Russia has amended its criminal code on cartels, signaling a major change in antitrust law enforcement. On March 8, 2015, President Vladimir Putin signed a Federal Law “introducing changes to Article 178 of the Criminal Code of the Russian Federation.” Article 178 creates criminal liability for cartel activities that prevent, restrict, or eliminate competition. The recent amendments introduce notable changes, including changing the title of the Article from “Preventing, restricting or eliminating competition” to simply “Restricting competition.”
The amendment abolishes criminal liability for repeatedly abusing market dominance. This is a significant shift from the law’s previous incarnation, which included “repeated abuse” – determined by successful prosecutions for at least three offenses within three consecutive years – in the law’s definition of restriction of competition that exposes a firm to criminal liability. Under the amendment, there is no longer criminal liability for a firm’s unreasonable refusal to conclude an agreement with a competitor, or for refusal to remove a barrier to entry to a market. The far narrower law defines this crime as restriction of competition by competing businesses which enter into an agreement that restricts competition, provided that conduct involves high profits or causes major damage to individuals, companies, or the state.
The thresholds for the level of income and damage that will trigger criminal liability have increased dramatically, and are now ten times higher. The amount considered sufficiently “high profits” has changed from 5 million to 50 million rubles ($824,266), and the phrase “particularly high profits” now refers to 250 million rubles ($4.12 million), increased from 25 million. The amount considered “major damage” caused by anticompetitive conduct has increased from 1 million rubles to 10 million ($164,853), and the amount of “particularly high” damage is now 30 million rubles ($494,560) rather than three million. This change is intended to exclude small businesses from criminal prosecution for antitrust violations.
In addition, a business entity or individual that participated in a cartel will be relieved from criminal liability if it was the first cartel participant to voluntarily report the activity, actively facilitated exposure of the cartel, paid restitution for losses caused by the cartel, or otherwise took action to make up losses caused by the cartel. Previously, Article 178 only provided for relief fromadministrative liability, and companies or individuals would be unlikely to report cartel agreements where the threat of criminal prosecution remained. Consequently, the change is meant to encourage reporting to antitrust authorities about cartel behavior.
The amendments to Article 178 are meant to relieve small- and medium-sized businesses from criminal liability for cartel activity, liberalizing and narrowing the reach of Russia’s competition laws, and to improve the rate of cartel detection. The changes should have a considerable impact on the way in which cartels are reported and the types of anti-competitive conduct that are prosecuted criminally.