One of the many controversial issues regarding the 2009 law “On the Fundamentals of the State Regulation of Trade Activity in the Russian Federation” (the “Trade Law”) is the question of whether one can use discounts not tied to volume of sales in food product supply agreements. This issue has been raised and discussed on multiple occasions in both expert committees and inquiries to FAS and the Ministry of Industry and Trade (“Minpromtorg”) without any clear resolution.

In response to an inquiry by the Alcoholic Beverages Committee, Minpromtorg stated in September 2010 that “the question of [the permissibility of] the grant of discounts for the performance of obligations arising from the terms of a supply agreement is not addressed by the Trade Law”; in other words, there are no restrictions on using discounts. Earlier, in February 2010, FAS had expressed its position on this issue to the effect that it is permissible to include unconditional fixed discounts in food product supply contracts “provided that the price of the food product supply contract is set in the contract as of the moment (date) of the contract’s conclusion based on the price of the total shipment (quantity) of goods to be supplied, taking into account the discounts granted to the buyer.” In other words, any conditional discounts (except for volume-based discounts) must be excluded. Obviously, such a loose construction of Article 9 of the Trade Law is at odds with the position of Minpromtorg.

Subsequently, FAS effectively retracted this interpretation by invoking its lack of authority to interpret Article 9 of the Trade Law. However, it seems that now the situation is being reversed. In late December 2010, changes were introduced into the Code of Administrative Procedure according to which FAS was designated as the agency in charge of enforcing Article 9 of the Trade Law, which implies that FAS is now vested with the authority to provide guidance on the application of Article 9. This in turn may mean that FAS interpretative statement quoted above is becoming de facto the official interpretation. However, FAS’s by-laws do not yet provide for this authority, so the overall position remains somewhat unclear.