Legislation and jurisdictionRelevant legislation and regulators
What is the relevant legislation and who enforces it?
The Russian Law on Protection of Competition (LPC) entered into force in October 2006. The latest major amendments to the LPC relating to the merger control rules came into effect on 7 January 2017. The LPC governs, inter alia, merger control in commodity and financial markets and applies to the transactions in which the targets are Russian entities or foreign entities operating in Russia (including those that do not have physical presence there).
The Russian merger control provisions are enforced by the Federal Antimonopoly Service (FAS) and a large network of its local agencies established in 83 Russian regions. The FAS is subdivided into several divisions, each of which deals with a specific economic sector. More detailed information on the structure and powers of the FAS can be found on its website, www.fas.gov.ru.Scope of legislation
What kinds of mergers are caught?
The LPC sets out a comprehensive list of events constituting economic concentration and falling within the control of the FAS. The most important events triggering merger control are:
- the acquisition of (direct or indirect) rights to determine the business activities of a Russian company by one or several enterprises (through shareholdings, agreements, voting arrangements, rights, etc);
- the acquisition of certain blocks of shares in another company, resulting in the acquirer and its group holding in total over 25, 50 or 75 per cent of voting shares in a Russian joint-stock company or over 33.3, 50 or 66.6 per cent of the shares in a Russian limited liability company;
- the incorporation of a company by contribution of assets of or shares in a Russian company;
- the consolidation of two or more companies resulting in the formation of a new company and the end of the corporate existence of the consolidated companies; or the merger of one company into another resulting in the former no longer having separate corporate existence;
- the acquisition of more than 20 per cent of fixed production (subject to certain exceptions) or intangible assets located in the territory of Russia from another company;
- the acquisition of certain blocks of shares, resulting in the acquirer and its group holding in total over 50 per cent of voting shares in a foreign company if its Russian turnover in the preceding year exceeded 1 billion roubles;
- the acquisition of (direct or indirect) rights to determine the business activities of a foreign company (through shareholdings, agreements, voting arrangements, rights, etc) if its Russian turnover in the preceding year exceeded 1 billion roubles; and
- entry into agreements between competitors providing for their joint activities in the territory of Russia.
Internal restructurings in which an intra-group transfer is made to a transferee in which the transferor directly or indirectly holds more than 50 per cent of voting shares or that directly or indirectly holds more than 50 per cent of voting shares in the transferor are exempt from the filing requirements. However, certain intra-group mergers are still subject to the prior approval requirement, but may alternatively be subject to post-completion notification if, prior to completion, a list of group members is disclosed to the FAS in a special format (see question 16). It should be noted that the FAS will make the structure of the group publicly available on its official website.
What types of joint ventures are caught?
Joint ventures are subject to the general rules set out above. There are no specific rules on full-function and non-full-function joint ventures. The amendments to the LPC known as the Fourth Antimonopoly Package, which came into effect on 5 January 2016, introduced new rules with respect to agreements on joint activities between competitors in the territory of Russia. Entry into such agreements is now subject to mandatory merger control filing if the parties’ groups’ assets or turnover exceed certain thresholds (see question 5). A joint venture agreement may be either a ‘concentrative’ (or corporate) joint venture or ‘cooperative’ joint venture.
Is there a definition of ‘control’ and are minority and other interests less than control caught?
The LPC contains a definition of ‘control’ for the purposes of certain clauses of the LPC, including for disclosure of the group of the acquirer and the target in a merger control filing. ‘Control’ means the ability of an individual or a legal entity to determine, directly or indirectly, the decisions to be taken by another legal entity (including the ability to determine the terms of conduct of business by another legal entity), through holding more than 50 per cent of the voting shares in such legal entity; or acting as an executive body of such legal entity.
Under Russian merger control provisions, acquisition of interests less than control are caught. Even an acquisition resulting in a holding of more than 25 per cent in a joint-stock company or an acquisition of more than 20 per cent of the fixed production (subject to certain exceptions) or intangible assets of another legal entity constitutes economic concentration under the LPC.Thresholds, triggers and approvals
What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?
