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12 May 2017
GCR Know how – Information Exchange 2017 – Russia Chapter | by Evgeny Bolshakov and Oksana Akhmedova

1. Describe the principal competition rules governing information exchange in your jurisdiction.

The information exchange, as such, is not prohibited by the effective Russian Federal Law On Protection of Competition (the Competition Law or Law), but the content of the information exchange between business entities and its consequences are important. Generally, a confirmed exchange of any commercially important information (about prices, production volumes, etc) may be treated as showing that there is an anticompetitive arrangement between companies that will be qualified as a cartel, if the information is exchanged between competitors and if the exchange agreement has resulted in variation of prices, lowering the number of market players or gaining a competitive advantage (article 11 of the Competition Law).

Information exchange is also analysed in concerted actions cases. Previously, article 8 of the Competition Law provided that one of the criteria of concerted actions is that each of the business entities concerned was in advance aware of such actions. Subsequently, this principle was adjusted: in the current version this criteria is deemed to be met if the actions were known in advance to each of the business entities involved and the fact has become known exclusively through a public announcement made by one of the parties that such actions have been taken. We note that the lawmaker has failed to define what “public announcement” shall be understood to mean. In case law an approach has emerged, according to which the word ‘announcement’ means disclosure of information about the taking of actions in any form, whether verbally (speech at a public event) or in writing (publishing information in the Internet, circulating letters, etc). Such disclosure shall be deemed public if the method of disclosure makes such information available to the general public.

2. Which bodies are responsible for enforcing competition rules on information exchange in your jurisdiction?

Under article 23 of the Competition Law, the powers to commence and hear anticompetitive cases are imposed on the antitrust body – Federal Antitrust Service and its local branches.

3. Describe the types of information exchanges that may be caught under the competition rules in your jurisdiction.

A potential anticompetitive breach can be deemed to have occurred if the exchanged information is of certain commercial value for the market players. Specifically, this can be any information about prices, costs, planned production volumes, available capacities, marketing plans, sales plans, client databases (ie, any information, which, if available, can help coordinate or concert activities of business entities so that to derive mutually beneficial competitive advantages). It is important that, unless otherwise is agreed between the parties, such information is not available to any other business entities, because it is typically protected as a commercial secret.

The fact that this information relates to future conduct, rather than conduct which has already taken place, also plays a highly important role. For example, such information must relate to prospective changes in prices, rather than to any past changes.

The Law deems acceptable if any such information is obtained from other sources (eg, analytical updates).

Also, in practice, no violation occurs if such information is received in the course of negotiations with a buyer that concurrently cooperates with the company’s competitors.

4. Are some information exchanges regarded as more serious breaches of the competition rules than others?

The most serious breaches of the competition laws are cartel agreements, ie, agreements between the competitors (business entities operating on the same product market). This prohibition is set out in article 11(1) of the Competition Law. In such cases, the antitrust body is not required to prove that the competition has been restricted – it suffices to prove that a prohibited agreement has been concluded. The persons guilty of entering into an anticompetitive agreement shall be held liable for a criminal offense, apart from the administrative liability in the form of a turnover fine.

Accordingly, any information exchange regarding the competitors’ activities, the effect of which is or can be:

  • fixing or maintaining product prices at a certain level;
  • increasing, reducing or maintaining public auction prices at a certain level;
  • squeezing one of the contracting parties out of the territory or any part of the territory where the other entity offers its products;
  • reducing production volumes; and
  • refusing to enter into a contract with certain sellers or buyers

will be deemed by the antitrust body a sufficient proof of the breach.

5. To what extent is it necessary for an information exchange to have a negative effect on competition to prove a competition infringement in your jurisdiction?

