Decision on case No. 2 06/121-03 of violation of the antimonopoly legislation

10.09.2003 | 16:50

Decision on case No. 2 06/121-03 of violation of the antimonopoly legislation

 

LLC NPO Western Union DP Vostok

5, 1st Tverskaya-Yamskaya St.,

125047, Moscow


JSCB RUSSLAVBANK

14, Donskaya St., building 2,

119049, Moscow (PO box 635)

Russian Federation Central Bank

12, Neglinnaya St.,

103016, Moscow

Credit organisations attracted

According to the list

DECISION

On case No. 2 06/121-03 of violation of the antimonopoly legislation

10 September 2003, Moscow

The Commission of the Russian MAP for considering case No. 2 06/121-03 of violation of the antimonopoly legislation in the composition of:

Commission Chairman - State Secretary, Russian Federation Deputy Minister for Antimonopoly Policy and Support of Entrepreneurship S.N. Dudkin; deputy head of Department for competition development on the market of financial services, commodity exchanges and the term market Yu.E. Bondareva; deputy head of the banking services office of the Department for competition development on the market of financial services, commodity exchanges and the term market Ye.Yu. Petrova, head of the legal and analytical work office of the Legal Department O.G. Mishakov,

Having considered case No. 2 06/121-03 initiated against LLC NPO Western Union DP Vostok,



HAS ESTABLISHED:

1. OJSC Russlavbank filed an application to the Russian MAP concerning the violation of the antimonopoly legislation. In the applicant's opinion, the violation consists in conclusion of agreements between LLC NPO Western Union DP Vostok (hereinafter - LLC Western Union) and Russian banks on provision of services to natural persons on remittance and payment of money transfers without opening bank accounts. The agreements concluded between Russian banks and LLC Western Union contain a standard item 4.2.8, according to which a bank is prohibited to cooperate with other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system during the period of validity of the agreement with LLC Western Union.

The applicant has created and develops a correspondence network, CONTACT, for the transfer of physical persons' money without opening bank accounts through the system of the banks' correspondence accounts. According to the application of OJSC Russlavbank, the network created by it incorporated over 40 Russian banks, as well as banks of counties of the «far» and «near» abroad.

At the same time, the applicant presented materials evidencing the Russian banks' refusal from continuing the fulfilment and conclusion of agreements with OJSC Russlavbank on the transfer of physical persons' finances without opening bank accounts with the use of the CONTACT network due to the agreements concluded earlier with LLC Western Union, containing the standard item 4.2.8, according to which a bank is prohibited to cooperate with other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system during the period of validity of the agreement with LLC Western Union.

The applicant believes that the above terms of agreements between Russian banks and LLC Western Union restrict the access to the market of services of transferring physical persons' money without opening bank accounts to other financial organisations, namely the applicant, which constitutes a violation of Art. 6 of the Federal Law «On Protection of Competition on the Market of Financial Services» No. 117-FZ of 23.06.1999 (hereinafter - the Law on Protection of Competition). The applicant also considers the actions of LLC Western Union consisting in agreements with Russian banking organisations of a standard provision prohibiting the banks to interact with other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system during the period of validity of the agreement with LLC Western Union to be unfair competition, banned by Art. 15 of the Law on Protection of Competition.



2. LLC Western Union objects against the position stated by OJSC Russlavbank, considering that the agreements concluded between LLC Western Union and Russian banks do not contradict the antimonopoly legislation.

3. The Commission considered the arguments presented by the parties, analysed the provided materials, and established the following.

LLC Western Union offers the Western Union System (hereinafter - the Western Union System) on the Russian Federation market - a system of transfer of physical persons' finances without opening bank accounts. Western Union is an international system organised by Western Union Financial Services, Inc. - a company incorporated under the laws of Delaware, USA. Western Union Financial Services, Inc. and LLC Western Union have concluded a cooperation agreement of 01.01.1999, regulating the parties' rights and liabilities on the use of the Western Union System of monetary transfers.

For purposes of providing to physical persons monetary transfer services without opening bank accounts, LLC Western Union and Russian banks conclude bilateral cooperation agreements between a concrete Russian bank and LLC Western Union on the rendering of the said services to physical persons on the territory of the Russian Federation (item 1 of the model agreement).

For joint attainment of the cooperation objectives constituting the subject of agreement, the bank allocates the necessary premises, equipment and personnel for working at the office for client services according to the Western Union System (item 4.2.1 of the model agreement). LLC Western Union, in its turn, provides the bank with advertising materials and instructions necessary for servicing individuals with the use of the Western Union System, delegates specialists to the bank for installing software and training the bank staff in using the Western Union System, renders consultative support to the bank in technical and organisational matters emerging in the process of utilisation of the Western Union System (items 4.1.1 - 4.1.3 of the model agreement).

The terms of agreements concluded by LLC Western Union with Russian banks according to which the bank is not entitled during the period of validity of the agreement with LLC Western Union to act as an agent or representative of other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system are standard, i.e. identical for all Russian banks.

The Western Union itself qualified the standard agreement it concludes with the banks as a «model agreement» (p.3 of the application of LLC Western Union to the Russian MAP Commission).



The analysis of provisions of the model agreement, including its subject - cooperation between a bank and LLC Western Union in joint rendering of services to physical persons on the transfer of money without the opening of bank accounts, as well as the main rights and liabilities of the parties, according to which the bank and LLC Western Union can only jointly provide the said service to natural persons, makes the Commission disagree with LLC Western Union in qualifying the agreement as a consignment contract according to which one party (the commission agent) obligates on assignment of the other party (the consignor) for a certain remuneration to conduct one or several transactions on its behalf but at the consignor's expense (Art. 990 of the Russian Federation Civil Code, hereinafter - RF CC).

The Commission also disagrees with LLC Western Union's interpretation of Art. 1007 of the RF CC as a norm allowing the division of the market by groups of sellers, buyers, according to the territorial principle, etc. Item 2 of Art. 1007 of the RF CC actually does envisage a possibility of including in the agency contract the agent's obligation not to conclude similar agency contracts with other principals, which should be implemented on a territory fully or partially coinciding with the territory indicated in the first contract. However, it is necessary to bear in mind that agreements concluded by banks with other organisers of payment systems (including agreements with OJSC Russlavbank on the use of the CONTACT system developed by the latter) are not regarded as agency contracts or consignment agreements either by the parties to the transaction or the Commission of the Russian MAP.

Moreover, according to Art. 2 (1) of the RF CC, the federal law can restrict civil rights. Specifically, such restrictions and exemptions from the general provisions on freedom of agreement are the provisions of Art. 6 of the Law on Protection of Competition, prohibiting the conclusion of agreements restricting competition on the market of financial services. At the same time the said article does not envisage any exemptions for agency contracts and consignment agreements.

As for contractual terms, the model agreement between a Russian bank and LLC Western Union contains, among the other terms, the standard item 4.2.8 according to which the bank is not entitled to act as an agent or representative of other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system during the period of validity of the agreement with LLC Western Union.

The presence of such a condition in the agreement prevents the bank that has concluded an agreement with LLC Western Union from concluding agreements with other organisations providing other payment systems. The banks cannot be considered to be absolutely free in their choice of the counterparty - organiser and owner of the monetary transfer system. The criterion used by the banks in the choice of their business partner in providing money transfer services to natural persons was the coverage of the territories to (from) which such transfers can be made. Before entering the Russian market, the international settlement system Western Union has been created and functioned in various countries of the world for a considerable period of time and currently covers the territories of over 195 countries. In the Russian Federation, LLC Western Union conducts its activity on the territory of 82 out of 89 Russian Federation Subjects (p. 2, 3 of Explanation on the case of LLC Western Union of 28.08.2003).

The Russian companies willing to operate on the market in question can achieve such a broad territorial coverage only in a sufficiently lengthy period of presence on this market and with considerable financial investments on creation and development of the system.

The presence of item 4.2.8 in the model agreement concluded by banks with LLC Western Union, considering the latter's competitive edge over the new payment systems and companies wishing to provide services on the same market results in restriction of competition on the market of services of transfers of physical persons' money without opening bank accounts, as it does not allow the banks to conclude agreements on the transfer of physical persons' money with other organisations, which, considering the difference in territorial coverage between LLC Western Union and its potential competitors, compels the banks to refuse from mutual beneficial cooperation with other payment system organisers in favour of LLC Western Union.

It should also be mentioned that LLC Western Union itself names as one of the purposes of including item 4.2.8 in the model agreement the securing of a bank's interest in promoting to the market only one company and its money transfer system, as well as the desire of LLC Western Union to rule out the possible competition on the part of organisers of other transfer systems which have a more flexible system of conducting settlements with the banks (as an example LLC Western Union refers to the work conditions within the CONTACT system; p. 4 of LLC Western Union application to the Russian MAP Commission).

The aforementioned circumstances and the considered materials enable the Commission to qualify item 4.2.8 of the model agreement concluded by LLC Western Union with Russian banks as a contractual term aimed at the restriction of access to the market of services of transfer of physical persons' money without opening bank accounts for other financial organisations and resulting in restriction of development of new payment systems on the market and, as a consequence, restriction of competition.

4. The Commission also disagrees with the arguments of LLC Western Union that item 4.2.8 of the model agreement is aimed at the protection of the company's intellectual property and prevention of cases of misleading the customers concerning the essence and main terms of the services rendered to natural persons.