Pre-approval of an acquisition is required if:
- the aggregate book value on a worldwide basis of all companies within the acquirer’s group and the target’s group exceeds 7 billion roubles and the aggregate book value on a worldwide basis of all companies within the target’s group exceeds 400 million roubles; or
- the aggregate turnover on a worldwide basis of all companies within the acquirer’s group and the target’s group exceeds 10 billion roubles and the aggregate book value on a worldwide basis of all companies within the target’s group exceeds 400 million roubles; and
- for joint venture agreements between competitors: the aggregate book value on a worldwide basis of all parties (and their groups) exceeds 7 billion roubles or their aggregate turnover on a worldwide basis exceeds 10 billion roubles for the calendar year preceding the entry into joint venture agreement.
Different thresholds apply to transactions with financial entities as targets.
If the thresholds for a notification are not met, the transaction is not subject to merger control.
Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?
Filing is mandatory. There are no exceptions.
Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?
Under the LPC, foreign mergers are subject to Russian merger control if they have or may have an impact on competition in the Russian Federation. The acquisition of shares, resulting in the acquirer and its group holding directly or indirectly in total over 50 per cent of voting shares in, or of rights to determine the business activities (through shareholdings, agreements, voting arrangements, rights, etc) of a foreign company is caught by Russian merger control rules if the target’s Russian turnover in the preceding year exceeded 1 billion roubles.
Are there also rules on foreign investment, special sectors or other relevant approvals?
For transactions in which financial organisations and natural monopolies are targets, special rules apply.
The LPC defines ‘financial organisations’ as banks, legal entities carrying out transactions or providing services in the securities market, insurance services or other services of a financial nature under an appropriate licence, non-government pension funds and their managing companies, managing companies of share investment trusts, leasing companies, credit consumer unions and other organisations, and individual entrepreneurs carrying out operations and transactions in the financial services market.
Companies providing, inter alia, the following services are deemed ‘natural monopoly entities’: gas and oil pipeline distribution, electricity transmission, rail transport, services provided at transport terminals (including sea ports and airports) and public electronic and postal communications and telecommunications providers. Law No. 147-FZ of 17 August 1995 on Natural Monopolies, in addition to the LPC, governs Russian merger control with respect to transactions involving natural monopolies. It is noteworthy that recent amendments to the relevant legislation abolished the requirement to submit post-closing notifications of share transactions involving natural monopolies under Law No. 147-FZ.
Federal Law No. 57-FZ on the Procedure for Making Foreign Investments in Business Entities with Strategic Value for the Defence of the Country and Security of the State (the Strategic Investments Law) became effective in May 2008. Under this law, the state shall exercise prior control over any transaction relating to the acquisition by foreign investors of Russian companies engaged in businesses that have strategic political interest for Russia and are active in the sectors listed in this law, namely, weaponry and military, nuclear, aviation, space exploration, explosives, etc. The Strategic Investments Law has been amended several times since its enactment. The most recent amendments came into force in June 2018 and introduced new rules on disclosure of information on controlling parties, beneficiaries and beneficial owners of foreign investors. This increased the administrative burden on foreign investors .
Furthermore, in accordance with Federal Law No. 160-FZ of 9 July 1999 on Foreign Investments in the Russian Federation (the Foreign Investments Law) if a company owned or controlled by a foreign state or international organisation intends to acquire, directly or indirectly a stake in a Russian company (including any company - not necessarily a ‘strategic’ one) that exceeds 25 per cent, or an ability to block, on any grounds, corporate decisions, such foreign company must make a filing under the procedure set out in the Strategic Investments Law. The amendments to the Foreign Investments Law, which came into effect in July 2017, introduced a new rule according to which the Chairman of the Government Commission for Control over Foreign Investments in the Russian Federation can now decide that any transaction to be entered into by a foreign investor in relation to any Russian entity (ie, including ‘non-strategic’ entities) requires, in order ‘to ensure defence of the country and the security of the state’, prior approval of the Government Commission and, accordingly, submission of a separate filing. Such decision would be made ‘with the view of securing national defence and security of the state’ and would be based on the opinions of the government authorities, including the authorities supervising the sectors in which the entity concerned operates.
Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
There are no legal deadlines for a pre-completion filing. Merger control clearance must be obtained before completion and the filing must be made well in advance of the envisaged completion date. The FAS’s clearance decision is valid for one year from its issue.
Failure to submit a required pre-completion filing can be penalised by fines on legal entities and on managers. These penalties are regularly applied.
In addition, the FAS may apply to a court to invalidate, in full or in part, agreements and other transactions for which its prior authorisation was required but has not been obtained, or to liquidate a company if it was incorporated without prior approval, provided that the relevant transaction or incorporation results in limitation of competition. These penalties are applied rarely.
Which parties are responsible for filing and are filing fees required?
Pre-completion notifications should be filed with the FAS by the acquirer of the shares, rights or assets. In the case of incorporation, a filing should be submitted by all parties that take decisions on incorporation. In the case of a joint venture agreement, a filing should be submitted by the parties to the agreement. The administrative liability for failure to submit a filing is borne by the party responsible for the filing. Pre-completion filings are subject to a fee of 35,000 roubles per filing.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
The FAS is obliged to consider pre-completion filings within 30 days of the filing date. However, if the FAS determines that further disclosure, documents or information is needed or that the transaction may result in limitation of competition, the FAS may extend the term of review by up to another two months. In the latter case, the FAS will publish information on the transaction on its website and invite interested parties to file submissions on the impact of the transaction on the Russian market. Moreover, the FAS may return the filing as incomplete and in this case the review period will start anew as soon as the full set of documents is submitted.
In the event of a possible impact on competition, the FAS may also delay clearance until the parties perform certain actions. The FAS will then set a term for performance of such actions, which may not exceed nine months.
If a transaction is also subject to prior approval in accordance with the Strategic Investments Law or the Foreign Investments Law (see question 8) the antimonopoly clearance will not be issued until the ‘strategic’ or ‘foreign investments’ clearance is granted. The ‘strategic’ process, by statute, may take up to six months but, in practice, may take longer. There is no statutory deadline for the ‘foreign investments’ process (ie, where the Russian target is not a ‘strategic’ entity), but in practice it takes usually one to two months to obtain clearance (which is in fact a FAS letter to the effect that ‘strategic’ clearance is not required).
In pre-completion filings, implementation of the transaction should be suspended until clearance, regardless of whether the statutory waiting period has expired.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
Completion of transactions and integrating the activities of the merging businesses (if such integration results in the acquirer actually beginning to control the target, eg, by way of giving binding instructions to it) before clearance may result in fines and invalidation of the transaction, as in the case of a failure to file (see question 9).
In a recent merger control review, the FAS concluded that the transaction notified also required prior consent under the Strategic Investment Law and extended the review period until receipt by the notifying party of such consent. The notifying party apparently disagreed with the FAS and closed the transaction without applying for consent and, accordingly, before merger control clearance was issued. The FAS viewed such closing as ‘conscious disrespect’ for Russian law, imposed a fine and brought court proceedings seeking to deprive the acquirer of the voting rights at the meeting of shareholders of the Russian target, which is the regular procedure in case of non-compliance with the Strategic Investment Law. The FAS decision was upheld by courts at two instances.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
We are not aware of any sanctions applied for closing before clearance in foreign-to-foreign mergers. However, it can reasonably be assumed that the FAS would apply sanctions in such cases. There are cases involving deals between foreign and Russian legal entities, where the FAS applied sanctions for closing before clearance and the courts upheld the FAS decisions. By way of example, in one case the company made a pre-completion filing two months after the transaction had been completed. The FAS discovered this violation during the review of the filing and applied administrative sanctions.
