1 May 2014
Competition in Russia: The Current Status of the Fourth Antitrust Package

 

The draft amendments to the Law on Protection of Competition and other regulations, including, inter alia, the Russian Code of Administrative Offenses and the Law on State Registration of Legal Entities  (known as “the fourth antitrust package”), include a number of substantial changes. Overall, the relevant amendments aim at, among other things, increasing the powers of the Federal Antitrust Service (the FAS), clarifying a number of antitrust prohibitions, introducing new institutions within the Federal Antitrust Service, and clarifying a number of elements relating to offenses included in the Administrative Offenses Code. 

Major changes include:

  • tightening FAS’ control over natural monopoly markets by promoting their transformation into competitive markets;
  • introducing additional requirements and control procedures in satisfying state and municipal preferences;
  • mandating prior approval by the Russian FAS for setting up state and municipal unitary enterprises;
  • requiring prior approval of the Russian FAS for joint venture agreements;
  • changing the dominance criteria, clarifying abuse of dominance indicators, and substantially increasing the grounds for issuing warnings to cease actions that may violate antitrust laws.

Additionally, new opportunities are envisaged for challenging the decisions of local FAS offices, so not only by way of litigation but also – subject to certain conditions – in the FAS Presidium, a body to be created as part of the central FAS that will, among other things, assess decisions on the basis of their consistency with FAS practice and their compliance with general public interests. Further, a new leniency procedure has been introduced not only for the first individuals who voluntarily admit their participation in an anticompetitive agreement – but also for the second and the third whistleblowers, if they meet certain statutory criteria; subject to this procedure the fines could be reduced to a minimum.

It should be noted that compared to the “second” and “third” packages of important changes to the antitrust laws, the fourth antitrust package caused an unprecedented debate both in the legal and business communities as well as within government authorities. Many of the proposals, of course, were viewed positively and gave rise to no substantial objections. Some of the proposed amendments, however, attracted much criticism.

The most criticized provisions of the original fourth package included the right of the FAS to issue compliance notices obliging targeted companies to draft and publish trade practices (i.e., rules binding on dominant entities with regard to their operations in the market); mandating prior approval by the Russian FAS of joint operation agreements (where the parties meet the asset and/or revenue tests); additional requirements imposed on entities seeking state or municipal subsidies; and overlapping responsibilities of FAS and the Federal Tariff Service with regard to natural monopolies. 

The hottest discussions were caused by the FAS’s proposal (now being debated) to expand the application of antitrust law to intellectual property, by the FAS's intention to expand non-discriminatory access rules on goods and services currently existing only in certain natural monopoly markets to other markets, and by its intention to renounce any express reference in the law to the exceptional status of an agency agreement. 

The discussions about the draft amendments are still ongoing. The fourth antitrust package was initially scheduled to be considered at the last year`s autumn session of State Duma of the Russian Federation (in which case it would have been adopted before the end of 2013). However, the document is still being adjusted and its introduction is now scheduled for the spring session of 2014, so it is not possible at the moment to  predict when and in what form the draft will be approved.

By Natalia Korosteleva, Partner, and Evgeny Bolshakov, Senior Associate, Egorov Puginsky Afanasiev & Partners.

Originally published in CEE Legal Matters. 

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