Enforcement proceedings in dominance in Russia

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

FAS is responsible for the enforcement of the dominance rules. It is authorised to:

• commence and consider antitrust violation cases;
• issue warning and compliance orders to dominance entities;
• impose administrative penalties on dominant entities and their officers; and
• carry out scheduled and extraordinary inspections of dominant entities.

In the framework of these authorities, FAS may request documents from legal entities, public bodies and individuals, access and view premises, review documents and objects, question persons who may have information relevant for the case being considered, attract experts and order expert reviews.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

FAS may:

• issue compliance orders to dominant entities requiring them to stop abusive practices or to conclude, amend or terminate contractual arrangements to eliminate an antitrust violation;
• issue a compliance order to dominant entities requiring that they transfer all income received as a result of the abuse of dominance to the public budget;
• apply to court for an order to split up a dominant entity if it is systematically engaged in monopolistic activities;
• apply to court for the invalidation of a transaction that violates antitrust legislation; and
• impose fixed fines up to 1 million roubles or turnover fines up to 15 per cent of an enterprise’s revenue on the respective market.

Officers of a business entity may be fined for up to 50,000 roubles or may be suspended for up to three years.

The highest fine imposed in the Russian Federation for an abuse of dominance reached 4,675,983,472 roubles. It was imposed on a leading oil company for withdrawal of goods from circulation and discrimination.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

FAS may impose most sanctions directly (including issuance of compliance orders and imposition of administrative fines, including turnover-based fines). However, it must petition a court in order to split up a dominant entity, suspend company officers, or invalidate a transaction violating antitrust legislation.

What is the recent enforcement record in your jurisdiction?

The rules on abuse of dominance are enforced quite often in the Russian Federation (for example, in 2017, it commenced 847 abuse of dominance cases). The most commonly prosecuted forms of abuse include breach of pricing regulations, unjustified refusal to deal, unjustified reduction or termination of production and imposition of unprofitable contractual terms on a counterparty. Among the industries that are affected the most are heat and electricity supply, and housing and utility infrastructure.

The average length of abuse of dominance proceedings is five months. In certain cases, this term may be extended, and the overall proceedings may take up to approximately 14 months.

The most recent high-profile abuse of dominance case was the case against Google considered and decided by FAS and courts in 2015-2016. Google was found dominant on the market for application stores for Android OS. It abused dominance by prohibiting manufacturers of Android OS smartphones from pre-installing applications competing with applications from the Google Mobile Services (GMS) package. Google’s abusive practices included tying Google Play application stores with other applications of the GMS package, compulsory pre-installation of Google search as the default search, preferential placement of Google applications on the home page and prohibition of pre-installation of competing software on smartphones. As a result, Google was fined 438.1 million roubles and required to, inter alia, introduce the necessary amendments to its agreements with smartphone manufacturers.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

If a clause in a contract involving a dominant company is inconsistent with the legislation, FAS may first issue a warning order to a business entity suggesting it should remove said clause from the agreement or bring it into compliance with the legislation or, as a result of consideration of an antitrust case, issue the same compliance order. Alternatively, FAS may apply to court to invalidate the respective clause.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Private enforcement is possible in the Russian Federation. A private party may apply to court to order a dominant firm to grant access to infrastructure (in particular, if a dominant firm enjoys a natural monopoly), to supply goods or services, or to conclude an agreement if a dominant firm is required to do so (eg, it enjoys a natural monopoly). In other cases, it is preferable to apply to FAS first, so that FAS could establish dominance and issue a compliance order with the same effect.

A private party may apply to court to invalidate a provision of a contract or a contract as a whole, but generally only if it is its party. If it is not the case, it is preferable to apply to FAS first.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

Companies harmed by abusive practices have a claim for damages. These cases are adjudicated by courts.

The damages include: actual damages - expenses that were incurred or will be incurred to reinstate the violated right or damaged property; and lost profit - profit that would have been derived in the ordinary course of business if the right had not been violated. The amount of lost profit cannot be less than the benefit earned by the dominant entity through its violation. Damages are often difficult to calculate. Therefore, the amount of damages is calculated with a reasonable degree of credibility, but recovery cannot be declined based on the fact that it is impossible to assess their exact amount.

By way of example, the Supreme Court of the Russian Federation in Case No. 305-ES15-4533 dated 7 December 2015 ruled that a pharmaceutical producer dominant in the market for a single drug must pay 408.3 million roubles in damages to its distributor, with which it unreasonably refused to conclude a supply contract. The damages were fully comprised of lost profit of the distributor - 16.5 per cent of the price of the supply contract that the distributor could have received if the producer had not refused to contract with it.

To what court may authority decisions finding an abuse be appealed?

FAS decisions on abuse of dominance cases may be appealed either to FAS Presidium (if the decision was adopted by regional FAS offices and it breaches uniformity of antitrust law application by FAS) within one month of adoption of the decision or to an arbitrazh court within three months of adoption of the decision (one month after adoption of the decision of FAS Presidium if the case was reviewed by it). FAS Presidium will review only matters of the law. The arbitrazh court will review both the facts and the law.