Sanctions for failure to submit a pre-completion filing may even be applied on formal grounds in circumstances where the parties make a filing, obtain FAS clearance and then change the structure of the transaction with the actual result remaining unchanged. For example, in one case a foreign legal entity applied for FAS consent to the acquisition of the shares in, or direct control over, Russian legal entities and obtained clearance. Subsequently, control over these Russian entities was obtained indirectly by way of acquisition of direct control over a 100 per cent parent company (a foreign entity) of the Russian legal entities. In this case the FAS applied sanctions for closing without clearance and the courts upheld the FAS’s decision.
There have been several cases in which foreign-to-foreign transactions were invalidated by courts or other sanctions were applied on the grounds of non-compliance with the requirement to obtain consent pursuant to the Strategic Investments Law (see question 8).
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
Hold-separate arrangements are not provided for by the LPC and have rarely been used where Russian issues held up a larger foreign-to-foreign transaction. In principle, such arrangements are only possible with regard to the acquisition of the rights to determine the business activities of a company, but even for those transactions they are not a 100 per cent ‘clean’ solution.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
There are no special merger control rules and notably no exemption from the prohibition on completing the transaction before clearance.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
The LPC lists the documents and information that must be collected for the filing. These include agreements or other documents relating to the transaction, corporate documents of the acquiring party and the target, information on the business activities of the parties and the target with exact production and sales figures for the past two years, information on the companies of the acquirer’s and the target’s groups and also on the ultimate beneficiaries of the groups. Failure to provide all documents and information required under the LPC may result in the FAS rejecting the application as incomplete.
The information and documents included in the filing must be accurate and complete. Provision of false information may be sanctioned by fines on both legal entities and managers and, more generally, serve as a ground for refusing clearance. In practice, incomplete information is qualified by the FAS as false information, and the provision of incomplete information therefore entails the risk of the same sanctions as those for submission of false information.
Documents issued abroad must carry an apostille (if the country where a document is issued is a party to the 1961 Hague Convention on Apostille) or be legalised. They need to be translated into Russian and the translator’s signature must be certified by a Russian notary.
The nature of the filing is rather technical. The waiting period begins after the filing has been submitted to the FAS.
There are specific procedures for filing of certain intra-group transfers. In particular, a post-completion filing is permitted if one of the group entities files a list of its group members with the FAS no later than one month before completion. The list should specify the reasons for inclusion in the group for each of the group members. Within 14 days of receipt of this list, the FAS informs the applicant either that it accepts the submitted list or that the list does not comply with the statutory requirements. The list as filed is published on the FAS website.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
After submission of the filing, the FAS must decide within 30 days whether to clear the merger or, if the transaction raises competition concerns, whether to enter into a second-stage investigation or impose conditions for clearing the transaction. The second-stage decision must be rendered within a further two months. If clearance is delayed until the parties perform certain actions, the deadline for such actions must not be longer than nine months.
Cases that raise no competition concerns and filings in relation to which are complete and meet all requirements (such as, for example, formalisation of documents) are typically cleared within 30 days of the filing date. At the same time, the timing of the review process is not always predictable, as the FAS has a broad discretion in determining whether the deal gives rise to concerns and, accordingly, whether to extend the review period. If the FAS requires additional information or clarifications, it typically issues a formal written request, which may result in an extension of the review period, and from that perspective it is advisable to try to avoid them, by making the filing as complete as possible and trying to pre-empt the FAS’s queries.
There are no legal means to speed up clearance.
Pre-notification consultations with the authority are not required but are possible. The notifying party may inform the FAS of the proposed transaction prior to submission of the filing, provide the authority with the relevant documents and information and suggest remedies for discussion. Such pre-notification contacts do not influence the timing or procedure of the review of the formal filing and the authority is not bound by the results of such pre-notification discussions. That said, when taking the decision in relation to the deal after it is formally filed, the authority is obliged to take into account the materials disclosed in the course of such pre-notification consultations. As a practical matter, such pre-notification contacts are recommendable in cases that may give rise to competition concerns.