Intellectual property in the Russian Federation is protected by legal provisions on intellectual property envisaging relevant protective means and methods, as well as items 2.10, 5.2, and 8.1 of the model agreement guaranteeing the keeping by the bank of confidentiality of technical documentation, software, and other information concerning joint activity handed over by LLC Western Union, and also introducing the bank's responsibility for abuses by its staff, including by compensation for the losses inflicted by such actions on LLC Western Union.

The prevention of cases of misleading consumers as to what payment system the client wishes to employ, is ensured by items 4.2.6, 4.2.7, and 5.2 of the model agreement, according to which the bank is obliged to place a Western Union logo at client service points using this system, use brochures, booklets, badges, and other visual ads and materials of the Western Union System; to strictly abide by the Western Union logotype and service sign, prevent the emergence of information which can mislead the clients or inflict damage on LLC Western Union's prestige.

Therefore, the Commission finds inconsistent the LLC Western Union's arguments that item 4.2.8 of the model agreement is aimed at attaining the above «business» objectives (p. 4 of LLC Western Union's application to the Russian MAP Commission), as these objectives are attained by other means and methods.

5. In addition to the terms of the model agreement concluded by LLC Western Union with Russian banks, the Commission also considered the actions of LLC Western Union on the cancellation or a threat of cancellation of agreements with the banks in the event of discovering the circumstance that the banks are conducting monetary transfers of physical persons with the use of another payment system, for example, the CONTACT system organised by OJSC Russlavbank, and the Anelik system organised by LLC Anelik Bank.

To ensure a maximally complete and comprehensive examination of the materials of the case, Russian banks indicated by the parties to the case (LLC Western Union and OJSC Russlavbank) that provided the services to natural persons on the transfer of money without opening bank accounts with the use of the Western Union, CONTACT, and Anelik systems were involved in the case.

In the event of detection of the fact of a bank's cooperation with other organisers of money transfer systems, LLC Western Union sent written notices to such banks on the cancellation of the agreement due to violation of item 4.2.8 of the model agreement. The receipt of such notices resulted in the banks' refusal from further cooperation with another organiser of money transfer systems.



The materials of the case contain copies of the letters of LLC Western Union to JSCB Mobiasbanka and JSCB Stella-Bank, in which LLC Western Union claims that «cooperation of JSCB Mobiasbanka and JSCB Stella-Bank with the CONTACT system violates item 4.2.8 of the Agreement … concluded between our organisations.»

As a result of the actions of LLC Western Union, JSCB Mobiasbanka cancelled the agreement with OJSC Russlavbank on conducting money transfers (JSCB Mobiasbanka letter No. 1352-07/3 of 18.07.2001).

JSCB Stella-Bank, in response to similar demands of LLC Western Union, sent it a return letter expressing disagreement with the position of LLC Western Union that the use of the CONTACT system by the bank is a violation of the agreement between the bank and LLC Western Union, as the bank is not an agent or a representative of this system's organiser - OJSC Russlavbank, and also pointed out that the CONTACT system is not an analogue of the Western Union System (letter No. 01-1-04/3-558 of 10.01.2001). However, LLC Western Union has not accepted the arguments of JSCB Stella-Bank and initiated a unilateral cancellation of the agreement between LLC Western Union and the bank as of 15.07.2001 (letter No. 0479/1-01 of 14.06.2001).

OJSC Omskpromstroibank applied to OJSC Russlavbank - the organiser of the CONTACT system with a request to remove the mention of the bank's name from the website informing of its cooperation with OJSC Russlavbank in conducting physical persons' money transfers. OJSC Omskpromstroibank pointed out in its letter No. 04-04/129 of 06.06.2001 that it took a diversified approach in its policy of cooperation with different organisations, in connection with which it considers it necessary to actively cooperate both with OJSC Russlavbank and with LLC Western Union.

However, the bank believes that the mention of the name OJSC Omskpromstroibank on the website may negatively tell on its relations with LLC Western Union, as «the company Western Union, referring to item 4.2.8 of our cooperation agreement, … claims that we are violating our agreement.»

OJCB Agroimpuls addressed OJSC Russlavbank with a request (No. 07-1106 of 18.06.2001) to cancel Agreements No. Rsl-840.00-50 of 31.10.2000 and No. Rsl-810.00-50 of 31.10.2000 on conducting monetary transfers on instruction of physical persons without opening current accounts within the CONTACT system. The reason for cancelling this agreement was the notice sent by LLC Western Union on the cancellation of its agreement with OJCB Agroimpuls because this bank was at the same time a participant of the CONTACT system in violation of item 4.2.8 of the Agreement.

The Independent Construction Bank commercial bank was also forced to cancel its Agreement No. Rsl-840.29 on conducting monetary transfers on instruction of physical persons without opening current accounts within the CONTACT system «in connection with a categorical demand of LLC Western Union (letter No. 414 of 05.07.2001 addressed to OJSC Russlavbank).

The materials of the case include documents according to which the actions of LLC Western Union aimed at restriction of the activity of credit organisations on the use of other payment systems also concern the participation of banks in the Anelik system of monetary transfers of physical persons. The materials of the case contain a letter of Snezhinsky Bank (outgoing No. 02/767 of 29.05.2001) addressed to LLC Bank Anelik, according to which LLC Western Union demanded from the said bank to terminate its participation in the Anelik system of transfers of physical persons' money. At the same time LLC Western Union notified Snezhinsky Bank of suspension of the Agreement in connection with the violation of item 4.2.8 of the Agreement.

Moreover, similar actions were taken by LLC Western Union with respect of OJSC Yekaterinburg Municipal Bank. According to the correspondence attached to the case materials, LLC Western Union cancelled Agreement No. 200 of 13.12.1999 as of 1 December 2001 in connection with the use by OJSC Yekaterinburg Municipal Bank of the Anelik system, which violated item 4.2.8 of the Agreement (letters of 10.03.2001 and 01.11.2001 No. 1302/1-01).

The examination of the terms of the model agreement concluded by LLC Western Union with Russian banks, as well as the assessment of the LLC Western Union actions on the implementation of item 4.2.8 of the agreement, restricting market access to other financial organisations and preventing the development of other payment systems, allows to qualify LLC Western Union's market behaviour as unfair competition.

Art. 15 of the Law on Protection of Competition prohibits unfair competition on the market of financial services between financial organisations, manifested in the actions aimed at gaining advantages in conducting entrepreneurial activity, concluding agreements contradicting Russian Federation law and normal business practice and can inflict of have inflicted damage on other financial organisations - competitors on the market of financial services.

As already mentioned, the Commission believes that the purpose of including item 4.2.8 in the model agreement is the restriction of development of other payment systems conducting the transfers of physical persons' finances without the opening of bank accounts on the Russian Federation market and restriction of market access to other financial organisations - organisers of such systems, which constitutes a violation of Art. 6 of the Law on Protection of Competition, as well as Art. 10 (1) of the RF CC prescribing the frameworks for exercising civil rights, and inflicts damage on other financial organisations - LLC Western Union competitors (the banks refuse to conclude agreements with other organisers of payment systems or cancel such agreements on demand of LLC Western Union under the threat of cancellation of the agreement with the latter).

Therefore, the Commission qualifies the entirety of the said actions of LLC Western Union on the market, considering their goals and implications, as unfair competition, prohibited by Art. 15 of the Law on Protection of Competition.

6. In addition to the above, the Commission noted that the conclusions on the violation by LLC Western Union of the bans imposed by articles 6 and 15 of the Law on Protection of Competition have been made with account taken of the following circumstances:

The opportunity of providing a maximum spectrum of services to clients is vital for competitive struggle of credit organisations. The conclusion of agreements with different payment systems on the transfer of physical persons' money enables a credit organisation to extend the list of provided services, attract a wider spectrum of clients with different needs and financial opportunities.

The examination and comparison of different payment systems by the Commission, specifically, Western Union and CONTACT, has demonstrated that these systems are not identical and have a number of technological, organisational, and other distinctions.

Item 4.2.8 of the model agreement does not allow the banks to act as the agent or representative of other companies on online transfer of finances during the period of validity of the agreement.

However, LLC Western Union sends notices to the banks on cancellation of the agreement in all cases of use by the latter of other payment systems than Western Union. At the same time the banks, upon the receipt of such notices, were sending explanations to LLC Western Union that the relations between the banks and an organiser of another payment system are neither representative not agency, as well as explanations that the work of the systems CONTACT and Anelik is based on working through correspondence accounts of banks participating in a particular system, which does not prompt a conclusion about similarity of the CONTACT and Anelik money transfer systems with the Western Union system. However, despite the arguments presented by the banks, LLC Western Union cancelled agreements with the banks that insisted on their position without further negotiations and explanation of their position concerning the interpretation of item 4.2.8 of the agreement.



7. Taking into account all the arguments and circumstances presented in the decision, analysed the provided materials, heard the parties' positions, the Commission of the Russian MAP, guided by articles 22, 23, 30 of the Federal Law «On Protection of Competition on the Market of Financial Services,»

HAS DECIDED:

1. To recognise the terms of item 4.2.8 of the model agreement concluded by Russian banks with LLC Western Union, according to which the bank is not entitled to act as an agent or a representative of other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system during the period of validity of the agreement with LLC Western Union, as inconsistent with Art. 6 of the Federal Law «On Protection of Competition on the Market of Financial Services,» No. 117-FZ of 23.06.1999, prohibiting the conclusion of agreements which result or can result in restriction of competition on the market of financial services, including for the purpose of restricting other financial organisations' access to the market of financial services.

