At a recent meeting, the Presidium of the Federal Antimonopoly Service of Russia (the “FAS”) adopted Clarification No. 2 of 17 February 2016 (the “Clarification”), concerning the application of antimonopoly legislation to vertical agreements, including distribution agreements. In particular, the Clarification concerns vertical agreements to which the parties may potentially prove to be competitors.

The Clarification affirmed the FAS’s position  that a distribution agreement is a vertical agreement, even when the parties to the agreement (a manufacturer and a distributor) sell goods in the same product market, if the following conditions are met:

  • the distributor engages in the sale of goods purchased from the manufacturer,
  • the distributor does not engage in the manufacture of substitute goods, and
  • the distributor sells substitute goods produced by other manufacturers.

These criteria provide clear guidance to manufacturers in work with distributors, including guidance in identifying terms of vertical agreements that are prohibited by law. We recall that according to clauses 1 and 2 of article 11(2) of Federal Law No. 135-FZ of 26 July 2006 on Protection of Competition, vertical agreements are prohibited from including provisions setting a minimum or fixed resale price (only a maximum or recommended price is permitted to be set) or requiring a buyer not to sell competing goods.

Referring to the criteria for admissible vertical agreements, the FAS reiterated that dealer agreements between auto manufacturers and dealers meeting all requirements of the Code of Conduct in the Automotive Sector  are not automatically, but very likely to be, recognized as admissible. The FAC focuses the attention of market participants on the importance of doing business properly, in particular with due regard to the provisions of the Code as a mechanism for market self-regulation. A similar Code of Conduct for the pharmaceutical industry is to be adopted in March 2016.

The Clarification also clearly identified the cases in which an agency agreement does not constitute a vertical agreement.  When products are supplied on the basis of an agency agreement, than relationship is subject to the prohibitions established for vertical agreements, even though one of the parties to the agreement is formally an agent. That said, it is unclear how this principle would apply to, for example, the provision of services, where the line between the functions of contractor and agent is not always clear.

On the whole, not being “revolutionary” in nature, the Clarification summarized the FAS’s position on certain aspects of vertical agreements. It should be remembered that the Clarification is recommendatory in nature and does not contain mandatory requirements.