What is the statutory timetable for clearance? Can it be speeded up?
Upon filing, the set of documents and information as filed is forwarded to the department of the FAS dealing with the relevant market sector.
The FAS will review the relevant market shares of the parties to the transaction (including the target market share) and investigate whether the transaction will influence competition in the Russian market. The FAS officials may use, apart from the filed documents, any sources of information, such as statistics from the databases of the Russian Statistics Committee and the Russian Customs Service, their own databases, and information from the internet and press, etc. They may also request additional information directly from the parties, competitors or other companies and individuals concerned.
If the transaction does not limit competition in the Russian market, the FAS is supposed to issue clearance within 30 days of receipt of the filing.
If competition concerns are identified, within 30 days the FAS either issues a prohibition order or informs the applicant in writing that the review period will be extended for up to two months (second-stage investigation) or that clearance can only be provided after the parties have fulfilled certain conditions. After the second stage, the FAS will issue either a prohibition or a clearance decision (conditional or unconditional).
The FAS usually meets the deadlines. That said, the timing of the review process is not always predictable as the FAS has broad discretion in determining whether the deal requires further analysis and, accordingly, whether to extend the review period. As a practical matter, in the absence of substantive issues an extension is unusual.
Substantive assessmentSubstantive test
What is the substantive test for clearance?
A merger must be prohibited or made conditional by the FAS if it leads to the creation or strengthening of a dominant position in the relevant Russian market sector or otherwise leads to a limitation of competition in the Russian market.
Dominance is defined in the LPC as the position of one or several companies or groups in the market for a specific product or service that allows it or them to seriously influence the terms of trade of such product or service or to impede other companies’ access to this market sector. If a company holds less than 35 per cent of the market, it may not be found dominant, except in case of collective dominance or if an industry-specific dominance threshold applies. Such industry-specific thresholds may be set by the federal laws regulating particular industries; for example, in wholesale and retail electricity markets an electricity generation company holding a market share of 20 per cent or above is deemed dominant. As a general rule, companies are deemed dominant if their market share is over 50 per cent. For companies with 35 to 50 per cent market share, additional criteria, such as competitive structure of the market and barriers to entry, are used to determine whether a company is dominant. Financial organisations are subject to a special dominance test.
The LPC does not provide for any special circumstances that would require, permit or encourage the FAS to qualify a ‘problematic’ merger as acceptable. That said, the parties are allowed to submit efficiency arguments to try to convince the FAS that the merger is permissible despite a dominance issue or any other potentially anticompetitive effects of the transaction (see question 23).
Is there a special substantive test for joint ventures?
The general merger control rules apply to joint ventures. Also, the Fourth Antimonopoly Package introduced a special merger control regime for joint venture agreements between competitors. The amendments provide for a mandatory pre-transaction clearance for agreements between competitors providing for their joint activities in the territory of Russia (see question 5 for thresholds). If the thresholds are not met, the application can still be submitted on a voluntary basis.Theories of harm
What are the ‘theories of harm’ that the authorities will investigate?
The FAS investigates whether the transaction may lead to limitation of competition in the Russian market, signs of which may be:
- a reduction in the number of companies in the relevant market sector that do not belong to the same group;
- an increase or decrease in the price for a product or a service that is not because of market forces;
- the abandonment of independent action in the market by companies not belonging to the same group;
- the determination of the conditions of trade in a product or service in the market by companies not belonging to the same group through agreements or concerted practice; or
- other circumstances that allow a company or several companies to unilaterally influence trade in a commodity or service in the market.
Creating or strengthening dominance is also considered harmful to the market (see question 19).Non-competition issues
To what extent are non-competition issues relevant in the review process?