2. To recognise the actions of LLC Western Union on inclusion of item 4.2.8 in the model agreement, as well as the company's demands that the banks should terminate all relations with other organisers of physical persons' monetary transfer systems without opening bank accounts, with a simultaneous threat of cancelling the agreement between the bank and LLC Western Union in connection with the violation of item 4.2 8 of the agreement, as unfair competition, banned by Art. 15 of the Federal Law «On Protection of Competition on the Market of Financial Services,» No. 117-FZ of 23.06.1999.

3. To issue an instruction to LLC Western Union to terminate the violations of the antimonopoly legislation within a period until 10.11.2003 and report to the Russian MAP about the measures taken not later than 15.11.2003.

Commission Chairman: S.N. Dudkin

Commission members: Yu.E. Bondareva, Ye.Yu. Petrova, O.G. Mishakov

To the Moscow City Arbitration Court

107996, Moscow, 10, Novaya Basmannaya St.


Applicant: Limited Liability Company

NPO Western Union DP Vostok

Address: 5, 1st Tverskaya-Yamskaya St.,

125047, Moscow



The public authority whose decision is appealed:

the Russian Federation Ministry of Antimonopoly Policy

and Support of Entrepreneurship

Address: Moscow, 11, Sadovaya Kudrinskaya St.



STATEMENT OF CLAIM

The RF Ministry for Antimonopoly Policy and Support of Entrepreneurship (hereinafter - the RF MAP) passed a decision on case No. 2 06/121-03 of the violation of the antimonopoly legislation with respect of LLC NPO Western Union DP Vostok (hereinafter - the Applicant) (Annex No. 1 to this application), dated 10 September 2003. According to this decision, the RF MAP recognised item 4.2.8 of the model agreement concluded between the Applicant and Russian banks (Annex No. 3), according to which the bank is not entitled to act as an agent or a representative of other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system during the period of validity of the agreement with LLC Western Union, as inconsistent with Art. 6 of the Federal Law «On Protection of Competition on the Market of Financial Services,» No. 117-FZ of 23 June 1999, prohibiting the conclusion of agreements which result or can result in restriction of competition on the market of financial services, including for the purpose of restricting other financial organisations' access to the market of financial services. The RF MAP has also recognised the Applicant's actions on inclusion of this item in the model agreement, as well as the actions aimed at the implementation of this provision, as unfair competition in keeping with Art. 15 of the Law on Protection of Competition on the Market of Financial Services. At the same time, the RF MAP issued an instruction on this case on termination by the Applicant of the aforementioned alleged violations of the antimonopoly legislation (Annex No. 2).

The Applicant believes that the above noon-regulatory acts of the RF MAP are unlawful and unjustified. Consequently, the Applicant considers that these non-regulatory acts considerably violate the rights and lawful interests of the Applicant, including the Applicant's right to freedom of agreement, specifically, the freedom of determining contractual terms (Art. 421 of the RF CC), as well as the right to protection of its private affairs against arbitrary interference (Art. 1 of the RF CC). The Applicant believes, in particular, that:

(1) The RF MAP is not authorised to decide whether the provisions of item 4.2.8 of the model agreement result or can result in restriction of competition on a relevant market of financial services According to the provisions of Art. 6 of the Law on Protection of Competition on the Market of Financial Services, the restrictions envisaged by this article are applicable only to agreements or concerted actions of parties whose position on the market enables them to exert a considerable influence on the state of competition on the market. The comparative analysis of Art. 6 of the Law on Protection of Competition on the Market of Financial Services and its other articles, e.g. articles 8 and 9, as well as other acts on protection of competition shows that the minimum condition for imposing on a party of restrictions stipulated by Art. 6 of the Law on Protection of Competition on the Market of Financial Services is the proof of the fact of its considerable market share, as otherwise there would be no influence on the market competitive environment. According to the Applicant, its share on the market of physical persons' money transfers without opening bank accounts is less than 10 percent, which is the evidence of a lack of an opportunity to influence competition. The RF MAP could not produce any evidence that the Applicant's share on the relevant market is significant enough to allow for the application of Art. 6 of the Law on Protection of Competition on the Market of Financial Services. Therefore, the RF MAP took an attempt without any legal grounds to restrict the provisions of the RF Civil Code directly envisaging the possibility of using exclusiveness provisions in contracts. Moreover, the RF MAP has not conducted a market examination, although it is prescribed by effective law and bylaws. Nevertheless, the RF MAP Decision characterised the Applicant' market position as an evidence of a «competitive edge,» referring to facts and circumstances the use of which as criteria of an economic entity's market position assessment is not stipulated by law. Moreover, during the analysis of a possible influence if item 4.2.8 of the model agreement on competition, the RF MAP has not considered and not taken into consideration the aspects of practical implementation of this item as one of the contractual terms, specifically, its combination with provisions on a possible unilateral cancellation of the agreement at any moment and without any negative implications for the cancelling party (the very existence of such a possibility of unilateral cancellation fully excludes the possibility of influencing the counterparty for purposes of competition restriction).

(2) The RF MAP, guided exclusively by literal interpretation of the wording of item 4.2.8 of the model agreement, having failed to analyse the contents of its other provisions, has misinterpreted the legal nature of the model agreement and, as a consequence, made an erroneous conclusion on legal norms applicable to relations between the parties under such an agreement, which has violated articles 431, 421, 1005, and 1007 of the RF CC.

(3) The RF MAP conclusion that the Applicant was engaging in unfair competition is not based on effective law of the RF (Art. 15 of the Law on Protection of Competition on the Market of Financial Services) and materials of the case of violation of the antimonopoly legislation No. 2 06/121-03. Making a conclusion that the Applicant's actions on implementation of item 4.2.8 of the model agreement constitute unfair competition, the RF MAP has disregarded the fact that articles 6 and 15 of the Law on Protection of Competition on the Market of Financial Services envisage two alternative elements of offence and, hence, the RF MAP could not accuse the Applicant of committing both these offences simultaneously. The RF MAP has also not taken into account the entirety f criteria stipulated y Art. 15 of the Law on Protection of Competition on the Market of Financial Services, enabling to make a conclusion on the presence of the elements of unfair competition in a party's actions, which are in fact not present in the Applicant's actions.

(4) The RF MAP has incompletely examined the materials of the case and lopsidedly interpreted them during the adoption of the decision on the case, making selective reference to individual documents and parts of documents. Nevertheless, a complete analysis of the materials of the case shows that the RF MAP conclusions are not backed with relevant references to materials and facts of the case. Moreover, the RF MAP substituted a comprehensive analysis of the materials of the case with literal quotation of individual items of the model agreement between the Applicant and banks participating in the Western Union money transfer system and references to isolated examples of relations between such parties.

(5) During the adoption of the decision on the case, the RF MAP has gone beyond the limits of its competence, attempting to make a conclusion on the application of the norms of civil law on protection of intellectual property and pass a decision on issues connected with the exercising and protection of civil rights. Therefore, the RF MAP has violated articles 22 and 23 of the Law on Protection of Competition on the Market of Financial Services introducing its competence frameworks.

(6) In the course of consideration of the case, the RF MAP committed multiple processional violations, specifically, concerning the granting of an opportunity to the Applicant to familiarise itself with the materials of the case. This has violated the provisions of Art. 25.1 of the RF Code of Administrative Offences and items 4.3 and 5.8 of the Rules of Considering Cases of Violation of the Antimonopoly Legislation and other laws and regulations on protection of competition on the market of financial services, approved by Order of the RF MAP No. 707 of 15 September 2000.

(a) Influence of Item 4.2.8 of the Model Agreement on Competition on the Markets of Financial Services

1.4. Contents of item 4.2.8 of the Model Agreement

In accordance with item 4.2.8 of the Model Agreement used to conclude agreements between the Applicant and banks participating in the Western Union system, a bank participating in the Western Union system obligates not to act as an agent or a representative of other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system during the period of validity of the agreement.

Proceeding from the contents of this item, the RF MAP made a conclusion that the inclusion of this item in the agreement has resulted in restriction of competition on the market of financial services by restricting market access to other financial organisations - organisers of payment systems.

In the Applicant's opinion, this conclusion (a) does not conform to the provisions of Art. 6 of the Law on Protection of Competition on the Market of Financial Services; and (b) is not substantiated by materials of the case.

1.4. Analysis of Provisions of the Law on Protection of Competition on the Market of Financial Services

In accordance with Art. 6 of the Law on Protection of Competition on the Market of Financial Services, «agreements or concerted actions attained in any form by financial organisations between each other or with the federal executive authorities regulating the market of financial services, the federal executive authorities, executive authorities of the Russian Federation Subjects, bodies of local self-government and any legal entities, except agreements or coordinated actions of financial organisations with the Russian Federation Central Bank, are not admitted and shall be fully or partially invalidated in the established manner, if such agreements or concerted actions result or can result in restriction of competition on the market of financial services.»

The very wording of Art. 6 of the Law on Protection of Competition on the Market of Financial Services suggests that the main condition of its application is the result of actual or possible influence of agreements on the competitive environment in the form of competition restriction. Therefore, the law stipulates that the persons concluding such agreements or conducting such concerted actions, should have a market position (namely, a market share) enabling them to influence the relevant market.