Depending on the composition of business entities and the nature of actions which show signs of a competitive infringement, the following categories can be identified:

  • information exchange between competitors. In this case it is sufficient to prove merely the fact of exchange of important information about prices, sales territory or buyers (sellers), public auction strategy or other information, as a result of which the parties reached arrangements listed in article 11(1) of the Competition Law. It is presumed that in these proceedings it is not required to prove any negative effect on the competition. Even in the absence of any arrangement, the information exchange can also be taken into account and admitted as evidence in anticompetitive investigation into concerted actions of competitors that entail similar consequences (article 11.1(1) of the Law);
  • information exchange between non-competitors. The antitrust body is required to establish that actions of business entities have led to restriction of competition according to the signs described in article 4(17) of the Competition Law. Any communications by way of correspondence (including email), negotiations, meetings and other information exchange between companies’ employees regarding the conduct of companies on the market can be subsequently used as evidence in support of concerted actions and/or arrangements.

6. What types of information exchanges are not caught by the competition laws in your jurisdiction? For example, are certain types of information exchanges viewed as pro-competitive?

Generally, an information exchange that does not directly relate to the conduct or business strategy of companies on the market is not treated as evidence of an anticompetitive breach. For example, this can be the case with the information exchange about various legislative initiatives, technical information and any other open and publicly available information.

Any information received from various associations, expert boards or other unions of companies on the market regarding any industry-specific issues, prospects of industry development etc., can also be regarded as permitted for exchange. Any information or data collected by an association or industrial union will also not evidence collusion or concerted actions, unless such information expressly relates to prices, production volumes or inventory of effective members of any such association or union. Any so aggregated information (about average prices, purchase volumes in prior periods, standard inventory, capacity of warehouses, etc) without naming a particular company can be legally disclosed to all other market players. At the same time, it is noteworthy that any discussions or negotiations of any joint conduct on the market even within an industrial association acting on legitimate grounds can give rise to a breach, if this will subsequently entail synchronous conduct of all or some of the market players.

7. To what extent can public information be caught under the competition rules governing information exchange in your jurisdiction?

It is the general rule that any information that has legally become available to the general public, including information of any commercial value, can be freely relied on by all the market players. However, it should be noted that such a criterion of concerted actions as a public announcement by one of the business entities that the actions have been taken (article 8(1.2) of the Competition Law) should not come down only to an official speech of a company’s representative that the company plans to take actions, but can be interpreted broadly and imply, among other things, publishing such information on the company’s website.

The conduct of other market players following such publication (ie, such information must become available in advance), together with the actions of the proprietor of such information, can be tested for signs of concerted actions. The concerted actions can be proved, specifically, by multiple repetition by a company of its competitor’s actions, which have become known to it from open sources as a result of their public announcement or other publication. For example, such situation arises when companies constantly monitor cach other's prices and adjust their conduct accordingly. Rather, if a company independently fixes its own prices and determines its own conduct on its own objective reasons, there are no grounds to treat such an entity as a party to concerted actions.

8. Are there any specific competition rules (including safe harbours or block exemptions) in place for certain types of information exchange or certain sectors? (Give details.)

No, there are no such rules at the present moment.

9. Have public bodies in your jurisdiction published any guidance on the competition rules governing information exchange?

No.

10. What defences are available for information exchanges caught by the competition laws in your jurisdiction. (Describe the types of defences available, the conditions to be fulfilled and any possible challenges in bringing such defences.)

The legality of information exchange between business entities is assessed by an antitrust body on a case-by-case basis. As it has already been noted, the nature of the exchanged information is taken into account (whether it relates to commercial operations, what value it has for doing business) along with the effect of such exchange, in the case at hand the question is mainly about the effect on competition (ie, whether such information exchange has resulted in restriction of competition).

Agreement means any arrangement that in some cases can take the form of a contract, but always implies an intentional and goal-oriented two-sided (or many-sided) information exchange characterising the conduct of the entities which have reached an arrangement in respect of a product market, as well as in respect of other entitiesIt is necessary to prove the fact of reaching an arrangement, according to which business entities must take the relevant actions intended to attain the anticompetitive goal (maintain a certain price at a public auction, market sharing, etc) and gain economic benefits, as a result. In this regard, the parties may submit to the Committee of the Russian FAS various evidence to show that the information exchange has taken place outside the anticompetitive agreement and has not entailed any consequences which could be qualified as a breach of article 11 (11.1) of the Competition Law.