Generally, the legal test for clearance is competition-related. However, the FAS may also refuse clearance if it finds out that information provided in the filing that has significance for the FAS decision is false or insufficient (eg, the ultimate owners or beneficiaries of the acquirer’s or target’s groups were not disclosed).
Clearance may also be delayed if the filed documents do not comply with the mandatory rules of Russian law.
Also, political considerations may have an impact on the review process. Some transactions relating to certain ‘sensitive’ sectors (military, aircraft industry, energy, insurance, etc) have given rise to political rather than competition-related decisions in the past, with clearance denied or made conditional on behavioural commitments, or the approval process taking much longer than usual.
Furthermore, public interest seems to be taking on increased importance in the review process. By way of example, in a recent Bayer/Monsanto case the FAS came to the conclusion that the transaction might have negative impact on the Russian agricultural technologies market and required that Bayer should transfer certain of its technologies to Russian companies and give them access to certain of its digital solutions so that the Russian companies could compete with foreign companies on equal terms.
There are no formal tests for assessing whether or not a deal gives rise to political or public interest concerns, so in practice assessment is made by the FAS in cooperation with other government authorities, including those supervising the relevant markets.Economic efficiencies
To what extent does the authority take into account economic efficiencies in the review process?
The task of the FAS is to find a compromise between protection of competition and economic development in Russia. The FAS takes the economic efficiency of the transaction into account and may give clearance even if the transaction results in limitation of competition, provided that the parties perform certain actions aimed at mitigating or eliminating the negative effects and achieving positive effects, including, for example, actions aimed at improvement of the local production or distribution processes.
Remedies and ancillary restraintsRegulatory powers
What powers do the authorities have to prohibit or otherwise interfere with a transaction?
The FAS is authorised to either prohibit a transaction that has an adverse effect on competition or to require the parties to fulfil certain conditions before a clearance is issued or before completion of the transaction. In such cases, the FAS issues binding orders aimed at protecting competition (eg, divestiture or conclusion, amendment or termination of agreements). If a transaction that leads to limitation of competition in the Russian market is closed without FAS approval, the FAS can challenge the transaction in court. The FAS has recently become more active in combating anticompetitive behaviour.Remedies and conditions
Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?
The FAS may delay clearance of the transaction until the parties perform certain actions aimed at protection of competition (eg, grant access to important assets or information, provide third parties with industrial property rights, divest assets or claims to third parties or restructure their respective groups - that is, divest company shares).
Also, the FAS may make clearance of the transaction conditional on the parties’ compliance with certain requirements, such as amending or entering into contracts; carrying out specific economic, technical or information measures to prevent creation of discriminatory conditions in the market; granting access to assets or information; and divesting assets or, on the contrary, not transferring any important assets, as well as notifying the FAS of the intention to carry out particular actions.
If a transaction is likely to lead to distortion of competition in Russia, it is advisable to discuss with high-level FAS officials how to remedy such effects. The parties may propose certain undertakings to mitigate the effect of the transaction on competition.
What are the basic conditions and timing issues applicable to a divestment or other remedy?
The basic condition for a divestment or another remedy is mitigation of the negative effects of the transaction by encouraging competition in the market.
The FAS usually sets a term within which the relevant remedy should be implemented, or the term during which the remedy should be maintained. Where the FAS delays clearance until performance of the remedies by the parties, this term may not exceed nine months.
What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?
The remedies required in foreign-to-foreign mergers could be the same as in Russian local mergers (see question 24). In the past, the FAS has usually applied remedies in Russian-to-Russian or Russian-to-foreign transactions rather than in foreign-to-foreign mergers.Ancillary restrictions
In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?
Related arrangements are covered to the extent that full information on these arrangements has been provided to the FAS and that such arrangements are not subject to approval themselves. If the transaction involves several arrangements that each require clearance, the FAS consent in relation to such arrangements should be sought either in one filing or in separate filings, depending on the subject matter of each particular arrangement.