This is indirectly confirmed by comparison with relevant provisions of the Law «On Competition and Restriction of Monopolistic Activity on Product Markets» (in edition of Federal Law No. 122-FZ of 9 October 2002) stipulating in Art. 6 (3) that restriction of agreement conclusion is not applicable to economic entities whose aggregate share on a certain product market does not exceed 35 percent.

Although the Law on Protection of Competition on the Market of Financial Services does not directly introduce any margin of agreement participants' share on a certain market of financial services under which credit organisations are not restricted in concluding any kind of agreements, it is obvious that its provisions cannot be interpreted as a general and comprehensive ban on conclusion of agreements by financial organisations whose aggregate share does not enable them to exert a significant influence on the market of financial services. In other words, the application of Art. 6 of the Law requires the presence of the criterion of «market influence of the agreement participants.»

This statement is also confirmed by system interpretation of provisions of the Law on Protection of Competition on the Market of Financial Services concerning agreements that have an impact on competition on relevant markets. E.g. articles 8 and 9 of the said Law introduce the procedure of notifying the RF MAP of agreements and concerted actions restricting competition on the markets of financial services and the procedure of acceptance/non-acceptance of these agreements and concerted actions by the ministry. According to Art. 8 (1) of the Law, agreements and concerted actions of financial organisations that have or can have an aggregate share on the market of financial services below the margin set by the RF Government are beyond the control of the RF MAP.

According to the RF Governmental Decree No. 194 of 7 March 2000, this margin is set at 10 percent of the turnover of a relevant financial service.

According to the aforementioned legal provisions and the meaning of the Law, any agreements between financial organisations whose aggregate share on the market is less than 10 percent of the turnover of a relevant financial service are taken beyond the control of the RF MAP. This is connected with the fact that any such agreements cannot make any impact on the competitive environment on relevant markets. Therefore, it should be recognised that in connection with a lack of such impact on the competitive environment, the said agreements are not covered by the general ban imposed by Art. 6 of the Law.

Therefore, the bank imposed by Art. 6 of the Law on Protection of Competition on the Market of Financial Services is not applicable to the Applicant, as its share on the market is less than 10 percent of the turnover of the relevant service (transfer of physical persons' money without opening bank accounts).

Indirectly the position on the need of the «market influence» criterion has also been confirmed by the RF MAP decision on this case. Specifically, in support of its position that item 4.2.8 of the Model Agreement can result in restriction of competition on the financial market, the RF MAP tried to assess the influence of the Applicant on this market (see p. 5 of the Decision). Nevertheless, in violation of provisions of the Law on Protection of Competition on the Market of Financial Services, the RF MAP was adopting its decision on the basis of improper criteria of evaluating the Applicant's position on the market of services of monetary transfers between physical persons without the opening of bank accounts (see item 1.3 below).

1.4. Invalidity of the RF MAP Conclusion on Applicability of Art. 6 of the Law on Protection of Competition on the Market of Financial Services to Item 4.2.8 of the Model Agreement

During the adoption of the decision that item 4.2.8 of the Model Agreement restricts competition on financial market the RF MAP was relying on improper criteria of assessing the Applicant's position on the relevant financial market. E.g. the RF MAP took into consideration the following factors:

(a) The Applicant's activity in foreign countries (in particular, the RF MAP indicated that the payment network organised by the Applicant covers 195 countries);

(b) The territorial coverage of financial service points within the Western Union system on the RF territory.

Apparently, the first of the above criteria is not applicable for evaluating the state of the competitive environment on the RF financial market, as in keeping with articles 1 and 2 of the Law on Protection of Competition on the Market of Financial Services, this law regulates relations on the market of financial services, interpreted as the «sphere of activity of financial organisations on the territory of the Russian Federation or its part, identified according to the place of rendering the financial service to consumers.»

The use of the second criterion is not based on provisions of effective law of the RF either, as according to Art. 4 of the Law on Protection of Competition on the Market of Financial Services, the share of a financial organisation on the market of financial services is calculated as the proportion of its aggregate turnover on the market of a certain type of financial services to the overall volume of financial organisations' turnover within the established dimensions of the market of financial services. It should be specially mentioned within this context that in keeping with the Methodology of Identifying the Turnover and Financial services Market Dimensions of Financial Organisations approved by RF Governmental Decree No. 194 of 7 March 2000, a financial service turnover is regarded as the sum of monetary funds raised and used by a financial organisation over the reporting period.



Neither the Law on Protection of Competition on the Market of Financial Services, nor the bylaws adopted on its basis envisage a possibility of evaluating the position of a financial organisation on the market of financial services and, hence, assessing the influence of such an organisation on a relevant market, proceeding exclusively from the number of financial service points or the territory within which the financial organisation exercises its activity.

It should also be mentioned that the Methodological Recommendations on Procedures for Conducting an Analysis and Evaluation of the State of the Competitive Environment on the Market of Financial Services, approved by Order of the RF MAP No. 86 of 31 March 2003, applicable, in keeping with item 1.2 of the said Methodological Recommendations, in part, to control over agreements and concerted actions of financial organisations restricting competition on the market of financial services, in accordance with articles 6 - 10 of the Law, prescribe to conduct an evaluation of the competitive environment on the financial market proceeding from a considerable number of parameters, including:

· the product dimensions of the market of financial services;

· the geographic dimensions of the market of financial services;

· the institutional structure of the market of financial services and the composition of clients of financial organisations;

· qualitative characteristics of the competitive environment of the market of financial services;

· the capacity of the financial market and the share of financial organisations on the market of financial services;

· market concentration indices;

· the market potential of the financial organisation.

According to the materials of the case and the Decision, none of the above criteria has been examined or taken into consideration by the RF MAP during the issuance of the appealed decision.

The attempt of the RF MAP to assess the Applicant's market position or its influence on the relevant market on the basis of criteria not stipulated by effective law and bylaws is unprecedented and surprising. The market actor's renown and popularity itself cannot constitute a manifestation of market dominance or a possibility of exerting a considerable influence on the market. Similarly, broad renown and popularity of the Western Union system of money transfers cannot justify the application to the Applicant of provisions applicable only to market actors that have a considerable share on the market and can influence competition on a relevant market.

In addition to the above, the RF MAP failed to explain in what particular way the banks' participation or non-participation in the Western Union system of settlements influences such financial organisations' competitiveness.

Therefore, the conclusion on the influence of item 4.2.8 of the Model Agreement was made without the evaluation of the state of the competitive environment on the relevant market and is completely unfounded. The RF MAP reference in this connection to a special position of the Western Union money transfer network on the market is totally incorrect and contradicts the spirit and the letter of the Law on Protection of Competition on the Market of Financial Services. In accordance with Art. 22 of this Law, the goal of the RF MAP consists in «promoting the development of competition on the market of financial services,» whereas by adoption of the appealed Decision the RF MAP, on the contrary, contributes to restriction of competition on the market, restricting the Applicant's lawful competitive edge gained as a result of durable fruitful activity on the relevant market in the RF, failing to prove the influence of the Applicant's actions on the competitive environment on the relevant market. This in fact creates a situation where the lawful rights and interests of a market participant whose activity and repute are beyond doubt and ensure its popularity among both the counterparties (banks willing to join the Western Union system of money transfers) and end consumers of the service of money transfers are infringed for providing advantages to financial organisations whose competitive opportunities and reputation do not allow than to gain a similar market position by other means.

1.4. Comparison of Art. 1007 of the RF CC and Art. 6 of the Law on Protection of Competition on the Market of Financial Services

According to the Decision, the RF MAP actually states that provisions of Art. 6 of the Law on Protection of Competition on the Market of Financial Services constitute an unconditional restriction of civil rights, including the freedom of agreement (Art. 421 of the RF CC) and the rights granted by Art. 1007 of the RF CC (see p. 4 of the Decision). Moreover, according to the Decision, the RF MAP assumes that Art. 6 of the Law on Protection of Competition on the Market of Financial Services is applicable to any contractual condition, which can be interpreted as restricting the market players in some or other way in their choice of counterparties or which in full conformity with Art. 421 of the RF CC contain a voluntarily accepted restriction of the freedom of agreement. The Applicant claims that such position is illegitimate.


In particular, as already stated above, the Applicant believes that Art. 6 of the Law on Protection of Competition on the Market of Financial Services is applicable exclusively in cases when the agreement really exerts a considerable influence on competition and only if the aggregate market share of the agreement participants exceeds 10 percent of the turnover of a relevant service.

At the same time, during the adoption of the Decision the RF MAP has not fully appraised any of the aforementioned grounds for applying Art. 6 of the Law on Protection of Competition on the Market of Financial Services (see item 3 of this Statement). The fact that the right of a bank participating in the Western Union system to cooperate with other payment system will be restricted during the period of validity of an agreement concluded on the basis of the Model Agreement form, cannot by itself provide the grounds for applying Art. 6. On the contrary, the validity of this item of the Model Agreement and the Model Agreement as a whole (its period, cancellation procedures, etc.) should be evaluated from the point of view of their actual or potential influence on competitiveness of other market players. During the adoption of its decision, the RF MAP has not identified the market dimensions, or its institutional composition, or the level of the Applicant's market influence, or the influence of item 4.2.8 of the Model Agreement on this market. Therefore, the RF MAP had no grounds to claim that the Applicant has gone beyond the frameworks of exercising civil rights prescribed by the RF civil and antimonopoly legislation.