Specifically, in one of the Judgments of the Federal Arbitrazh Court for the Povolzhie Circuit (dated 28 January 2013 in Case No. А12-6375/2011), the courts have analysed the correspondence between business entities and concluded that this correspondence, as such, does not evidence that the information exchange has taken place for the purpose to be involved in an anticompetitive agreement, does not prove that prices were fixed and maintained at a certain level or that the chlorine market has been divided by sales volumes and customers. The correspondence was between chlorine market players which had effective commercial contracts for supply of chemical products between them and was intended to agree the terms of the contracts, including on the volume of liquid chlorine planned for the supply in containers and the time of shipment. The antitrust body did not establish, check or assess these circumstances, and failed to prove otherwise. Subject to the above, the courts have concluded that the decision of the Russian FAS declaring that the defendants were parties to an agreement that resulted or could have resulted in fixing prices at a certain level and sharing the market by sales and customers, was unlawful.

In another Judgment (Federal Arbitrazh Court for the Moscow Circuit, dated 2 April 2014 No. F05-2458/2014 in Case No. А40-152254/12.), the courts upheld the decision of the antitrust body by which the companies were declared to have violated article 11 of the Competition Law as a result of concluding an anticompetitive agreement which has led to maintaining a certain price at a public auction. The antitrust body found that the business entities pursued a goal of deriving benefits by entering into public contracts at the lowest possible downward step from the initial maximum price. This has created a competitive restriction on the market of construction and installation works.The fact that the information exchange has taken place between the defendants under the anticompetitive agreement was proved by the antitrust body on the basis of an analysis of the relatively consistent conduct of the market players which have derived a mutually beneficial result, while this is against the principles of reasonableness of economic activity.

The judgment of the Federal Arbitrazh Court for the Volga-Vyatka Circuit dated 2 February 2011 in Case No. А79-4621/2010 deals with the contract between Sberbank and the Federal Bailiff Service for electronic document exchange for the purpose of accepting and making payments from/to the Federal Bailiff Service. Under that contract, Sberbank undertook to accept payments from payers in favour of the Federal Bailiff Service. The Federal Bailiff Service, in turn, undertook to provide Sberbank with the registers of outstanding amounts under writs of execution. The antitrust body found that the Federal Bailiff Service is in breach of article 15(1) of the Competition Law (prohibition on any competition-restricting regulations and actions (omissions) of federal executive authorities, regional and local authorities or other bodies or organisations acting in such capacity, as well as state non-budgetary funds and the Russian Central Bank), because submission of information about outstanding amounts to Sberbank will result in a situation when a payer will be unable to find out the amount he owes under a writ of execution and to pay it in a bank other than Sberbank. The courts found that the FAS did not properly reason its decision as to how the submission of such information will result or can result in restriction of competition, because other banks were aware of the opportunity to enter into a contract with the Federal Bailiff Service similar to that with Sberbank. No evidence was presented to show that other banks were interested in conclusion of such agreements or that the Federal Bailiff Service prevented them from doing so (that it evaded conclusion of such contracts with other banks).

Therefore, it is the proof or lack of proof of restrictive effect on competition that is of prevailing importance, rather than the information exchange itself.

11. What is the standard of proof and on whom does the burden of proof fall in information exchange cases? Are there any scenarios in which the burden of proof is or could be reversed?

