According to the Federal Antimonopoly Service (FAS), amendments to the Law on Competition (the “Competition Law,” the Code of Administrative Offenses and the Criminal Code, comprising the so-called “third antimonopoly package,” have been substantially agreed with the Russian government and will soon be submitted to the State Duma. FAS estimates that the package will be adopted before the State Duma’s 2011 summer recess.
On balance, these amendments will add clarity, and, consistent with other government initiatives, will eliminate criminal liability in certain cases, which should improve the business environment for M&A in Russia.
We set out below some of the key developments in the third antimonopoly package that have been approved by the Russian government.
Changes to the definition of “concerted actions.” A new mandatory criterion has been added to the definition of a concerted action, namely that actions deemed “concerted actions” must be “known in advance to each of the business entities participating in them, due to one of them publicly announcing that such actions were being carried out.” This should at least partially change the judicial interpretation of concerted actions, in which courts held them to be practically equivalent to the concept of “parallel conduct” by market participants. The amendments also introduce a “safe harbor” for concerted actions where the combined market share of the participants is less than 20%, provided that no participant’s individual share exceeds 8% of the relevant market.
Changes in the evaluation of anticompetitive agreements and concerted actions. An absolute prohibition has been proposed on such agreements and actions, albeit only if they are concluded among competitors (i.e., against cartels). However, in vertical agreements, it is still prohibited to set resale prices and enter into exclusive distribution arrangements. Under the current law, any agreements and concerted actions between companies in the same corporate group (connected through actual control, for example, between a parent and a direct or indirect subsidiary) cannot be deemed to be anticompetitive. Finally, it is proposed to remedy the shortcomings of the so-called “impermissibility mechanism” related to coordinatory and other technical discrepancies in the current law.
Changes in merger control regulations. Acquisitions of foreign companies that have no assets in Russia but sell their products in Russia, where the Russian sales of such companies exceed RUB 1 billion, will be subject to a new clearance criterion. The list of documents required to be submitted when making applications or notifications to FAS has also been updated. The requirement for financial organizations to provide FAS with copies of all agreements they have concluded with each other will also be completely eliminated.
Procedural innovations. The clarifications recently issued by FAS in relation to its decisions and prescriptions are to be formalized and a mechanism for reissuing FAS decisions and prescriptions in the event of newly-discovered circumstances will be formulated.
Mitigation of liability. The new amendments will eliminate criminal liability for concerted actions and vertical agreements. In addition, “turnover-based fines” will now only apply to cases of abuse of a dominant position that result in (or may result in) the prevention, restriction or elimination of competition. If this abuse results in the infringement of a third party’s rights and is not related to the restriction of competition, then the maximum fine for such abuse will be RUB 1 million.
We can provide more detailed information on each of the developments mentioned above as required, as well as the other developments proposed as part of the third antimonopoly package.