1.5. Applicant's Position

The Applicant states that provisions of item 4.2.8 of the Model Agreement cannot influence the state of the competitive environment on the market of financial services of transfer of finances between physical persons without the opening of bank accounts for the following reasons:

(1) In accordance with the data at the Applicant's disposal, its share on the market of money transfers between natural persons without opening bank accounts is less than 10 percent of the overall turnover of this service. Therefore, by inclusion of item 4.2.8 in the Model Agreement the Applicant and its counterparty banks do not and cannot render any influence on the competitive environment on the market.

(2) In accordance with item 11.4 of the Model Agreement, each party has a right to cancel the agreement having notified the other party one month in before the cancellation date. This manner of cancellation of the Model Agreement does not entail any responsibility for the cancelling party (whether in the form of a fine or any other form). Therefore, the provision on exclusiveness stipulated by item 4.2.8 of the Agreement can in no way prevent the bank from launching cooperation with another credit organisation - an organiser of a settlement network, if the commercial offer of such an organisation is more profitable than the terms of the bank's participation in the payment system organised by the Applicant. In particular, during the past 18 months 13 credit organisations terminated their cooperation with the company, which shows that a new competitive market actor can always attract a sufficient number of counterparties for organising its settlement system. Therefore, item 4.2.8 of the Agreement can in no way rule out the possibility of competition on the market in question.

(3) A large number of competing systems are now present on the market of financial services connected with money transfers between natural persons without opening bank accounts, including MoneyGram, CONTACT, Anelik, the Sberbank money transfer system, the Impexbank and Alpha-bank express transfers systems, the TWML/Travelix payment system, the system of postal, telegraph, and electronic transfers of the RF Communication Ministry, which render services identical in essence and from the consumer's point of view.

(4) The market of money transfers between natural persons without opening bank accounts is developing rather quickly, which is confirmed by a constant emergence of new competing money transfer systems and increase of the volume of relevant financial services. E.g. according to the information at the Applicant's disposal, the expected increase of the volumes of the market of money transfers between natural persons without opening bank accounts in the next five years stands approximately at one third every subsequent year. The following new systems of money transfer have emerged on the Russian market in 2002-2003: MIGOM (THE European Trust Bank), Travelex, Unistream, STB-Express, the Impexbank money transfer system, RiaEnvia (Ship Building Bank). The largest player - the VISA money transfer system - is currently entering the market. In the Applicant's opinion, in a situation of a rapid growth of the market and the number of competitors on it, the Applicant cannot in principle have any considerable influence on such market (which is confirmed by its insignificant market share).

In the Applicant's opinion, all the above circumstances undoubtedly prove the fact that the provision on exclusiveness as presented in item 4.2.8 of the Model Agreement cannot have any impact on the competitive environment on the market of money transfers between natural persons without opening bank accounts. The RF MAP has disregarded and not considered during the hearings and the adoption of the Decision any of such circumstances, which resulted in the passing of an unlawful and unreasonable decision on the case of violation of the antimonopoly legislation.

2. Matters of Qualifying the Model Agreement and Using the Exclusiveness Provision in it

2.1. Legal Nature of the Model Agreement

During the adoption of the Decision, the RF MAP has misinterpreted the contents of the Model Agreement, which resulted in a misunderstanding of its legal nature.

The RF MAP indicated on p. 4 of the Decision that the subject of the Model Agreement is «cooperation between a bank and LLC Western Union in joint rendering of services to physical persons on the transfer of money without the opening of bank accounts.» In the Applicant's opinion, such interpretation of the subject of the Model Agreement is not based on provisions of effective civil law. Moreover, the above quote shows that in adoption of its Decision the RF MAP has failed to make a distinction between the subject of agreement (i.e. the actions to be taken by each party to the agreement or the actions from which the parties must refrain) and the purpose of the agreement, i.e. the legal consequences that the parties intend to achieve as a result of implementation of the agreement. The conclusion made by the RF MAP is particularly incorrect in view of the fact that the Applicant is not a party to any agreement on conducting money transfers with physical persons and, hence, from the legal point of view, any sort of «joint rendering of services» is totally out of the question.

Making a conclusion on the subject of the Model Agreement, the RF MAP was guided exclusively by the literal interpretation of item 1.1 of the Model Agreement, paying no attention to its other provisions and not trying to find out the actual will of the parties to the agreement, as prescribed by Art. 431 of the RF CC. Moreover, this conclusion of the RF MAP is totally ungrounded and is not backed with references to any legal provisions.

In the Applicant's opinion, the contents of the Model Agreement and forms of documents used for concluding agreements between a bank participating in the Western Union money transfer system and a client show that the main obligations of the bank consist in: (a) concluding money transfer and acceptance agreements on its own behalf; (b) payment of the money transferred within the Western Union system, i.e. the implementation of transfer agreements concluded by third parties or the bank itself (see items 4.2.3 and 4.2.4 of the Model Agreement). All the said transactions are conducted on behalf of the participating bank in accordance with the Applicant's instructions on the prescribed pricing and time conditions (see items 2.5 - 2.8 of the Model Agreement).

According to items 3.2, 3.6 and 3.7 of the Model Agreement, the participating bank must transfer everything received under the said transactions to the Applicant and, in its turn, is entitled to demand a compensation of expenses sustained during the payment of the transfers. Considering this circumstance, a conclusion can be made that the bank is not personally interested in the implementation of agreement by a client in a transaction, because it transfers everything received from the client directly to the bank's counterparty, namely - the Applicant. On the contrary, the bank received compensation from the Applicant on the basis of a transaction concluded by the bank with a third party (a client). It should be mentioned that the bank receives compensation from the Applicant not only for concluding money transfer transactions with clients, but also when the bank's function consists merely in the payment of the money transfer to the client (i.e. when no sums are charged from the client and not remitted by the bank to the Applicant). Considering the above, it should be recognised that by entering relations with clients the participating bank acts in the interests and at the expense of the Applicant, concluding transactions in which the Applicant is interested.

In qualifying the conditions connected with the actions taken by a bank - party to the Model Agreement on its own behalf but on assignment and at the expense of the Applicant, it is necessary to take into account the other obligations of the parties, specifically, the obligations concerning physical actions the duty of exercising which is assigned to the bank (for instance, actions connected with the placement of advertising and information materials, providing information to clients, etc.).

Consequently, this part of the Model Agreement can be referred to the category of obligations to render the services including both legal and physical actions, i.e. the obligations involving the participation of an intermediary - a representative (agent), commissioner, beneficial owner - acting in civil transactions on behalf of somebody else or even on its own behalf, but always in somebody else's interests.

The construction of an agency contract in Russian law pursues the goal of civil registration of relations in which an intermediary (representative) conducts in the interests of other parties both transactions and other legal actions (which is characteristic of assignment and commission relations) and physical actions, not generating legal relations between the principal and third parties. The above characteristics seem to be fully applicable to the Model Agreement.

This suggests the conclusion that relations between the parties within the frameworks of the Model Agreement include two basic elements:

· conducting legal actions by the bank (transactions with clients on receipt and payment of money transfers) on behalf of the bank with the transfer of everything received in favour of the Applicant;

· conducting various physical actions by the bank.

Moreover, in identifying the legal nature of the Model Agreement it is necessary to take into consideration that in addition to establishing agency relations between the Applicant and the bank, it stipulates also other obligations of the parties going beyond the limits of agency relations. In particular, these obligations are connected with providing by the Applicant and the use by the bank participating in the Western Union settlement system of software and communication lines, as well as the training of the staff of the banks and providing the banks by the Applicant with advertising materials and materials for equipping the Western Union servicing points. Therefore, the Model Agreement includes, in addition to the terms of agency agreement, the elements of a license agreement and an agreement on the rendering of services for value. Consequently, the Model Agreement is a mixed-type agreement, whose elements containing the regulations concerning agreements are applicable to relations between the parties covered by it (Art. 421 (part 3) of the RF CC).

Therefore, the Applicant believes that the relations between the parties under the Model Agreement contain the elements of agency relations, whose subject and contents fully complies with the legal definition of the subject of an agency agreement, as presented by art. 105 (1) of the RF CC and, as a consequence, the imposition of restrictions stipulated by Art. 1007 of the RF CC on agents' (banks participating in the Western Union system) activities by the Model Agreement is totally legal and justified.

2.2. 2.2. Legal and Business Grounds for Including in Agreements of Provisions Similar to Item 4.2.8 of the Model Agreement

The RF MAP, having made a conclusion in its Decision on case No. 2 06/121-03 that item 4.2.8 of the Model Agreement is a condition aimed at restricting competition, has disregarded the fact that inclusion in agreements of terms similar to item 4.2.8 of the Model Agreement, i.e. conditions restricting the right of one of the parties to agreement to conclude similar contracts with other counterparties during the period of validity of the already concluded agreement, is not only completely legitimate (which is confirmed by the fact that such a possibility is directly envisaged by Art. 1007 (2) of the RF CC), but is also based on legal and good business grounds aimed at protection of commercial interests of economic entities in civil transactions and not aimed at restriction of competition on a relevant market. Moreover, during the adoption of its Decision, the RF MAP has not taken into account the fact that a financial organisation's choice of a most commercially favourable counterparty (in our case, the choice of a financial organisation - organiser of a settlement system) constitutes the essence of competition on the market under consideration. The RF MAP has also disregarded the circumstance that exclusive cooperation of a financial organisation with a certain payment system provides considerable benefits to the financial organisation itself, as it receives an opportunity of conducting its activity with the use of wide-known service identification means. Moreover, exclusive cooperation with one «brand» contributes to enhancing the recognition of services rendered by a particular organisation.