Involvement of other parties or authoritiesThird-party involvement and rights
Are customers and competitors involved in the review process and what rights do complainants have?
During the review process, the FAS may invite customers and competitors to give their opinion on the contemplated transaction. Applications for clearance should contain information on all customers that buy over 5 per cent of the production or sales volume of the relevant party and all sellers supplying over 5 per cent of its purchases or consumption volume.
If the FAS suspects a competition issue, it may extend the review for up to two months (second-stage investigation) with a simultaneous publication on its website, so that any interested parties can provide information on the effects on competition of the transaction. Moreover, as a matter of law the FAS must publish information on all filings submitted to it on its website (except where the Government of the Russian Federation determines that the FAS has the right not to publish information on any particular transaction) so that any interested third parties can provide comments on the possible impact of the transaction on competition. The analysis of information posted on the FAS’s website shows, however, that such publications are very rare.Publicity and confidentiality
What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?
Commercial information, including business secrets, cannot be withheld in a filing. The FAS has the right to demand it from the parties and extend the review period if it is not provided promptly.
The FAS is under an obligation not to disclose commercial secrets (provided that they are designated as such) contained in filings. FAS officials are criminally liable for unauthorised disclosure, and the damage done by such disclosure is to be compensated from the Russian federal budget. However, the information required for filings sometimes does not meet the criteria of commercial secrets as provided for by Russian law and thus remains unprotected.
Under the LPC, general information on the transaction notified to the FAS is public and the FAS must publish information on all filings submitted to it on its website (see question 29). Also, until recently, the FAS information policy required it to publish on its website all decisions (including binding orders, if any) issued upon review of the filings. However, it follows from the recent changes to the FAS information policy that such decisions and binding orders are no longer public and as a result the FAS does not publish them now. The changes to the information policy did not impact the rules on disclosure of group-related information, under which the FAS may publish a list of the companies of the group for the purposes of a post-completion notification (see question 16).Cross-border regulatory cooperation
Do the authorities cooperate with antitrust authorities in other jurisdictions?
The FAS cooperates with antitrust authorities of the former socialist countries (Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia), Commonwealth of Independent States countries, some EU member states (Austria, Finland, France, Greece, Italy and Sweden), Asian states (China and Korea), the United States and South American states (Argentina and Bolivia).
Cooperation between Russia and the European Union with regard to competition was established by the 1994 Partnership and Cooperation Agreement. In 2003, the FAS proposed to the Russian government to enter into a positive comity agreement with the European Union.
Finally, Russia, represented by the FAS, cooperates with antitrust authorities of other countries in the International Competition Network, the Organisation for Economic Cooperation and Development and the United Nations Conference on Trade and Development, of which Russia is a member.
According to publicly available information, the FAS has recently become more active in contacting antitrust authorities of other countries in the context of merger control procedures.
We are aware of several cases where the FAS contacted antitrust authorities in other countries (India, China, Germany, Kazakhstan, Republic of Korea, Mexico, South Africa and the United States) during the review of large foreign-to-foreign mergers to discuss the influence of the relevant transactions on competition in the respective jurisdictions.
Judicial reviewAvailable avenues
What are the opportunities for appeal or judicial review?
Decisions of the FAS may be challenged within three months of their issue before Russian courts in a civil law procedure. The parties concerned may challenge FAS decisions denying clearance or granting conditional clearance, or the lack of decision within the legal waiting period.
The majority of FAS rejection decisions are issued on the grounds of incompleteness of information provided in the filing (such as information on the ultimate beneficiaries). Some of those rejection decisions have been challenged in courts. Court practice is inconsistent - some court decisions uphold the FAS’s formal position and some overrule them on the grounds that the FAS’s requests contain excessive requirements that, from the courts’ perspective, are irrelevant for the purposes of merger control.