The burden of proof in information exchange cases is distributed as follows:

- in cartel cases, in cases of concerted actions and vertical agreements prohibited per se the antitrust body is not required to prove the negative effect on competition, it will suffice to establish the fact of reaching a prohibited agreement. The exhaustive list of such agreements and concerted actions is presented in article 11(1,2) and 11.1(1) of the Competition Law. A business entity may submit evidence to the contrary. The Law does not treat such actions as admissible, specifically, under article 13 of the Law (apart from concerted actions and vertical agreements prohibited per se);

- in the “other” agreements (article 11(4) and 11(3) of the Competition Law) and concerted actions (article 11.1(2,3) of the Competition Law), the burden of proving the occurrence of consequences restricting competition falls on the antitrust authority. A business entity may submit evidence that there are no such consequences. 

12. What are the sanctions for anticompetitive information exchanges in your jurisdiction?

An information exchange under an agreement that has or could have resulted in restriction of competition or in pursuance of concerted actions, primarily, gives rise to the liability under the Federal Law On Protection of Competition. Specifically, at the end of a proceeding, the antitrust body can grant a compliance order containing the terms of the conduct intended, among other things, to remove the breach and to bring the competitive situation back on track. Such compliance order can also require the defendant to terminate the information exchange.

An accusing decision of the Russian FAS is a ground to initiate a standalone administrative proceeding and hold a business entity liable for an administrative offence by imposing a turnover fine which can amount to 15 per cent of the offender’s proceeds from sales of a product (work or service) or of the offender’s expenses for purchasing such product (work or service) on the relevant market (article 14.32 of the Russian Code of Administrative Offences). 

Any proved existence of a cartel agreement, if it has caused major damages to individuals, organisations or the state, or has resulted in deriving major revenue, also entails criminal liability for officers of guilty business entities (article 178 of the Russian Criminal Code). Such offences are also penalised by a fine in an amount of 300,000 to 500,000 roubles or of the convict’s salary or other earnings for a period of one to two years, or community service for a period of up to three years with or without deprivation of the right to hold certain offices or engage in certain activities for a period of up to one year, or imprisonment for a period of up to three years with or without deprivation of the right to hold certain offices or engage in certain activities for a period of up to one year.

13. Describe any recent cases in the area of information exchange of note in your jurisdiction and how they were decided (such as cases decided by the competition authority or by the courts, or involving private damages).

In 2013, the Russian FAS initiated a case against major global container shipping companies accusing them of taking concerted actions by fixing prices (freight rates) at a certain level. The proceeding lasted for more than two years and ended in December 2015 by an accusatory decision. The FAS found that during a long period of time the companies concertedly determined their pricing strategy by placing notices of the “General Rate Increase” (GRI) on their official websites. The dates of publications and the increase rates were often the same. On that basis, the FAS concluded that the carriers changed their prices concurrently and consistently.

It is noteworthy that the actual prices of carriers varied as between each other, because various discounts and markups were applied to the base freight rates, while each carrier had its own system of such discounts and markups. In other words, GRIs have never reflected the actual level of the price, which will be offered to the customer. Specifically, there were cases when, regardless of the notice of price increase from a certain date, some of the companies did not change the actual prices for the customers much, if at all. The container shipping market is seasonal and exposed to many other objective factors (weather, holidays in certain regions, etc). 

Meanwhile, the regulator found that the concerted pricing strategy is proved by publication of the planned increases on the website. The FAS held that, bearing in mind different business economics of each defendant (cost of sales, expenses), the publication of equal rates on close dates proves that concerted actions have been taken.

Subject to the mandatory criteria of concerted actions contemplated by the Russian laws (ie, a public announcement, the FAS specifically paid attention to the publications on the website, having stated that this method of communication ensured such level of market transparency for the container shipping companies that offered opportunities for pursuing a concerted strategy. Thus, the publication of GRIs on the website has become a method of committing an offence. Most companies stopped publishing this information during the proceeding, which fact was qualified by the FAS as termination of the offence. Thus, it decided not to grant a compliance order.

14. Are there any proposals to reform the rules governing information exchange in your jurisdiction?

No.

15. Are there any other noteworthy characteristics or practical examples specific to your jurisdiction?

No.

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