(1) Provisions of agreements restricting, for instance, an agent's right to conclude similar agreements with other principals, are aimed at the protection of intellectual property, confidential information and secrets of the activity on a relevant segment of the market of financial services, which in a considerable measure ensure the competitiveness of financial organisations. Companies operating on the market in question make considerable financial investments in development of software, hardware, and methodological support of their activity connected with money transfers, and these factors largely determine the terms and quality of the services rendered. It is noteworthy that the agent (in this case - a bank participating in the Western Union system entrusted to exercise individual agency functions by the agreement with the Applicant) has at its disposal a considerable volume of strictly confidential information necessary for ensuring a possibility of conducting transactions of online money transfers, information concerning work with the clients, as well as the latest developments and strategic plans of the principal. Hence, the financial organisations' requirement of restricting competitors' access to any such data is quite justified and lawful. It is obvious that a bank's simultaneous cooperation with several payment systems, particularly in conditions of restricted technological and personnel opportunities (which is typical of many bank branches or small banks), makes it practically impossible to prevent confidential information disclosure or leakage.

It should be mentioned that the RF MAP statements that protection of intellectual property should be exercised within the frameworks of legal provisions on intellectual property, as well as the items of the Model Agreement «introducing the bank's responsibility for abuses by its staff, including by compensation for the losses inflicted by such actions on LLC Western Union» (p. 6 of the Decision), are totally groundless. First of all, the civil law does not impose restrictions on parties to set by their agreements additional requirements and guarantees against the violation of their rights. The existence of «other means and methods» of achieving a goal (in our case - preventing third party access to information constituting commercial secret of the Applicant) does not invalidate the means and methods prescribed by the parties in their agreement relying on direct provisions of effective law. Moreover, it is not difficult to notice that most of the Model Agreement provisions, referred to by the RF MAP as a safeguard of the Applicant's intellectual property, concern the consequences of responsibility emerging in the event of disclosure by the bank of the Applicant's confidential information, but do not cover the prevention of a possibility of such disclosure.

(2) In addition, the said terms of the agreements facilitate the conducting of joint promotional and marketing functions by the Applicant and banks participating in the Western Union system, aimed at awareness raising among consumers of the services offered by the Western Union money transfer system and on the banks cooperating with the Applicant in rendering such services to consumers. It should also be mentioned that in the course of such joint promotional and marketing functions the banks receive an additional competitive edge thanks to the Applicant's considerable financial investments in such promotional and marketing functions, which the bank could not conduct on it own. In a situation where one credit organisation is a participant of two payment systems at a time, it is practically impossible to ensure the bank's equal interest in promotion and development of both such systems simultaneously and applying maximal effort by it for active participation in advertising campaigns aimed at the promotion of the Western Union money transfer system. As a consequence, the Applicant would be forced to noticeably reduce or altogether refuse from conducting joint promotional and marketing functions with the banks, which would have inevitable negative implications also for such banks' development (as in many cases consumer interest in a certain bank is directly connected with the fact of advertising its cooperation with the Applicant).

(3) Provisions similar to item 4.2.8 of the Model Agreement are also necessary for creating full awareness of a relevant service consumer of the particular payment system he/she uses and a strict distinction between the services of different money transfer systems, as well as preventing cases of misleading the consumer concerning the essence and main conditions of the rendered financial services. It should be mentioned in this connection that the arguments presented by the RF MAP on p. 6 of the Decision that «the prevention of cases of misleading consumers … is ensured by items … of the model agreement, according to which the bank is obliged to place a Western Union logo at client service points … use … visual ads and other materials of the Western Union System,» etc., must be recognised inconsistent. Apparently, if a bank simultaneously offers the services of money transfers in several systems, all the above practical measures would result in the formation of a customer's distinctive awareness of the difference between such systems only if all systems apply equal self-identification efforts. From the practical viewpoint, this seems to be impossible, just as it is impossible to force any of the payment system organisers to take comparable self-identification steps as the other market participants. If only one of the participants takes measures to ensure the recognition and identification of its system service points, the probability of misleading the customer as to the applicability of the used identification means equally to all the services offered is quite high.

Consequently, the said provisions of agreements not only cannot be regarded as competition restrictive, but on the contrary, promote its development, protecting the legally gained competitive edge of the financial services market participants (such as business reputation and recognition on the market). It should also be taken into consideration that although the possibility of including exclusiveness provisions in agreements between the parties to civil transactions is envisaged by a limited number of articles of the RF CC (e.g. Art. 1007, 1033 of the RF CC), RF law does not impose direct bans on including such provisions in other types of agreements. An agency agreement and a commercial consignment agreement are obviously the most types examples of legal relations including the aforementioned grounds for including an exclusiveness provision in the agreement (e.g. during intellectual property transfer or providing an agent or a consignor with access to information constituting commercial secret). One has to admit, however, that in other cases, under similar circumstances requiring, in particular, strict identification of a product or services offered on the market, or protection of intellectual property rights or the rights to information, provisions restricting a party's right to conclude similar agreements with other counterparties may be lawfully included in other types of agreements as well. This is confirmed by the broad practice of contractual relations, and the lawfulness of including exclusiveness provisions in agreements has never been doubted in enforcement practice.



To the Moscow City Arbitration Court

107996, Moscow, 10, Novaya Basmannaya St.



Applicant: Limited Liability Company

NPO Western Union DP Vostok

Address: 5, 1st Tverskaya-Yamskaya St.,

125047, Moscow



The public authority whose decision is appealed:

the Russian Federation Ministry of Antimonopoly Policy

and Support of Entrepreneurship (the Russian MAP)

Address: 123808, Moscow, 11, Sadovaya Kudrinskaya St.



Case No. A40-47677/03-12-495

Response of the Russian MAP

to the claim of NPO Western Union DP Vostok on invalidating the decision and instruction of the Russian MAP of 10.09.2003 on case No. 2 06/121-03 of violation of the antimonopoly legislation

The Russian MAP has considered the claim of NPO Western Union DP Vostok on invalidating the decision and instruction of the Russian MAP of 10.09.2003 on case No. 2 06/121-03 (hereinafter - the Russian MAP Decision) and considers the demands set forward by it to be unjustified and not subject to satisfaction for the following reasons.


In accordance with Art. 201 (2) of the Russian Federation Arbitration-Processional Code (hereinafter - the RF APC), the grounds for issuing a court decision on the invalidation of a non-regulatory act of a public authority are simultaneously:
- inconsistency of the non-regulatory act with the law or another legal act, and
- violation by the non-regulatory act of the rights and lawful interests of a person filing a relevant court claim.

1. The Decision of the Russian MAP is justified, conforms to the law and other regulatory legal acts.

1.1. Any agreements or concerted actions of financial organisations restricting competition are subject to antimonopoly control regardless of these organisations' share on the market.


Art. 6 of the Federal Law «On Protection of Competition on the Market of Financial Services» of 4 June 1999 No. 117-FZ (hereinafter - the Law) prohibits and in the prescribed manner recognises fully or partially invalid any forms of agreements or concerted actions of financial organisations between each other, if such agreements or concerted actions result or can result in restriction of competition on the market of financial services, in part, if such agreements or concerted actions are directly or indirectly aimed at:


the setting (maintaining) of prices (tariffs), discounts, mark-ups, bonuses, premiums, interest rates;

increasing, lowering or maintaining auction prices;

division of the market of financial services according to the territorial principle, by the types of financial services rendered on the market of financial services or by consumers of financial services on the market of financial services;

restriction of the access to the market of financial services or elimination of other financial organisations from this market;

setting unreasonable membership criteria constituting barriers to joining payment and other systems without the participation in which the competing financial organisations could not provide the necessary financial services to their consumers enabling them to compete on the market of financial services.

Therefore, in keeping with Art. 6, if agreements or concerted actions are directly or indirectly aimed at:

the setting (maintaining) of prices (tariffs), discounts, mark-ups, bonuses, premiums, interest rates;

increasing, lowering or maintaining auction prices;

division of the market of financial services according to the territorial principle, by the types of financial services rendered on the market of financial services or by consumers of financial services on the market of financial services;

restriction of the access to the market of financial services or elimination of other financial organisations from this market;

setting unreasonable membership criteria constituting barriers to joining payment and other systems without the participation in which the competing financial organisations could not provide the necessary financial services to their consumers enabling them to compete on the market of financial services,

they shall be by force of Law be qualified as prohibited agreements restricting competition regardless of the market share of the organisations that have concluded them.

In other words, the said article imposes an unconditional legal ban on agreements restricting competition on financial markets and regards the forms of agreements specially stipulated by it as its special cases, i.e. agreements that are already qualified as resulting or capable of resulting in competition restriction by force of the Law.

Therefore, agreements restricting access to the market of financial services to other financial organisations are already regarded as competition restriction by force of the Law and do not require the identification of the financial organisation's share on the market or, in this case, conducting an analysis and evaluation of the state of the competitive environment, but merely the establishment of the very fact of such market entry restriction.

At the same time, this does not rule out the need to conduct an analysis and evaluation of competition on the market with respect of the other cases of competition restriction, not specially stipulated by Art. 6 of the Law, which are established on the basis of the Methodological Recommendations on Procedures for Conducting an Analysis and Evaluation of the State of Competitive Environment on the Market of Financial Services, approved by Order of the Russian MAP No. 86 of 31.03.2003.