Where rejection decisions are issued on the ground that the transactions notified would have anticompetitive effects, the decisions may not necessarily be final and may be reconsidered by the FAS if the applicant submits a new filing in which it substantiates why the deal is permissible. Recent cases show that the parties, having received a rejection decision from the FAS, could be better off if they first resubmitted the filing to the FAS instead of challenging the FAS’s decision in court. By way of example, the FAS initially blocked the proposed acquisition by Elutek Beteiligungs GmbH of control of 11 Alutech Russian subsidiaries located in various cities and regions of Russia on the ground that the acquisition would result in Elutek becoming dominant in certain regions of Russia. However, subsequently, Elutek submitted a new filing in relation to the same transaction, in which it provided evidence that the deal is permissible under the LPC, and upon review of that filing the FAS ultimately cleared the transaction subject to behavioural remedies.Time frame
What is the usual time frame for appeal or judicial review?
The Russian judicial process takes up to three months in the court of the first instance, and up to two months at each of the two further review levels - the court of appeal and the court of cassation. A further appeal may be filed with the Collegium of the Supreme Court of Russia in charge of considering commercial disputes, which only accepts the cases for consideration in exceptional circumstances (ie, if there are severe violations of substantive or procedural law). The Collegium’s resolution could finally be referred to the Presidium of the Supreme Court within three months of the date of the resolution. The judicial process at the Collegium and Presidium of the Supreme Court could take up to three months. So, it could take more than a year to overturn a decision of the FAS.
If the claimant or another participant in the court action is a foreign company, judicial review may become a very lengthy process. If the foreign participant is incorporated (located) in a country that is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965), the Russian court may need to serve judicial documents on such company through a special authority in the country of such company’s incorporation (location), which will lead to delay at each level of review for up to half a year.
Enforcement practice and future developmentsEnforcement record
What is the recent enforcement record and what are the current enforcement concerns of the authorities?
The FAS does not publish its enforcement record with regard to mergers. That said, according to the FAS’s officials, the changes to merger control rules that have been gradually introduced since the LPC came into effect in 2006 resulted in a significant reduction of merger control flings submitted to the FAS.
The FAS aims to further transform merger control in Russia from a formal procedure into actual control by enabling it to have a better focus on mergers of particular interest to it by reducing the total number of filings.Reform proposals
Are there current proposals to change the legislation?
The LPC is an evolving statute. Following the Fourth Antimonopoly Package, which came into effect in January 2016, further amendments were introduced in July 2016 and January 2017. However, such amendments to the LPC did not cover all open issues in Russian antimonopoly legislation. Over the past years, several complex global transactions reviewed by the FAS, including the Bayer/Monsanto transaction, revealed a number of problem areas in the merger control rules that require changes to the legislation, especially in high-technology sectors. The FAS took the relevant experience into account in the course of preparation of a new set of amendments to the LPC, called the Fifth ‘Digital’ Antimonopoly Package. Some of the proposed changes relate to merger control procedure. More specifically, the proposed amendments provide that the authority will have the right to extend the review period for up to three years (such extensions, however, will be subject to approval by the Russian government and may be applied in relation to multijurisdictional cross-border transactions only). Furthermore, as part of the new merger control rules the FAS will have to prepare a report setting out the details of the assessment and send it to the parties before issuance of the final decision, so that the parties can submit additional evidence that the notified transaction is permissible. The parties will also have the right to offer remedies to the authority in course of the review of the filing. Also, it is expected that a new notification threshold will be introduced, which will be based on the value of the proposed transaction: namely, if the value of the proposed transaction exceeds 7 billion roubles, the transaction will require clearance even if the relevant asset or turnover thresholds are not met. Furthermore, the proposed changes envisage introduction of an institute of independent trustees that will control and monitor implementation of remedies imposed.
The amendments are yet to be approved by the Russian government and the State Duma. According to the Head of the FAS, they are expected to be adopted and to come into force in 2020.
Update and trendsKey developments of the past year
What were the key cases, decisions, judgments and policy and legislative developments of the past year?No updates at this time.