian Federal Law ‘On Protection of Competition’ (hereafter referred to as the Law) and related laws will come into force. Other amendments to antitrust regulations are also due to be introduced. This is the fourth set of material amendments in this area since the Law was enacted in 2006, and is therefore known as the Fourth Antimonopoly Package. This package has been produced by the Federal Antimonopoly Service of Russia (FAS) in close cooperation with representatives of the business community, other government authorities, lawyers and economists specialising in competition law. The amendments relate to a number of important areas such as dominance, economic concentration and cartels.
The key changes include:
1. Requirement to obtain clearance for join venture agreements
Entry into agreements between competitors in preparation of their joint activities in Russia is now subject to mandatory pre-transaction clearance if the aggregate value of the assets of all parties exceeds RUB7bn or their aggregate turnover exceeds RUB10bn. If the above thresholds are not met, the application can still be submitted on a voluntary basis.
2. Introduction of new procedural rules in merger control
The amendments introduce a new rule requiring the FAS to publish information on all merger control filings submitted (including joint venture filings), and invite all interested third parties to provide comments on the possible competition impact of the proposed transaction. Previously, such a procedure was only required for cases containing an extension of the review period where the transaction involved competition concerns.
In addition, the Fourth Antimonopoly Package introduces the possibility of pre-notification contact with the FAS and the electronic submission of merger control filings. Parties can now inform the FAS of a proposed transaction prior to submission of the filing and can suggest remedies. However, the FAS has yet to produce guidance as to what the procedures for pre-notification contact and electronic submission will be.
3. Abolishment of the Register of companies whose market share exceeds 35 per cent
Previously, appearing on the Register triggered the filing requirement even if the relevant asset or turnover thresholds were not met. This amendment may reduce the number of transactions subject to merger control. This is an acknowledgment from the FAS that the Register is outdated and does not accurately reflect the competition environment.
4. Eliminating the rule whereby a company whose market share is less than 35 per cent could still be found dominant
The market power concept that was introduced in 2009 has now been eliminated. A company with a market share below 35 per cent may only be found dominant if a sector-specific dominance threshold applies or in a situation of collective dominance.
5. Clarification on the definition of a cartel
The definition has been extended to cover agreements between competitors involving the purchase of products or services, in other words cartel buyers.
6. Broadening grounds for issuing warnings to stop actions that may violate antitrust laws
Amendments to the Law introduced in January 2012 created a procedure whereby the FAS can issue warnings to dominant parties when one of the following offences occurs:
- imposition of contractual terms that are either disadvantageous to the other party or are unrelated to the subject of the contract but are still binding; or
- unjustified refusal to enter into a contract with a party, or avoiding fulfilment of a contract.
The FAS may not commence proceedings or impose a fine against any party accused of the above offences, until such a warning has been issued and the time designated to resolve the breach has expired.
The Fourth Antimonopoly Package expands the list of offences that can trigger an FAS warning such as this to include:
- setting of different prices for the same product without justification; and
- applying discriminatory terms.
Furthermore, the warning procedure has been extended to include certain offences related to unfair competition. The amendment is expected to reduce the number of abuse of dominance cases.
7. Stricter controls over dominant companies
Once the Fourth Antimonopoly Package comes into force the Russian government will have the right to:
- set rules for non-discriminatory access to a company's products and services; and
- subject the company's products and services to a process of mandatory tendering.
However the government will only be able to exercise this right if the company meets two conditions:
- a market share of over 70 per cent; and
- an FAS ruling has confirmed that it has abused its dominant position.
Previously, such non-discriminatory access rules could only be applied where a natural monopoly exists in the market.
8. Clarifying the abuse of dominance concept
The Fourth Antimonopoly Package states that actions by a dominant entity only amount to abuse if they harm interests of either business entities or an unlimited number of consumers. Prior to the package’s introduction, the FAS also had to bring proceedings against abusive companies when their actions impaired the interests of any single individual (eg where an energy provider refused to supply power to a private household). This type of case would now fall outside of the FAS’ jurisdiction.
9. Broadening leniency in relation to administrative liability
Leniency is currently only available to the first person applying for it who satisfies certain conditions. This person would be granted full immunity from administrative liability. Decreasing levels of liability are not catered for and, accordingly, the general rules for calculation of the fine apply to all subsequent applicants.
In this context of administrative liability, the Fourth Antimonopoly Package further extends the possibility of applying for leniency to second and third applicants who voluntarily provide the FAS with information on an anticompetitive agreement. The following conditions, however, must be met:
- the person accepts responsibility for their actions;
- the person ceases participation in the agreement; and
- the information and documents provided are sufficient to establish proof of the offence.
If these conditions are met, the minimal administrative fine permitted for that offence will be imposed. This rule does not apply if the person organised a cartel. It is also worth noting that it is not fully clear whether the broadened leniency applies to any anticompetitive agreements or only to cartels.