Attention should be drawn to the fact that articles 8 and 9 of the Law cannot and should be applied jointly with Art. 6 of the Law, as the provisions of articles 8 and 9 introduce the rules of notification of agreements between financial organisations.



The notification of the Russian MAP in keeping with Art. 8 of the Law about agreements of concerted actions of financial organisations whose aggregate share on the market exceeds 10% is required not only for antimonopoly control of agreements, but also for detecting dominance and facts of its abuse, as well as cases of unfair competition.

It should be mentioned in this connection that the requirement of a 10-percent aggregate share on the market is stipulated by the law only as a condition in the presence of which the agreement participants must submit it for coordination to the antimonopoly authority (notify).

This does not mean, however, that agreements between financial organisations whose share on the market is less than 10% cannot restrict competition.

I.e. agreements or concerted actions can result not only in restriction of competition, but also in dominance abuse on the market, as well as unfair competition the detection of which is the purpose of the said Art. 8 of the Law.

Moreover, it is obvious that in accordance with Art. 15 of the Law, the share of a financial organisation on the market is totally irrelevant during the conclusion of agreements for all forms of unfair competition.

Proceeding from the above, the interpretation by the Applicant of articles 6, 8, 9, and 15 of the Law

(1) as exempting all agreements of financial organisations whose aggregate share on the market is less than 10% from the sphere of antimonopoly regulation and

(2) as a consequence, a lack of the antimonopoly authority's right to adopt decisions on this category of cases,

contradicts Russian Federation law.


1.2. Presence of Competition Restriction in the Applicant's Actions

Art. 6 of the Law prohibits and invalidates in the prescribed manner any forms of agreements between financial organisations aimed at restricting access to the market of financial services of elimination of other financial organisations from it.



Item 4.2.8. of the model agreement with LLC Western Union imposes a duty upon the banks not to act as an agent or a representative of other companies offering the services of online monetary transfer in forms similar to those used by the LLC Western Union system.

The analysis of the said item of the model agreement with LLC Western Union and the term of its practical enforcement has revealed the restriction of the right of a bank participating in the Western Union system to cooperate with other payment systems, which the Applicant does not deny (page 7 of the Statement of Claim against the Russian MAP Decision).

At the same time, the Applicant uses as the criterion of similarity of the system of transfers the possibility of online transfer of money, rather than the agency form of relations between the parties, which is confirmed by cases of cancellation of the model agreement with participants in the CONTACT system.

The legislation of the Russian Federation does not envisage a possibility of such restriction of an organisation's rights of access to the market of financial services of money transfer.

The presence of item 4.2.8 in the model agreement concluded by banks with LLC Western Union, considering the latter's competitive edge over the new payment systems and companies wishing to provide services on the same market, results in restriction of competition on the market of services of physical persons' money transfer without opening bank accounts, as it prevents banks from concluding agreements on the transfer of physical persons' finances with other organisations, which compels the banks to refuse from cooperation with other organisers of payment systems in favour of Western Union, as given a different approach Western Union would have cancelled the agreement unilaterally.

Such a refusal also results in a situation where the banks, having made their choice in favour of the Western Union system, cannot offer to the consumers a choice of an alternative transfer system.

It should also be mentioned that LLC Western Union indicates as one of the purposes of including item 4.2.8 in the model agreement ensuring the bank's interest in promoting only one company and its money transfer system on the market, as well as the desire of LLC Western Union to rule out possible competition on the part of the organisers of other transfer systems which have a more flexible system of settlements with the banks (page 4 of the LLC Western Union Statement of Claim to the Russian MAP Commission).

On the basis of the above, the Russian MAP has lawfully qualified item 4.2.8 of the model agreement concluded by LLC Western Union with Russian banks as a contractual term aimed at restricting access to the market of services of physical persons' money transfers without opening bank accounts, other financial organisations, and resulting in restriction of development of new payment systems on the market and, as a consequence, restriction of competition.

Moscow City Arbitration Court

in the name of the Russian Federation

DECISION


Moscow No. A40-47677/03-12-495

14.04.2004

The arbitration court in the composition of:

Chief justice: V.Kh. Voronin

Court members: individually

The record of the court session was drawn up by assistant judge V.O. Sushchenko

Has considered the case initiated on the application of LLC NPO Western Union DP Vostok against the respondent - the RF Ministry for Antimonopoly Policy and Support of Entrepreneurship - on invalidating the decision and instruction of the RF Ministry for Antimonopoly Policy and Support of Entrepreneurship on case No. 2 06/121-03 dd. 10.09.2003.

The session was attended by:

On behalf of the Applicant - A.Yu. Naglis - power of attorney n/n of 20.10.2003;

O.M. Kozyr - power of attorney n/n of 27.11.2003;

I.O. Zotkin - power of attorney n/n of 20.10.2003;

L.I. Yunusova - power of attorney n/n of 27.11.2003;

On behalf of the Respondent - Ye.Ye. Azarova - power of attorney IYu/16306 of 23.12.2003;

G.G. Astakhov - power of attorney IYu/16310 of 23.12.2003;

O.G. Mishakov - power of attorney IYu/16304 of 23.12.2003,

HAS ESTABLISHED:

LLC NPO Western Union DP Vostok has applied to the arbitration court with a claim against the RF Ministry for Antimonopoly Policy and Support of Entrepreneurship to invalidate the decision and instruction of the RF Ministry for Antimonopoly Policy and Support of Entrepreneurship on case No. 2 06/121-03 dd. 10.09.2003.


The claim was motivated by the assumption that any agreements between financial organisations whose aggregate share on the market is less than 10% of the turnover of a relevant financial services are exempt from the RF MAP control; the conclusion on the influence of item 4.2.8 of the Model Agreement has been made without an assessment of the state of the competitive environment on the market in question and is totally groundless; relations between the parties under the Model Agreement contain the elements of agency contracts, the subject and contents of which fully meets the legal definition of the subject of an agency contract allowing the imposition of restrictions on agents' activity by the Model Agreement; item 4.2.8 of the Model Agreement encourages the development of competition by protecting the legally acquired competitive edge of participants of the market of financial services; the civil law does not impose direct bans on inclusion of such provisions in all types of agreements; Art. 15 of the Federal Law on Protection of Competition on the Market of Financial Services is not applicable to the case under consideration; incomplete examination of the facts and circumstances of the case, and their erroneous interpretation have resulted in conclusions that do not correspond to reality; in adopting its decision the RF MAP exceeded its competence; the RF MAP considered the case with processional violations.

The RF Ministry for Antimonopoly Policy and Support of Entrepreneurship considers that the claim should not be satisfied and pointed out in its written response that any agreements or concerted actions of financial organisations restricting competition are subject to antimonopoly control, regardless of the share of these organisations on the market; any forms of agreements between financial organisations aimed at restricting the access to the market of financial services or eliminating other financial organisations from it are not allowed and are invalidated in the established manner; item 4.2.8 of the Model Agreement with LLC Western Union obligates the banks not to act as agents or representatives of other companies offering the services of online money transfer in forms similar to the Western Union system, which constitutes a violation of the antimonopoly legislation; the actions of LLC Western Union constitute unfair competition; the RF Code of Administrative Offence is not applicable to procedures for considering cases of violation of the antimonopoly legislation on the market of financial services; the Rules of Considering Cases of Violation of the Antimonopoly Legislation and other regulations are not applicable to credit organisations; the appealed decision does not violate the rights and lawful interests of LLC Western Union.

Having heard the arguments presented by representatives of the parties and evaluated the evidence of the case, the court believes that the case should be considered on the merits and the claim should be dismissed in full volume, with legal expenses to be compensated by the Applicant for the following reasons:

The Applicant is registered with RF Interregional Inspection of the Ministry for Taxes and Levies No. 39 for the city of Moscow on 13.02.2003 under the main state registration No. 1037739616122 on the basis of the registration at the CBR on 01.03.1994, No. 2726-s.

By decision of 10.09.2003 on case No. 2 06/121-03 of violation of the antimonopoly legislation, the RF Ministry for Antimonopoly Policy and Support of Entrepreneurship recognised item 4.2.8 of the Model Agreement concluded by Russian banks with LLC Western Union according to which the bank has no right to act as an agent or a representative of other companies offering the services of online money transfer in forms similar to the Western Union system during the period of validity of the agreement as inconsistent with Art. 6 of the Federal Law «On Protection of Competition on the Market of Financial Services» No. 117-FZ of 23.06.1999, prohibiting the conclusion of agreements that result or can result in restriction of competition on the market of financial services, including those aiming at restriction of the access of other financial organisations to the market of financial services;

recognised the actions of LLC Western Union on inclusion of item 4.2.8 in the Model Agreement, as well as the company's demands of terminating the banks' relations with other organisers of physical persons' money transfer systems without the opening of bank accounts with a simultaneous threat of cancelling the agreement between the bank and LLC Western Union in connection with the violation of item 4.2.8 of the agreement, as unfair competition prohibited by Art. 15 of the law «On Protection of Competition on the Market of Financial Services» No. 117-FZ of 23.06.1999; issued an instruction to LLC Western Union to terminate the violation of the antimonopoly legislation.

The dispute emerged from administrative legal relations on invalidating the act of an authority adopted in the sphere of the antimonopoly legislation subject to consideration in the manner prescribed by articles 1970201 of the RF APC.

In keeping with Art. 198 (1) of the RF APC, organisations are entitled to apply to the arbitration court for invalidating a non-regulatory act of a public authority if they consider that the appeal non-regulatory legal act is inconsistent with the law or another regulatory legal act and violates their rights and lawful interests.

According to Art. 27 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets,» the federal antimonopoly authority considers the facts of violation of the antimonopoly legislation. The grounds for considering cases of violation of the antimonopoly legislation are, among other things, the applications filed by commercial organisations.

LLC Western Union offers on the RF market the Western Union system - a system of transfer of physical persons' money without opening bank accounts. Western Union is an international system.

For purposes of providing to physical persons monetary transfer services without opening bank accounts, LLC Western Union and Russian banks conclude bilateral cooperation agreements between a concrete Russian bank and LLC Western Union on the rendering of the said services to physical persons on the territory of the Russian Federation (item 1 of the model agreement).

For joint attainment of the cooperation objectives constituting the subject of agreement, the bank allocates the necessary premises, equipment and personnel for working at the office for client services according to the Western Union System (item 4.2.1 of the model agreement).

The terms of agreements concluded by LLC Western Union with Russian banks according to which the bank is not entitled during the period of validity of the agreement with LLC Western Union to act as an agent or representative of other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system are standard, i.e. identical for all Russian banks.

Art. 6 of the Federal Law on Protection of Competition on the Market of Financial Services prohibits and recognises in the prescribed manner fully or partially invalid any forms of agreements and concerted actions of financial organisations between themselves, if such agreements or concerted actions result or can result in restriction of competition on the market of financial services, including agreements or concerted actions directly or indirectly aimed at restricting other financial organisations' access to the market of financial services or eliminating them from the market.

According to Art. 6 of the Federal Law on Protection of Competition on the Market of Financial Services, if agreements or concerted actions are directly or indirectly aimed at restricting other financial organisations' access to the market of financial services or eliminating them from the market, they shall be by force of Law be qualified as prohibited agreements restricting competition regardless of the market share of the organisations that have concluded them.

According to the Law, agreements restricting other financial organisations' access to the market of financial services constitute a restriction of competition and do not require the identification of the financial organisation's market share or, in this case, the conducting of an analysis of the state of the competitive environment, but only the establishment of the fact of restricting market access.

Articles 8 and 9 of the Law on Protection of Competition on the Market of Financial Services cannot be applied jointly with Art. 6 of the Law, as the provisions of articles 8 and 9 introduce the rules of notification of agreements between financial organizations.

Model agreements concluded by LLC Western Union with banks are not consignment contracts according to which one party (the commission agent) obligates on assignment of the other party (the consignor) for a certain remuneration to conduct one or several transactions on its behalf but at the consignor's expense (Art. 990 of the RF CC).

The model agreements concluded by LLC Western Union with banks are not agency contracts, as norms allowing the division of the market by groups of sellers, buyers, territories, etc. Art. 1007 (2) of the RF CC actually does envisage a possibility of including in an agency contract the agent's obligation not to conclude similar agency contracts with other principals, which should be implemented on the territory fully or partially coinciding with the territory indicated in the agreement. However, agreements concluded by banks with other payment systems organisers (including agreements with OJSC Russlavbank on the use of the CONTACT system organised by the latter) are not regarded as agency contracts by the parties to the transaction.

According to Art. 1(2) of the RF CC, civil rights may be restricted by federal law.

Specifically, such restrictions and exemptions from the general provisions on freedom of agreement are the provisions of Art. 6 of the Law on Protection of Competition, prohibiting the conclusion of agreements restricting competition on the market of financial services.

The model agreement concluded between Russian banks and LLC Western Union contain a standard item 4.2.8, according to which a bank is prohibited to cooperate with other companies rendering the services of online monetary transfer in forms similar to those used by the LLC Western Union system during the period of validity of the agreement with LLC Western Union.

The presence of such a condition in the agreement prevents the bank that has concluded an agreement with LLC Western Union from concluding agreements with other organisations providing other payment systems. As a result, the banks are not free in their choice of the counterparty - organiser and owner of the monetary transfer system. The criterion used by the banks in the choice of their business partner in providing money transfer services to natural persons was the coverage of the territories on which such transfers can be made. Before entering the Russian market, the international settlement system Western Union has been created and functioned in various countries of the world for a considerable period of time and currently covers the territories of over 195 countries. In the Russian Federation, LLC Western Union conducts its activity on the territory of 82 out of 89 Russian Federation Subjects.

The Russian companies willing to operate on the market in question can achieve such a broad territorial coverage only in a sufficiently lengthy period of presence on this market and with considerable financial investments on creation and development of the system.

The presence of item 4.2.8 in the model agreement concluded by banks with LLC Western Union, considering the latter's competitive edge over the new payment systems and companies wishing to provide services on the same market results in restriction of competition on the market of services of transfers of physical persons' money without opening bank accounts, as it does not allow the banks to conclude agreements on the transfer of physical persons' money with other organisations, which, considering the difference in territorial coverage between LLC Western Union and its potential competitors, compels the banks to refuse from mutual beneficial cooperation with other payment system organisers in favour of LLC Western Union.

LLC Western Union itself names as one of the purposes of including item 4.2.8 in the model agreement the securing of a bank's interest in promoting to the market only one company and its money transfer system, as well as the desire of LLC Western Union to rule out the possible competition on the part of organisers of other transfer systems which have a more flexible system of conducting settlements with the banks.

Therefore, item 4.2.8 of the Model Agreement concluded by LLC Western Union with Russian banks is a contractual term aimed at restricting other financial organisations' access to the market of services of physical persons' money transfers without opening bank accounts and resulting in restriction of the development of new payment systems on the market and, as a consequence, restriction of competition.

In the event of detection of the fact of a bank's cooperation with other organisers of money transfer systems, LLC Western Union sent written notices to such banks on the cancellation of the agreement due to violation of item 4.2.8 of the model agreement. The receipt of such notices resulted in the banks' refusal from further cooperation with another organiser of money transfer systems.

The materials of the case contain copies of the letters of LLC Western Union to JSCB Mobiasbanka and JSCB Stella-Bank, in which LLC Western Union claims that «cooperation of JSCB Mobiasbanka and JSCB Stella-Bank with the CONTACT system violates item 4.2.8 of the Agreement … concluded between our organisations.»

As a result of the actions of LLC Western Union, JSCB Mobiasbanka cancelled the agreement with OJSC Russlavbank on conducting money transfers (JSCB Mobiasbanka letter No. 1352-07/3 of 18.07.2001).

JSCB Stella-Bank, in response to similar demands of LLC Western Union, sent it a return letter expressing disagreement with the position of LLC Western Union that the use of the CONTACT system by the bank is a violation of the agreement between the bank and LLC Western Union, as the bank is not an agent or a representative of this system's organiser - OJSC Russlavbank, and also pointed out that the CONTACT system is not an analogue of the Western Union System (letter No. 01-1-04/3-558 of 10.01.2001). However, LLC Western Union has not accepted the arguments of JSCB Stella-Bank and initiated a unilateral cancellation of the agreement between LLC Western Union and the bank as of 15.07.2001 (letter No. 0479/1-01 of 14.06.2001).

OJSC Omskpromstroibank applied to OJSC Russlavbank - the organiser of the CONTACT system with a request to remove the mention of the bank's name from the website informing of its cooperation with OJSC Russlavbank in conducting physical persons' money transfers. OJSC Omskpromstroibank pointed out in its letter No. 04-04/129 of 06.06.2001 that it took a diversified approach in its policy of cooperation with different organisations, in connection with which it considers it necessary to actively cooperate both with OJSC Russlavbank and with LLC Western Union.

However, the bank believes that the mention of the name OJSC Omskpromstroibank on the website may negatively tell on its relations with LLC Western Union, as «the company Western Union, referring to item 4.2.8 of our cooperation agreement, … claims that we are violating our agreement.»

OJCB Agroimpuls addressed OJSC Russlavbank with a request (No. 07-1106 of 18.06.2001) to cancel Agreements No. Rsl-840.00-50 of 31.10.2000 and No. Rsl-810.00-50 of 31.10.2000 on conducting monetary transfers on instruction of physical persons without opening current accounts within the CONTACT system. The reason for cancelling this agreement was the notice sent by LLC Western Union on the cancellation of its agreement with OJCB Agroimpuls because this bank was at the same time a participant of the CONTACT system in violation of item 4.2.8 of the Agreement.

The Independent Construction Bank commercial bank was also forced to cancel its Agreement No. Rsl-840.29 on conducting monetary transfers on instruction of physical persons without opening current accounts within the CONTACT system «in connection with a categorical demand of LLC Western Union (letter No. 414 of 05.07.2001 addressed to OJSC Russlavbank).

The materials of the case include documents according to which the actions of LLC Western Union aimed at restriction of the activity of credit organisations on the use of other payment systems also concern the participation of banks in the Anelik system of monetary transfers of physical persons. The materials of the case contain a letter of Snezhinsky Bank (outgoing No. 02/767 of 29.05.2001) addressed to LLC Bank Anelik, according to which LLC Western Union demanded from the said bank to terminate its participation in the Anelik system of transfers of physical persons' money. At the same time LLC Western Union notified Snezhinsky Bank of suspension of the Agreement in connection with the violation of item 4.2.8 of the Agreement.

Moreover, similar actions were taken by LLC Western Union with respect of OJSC Yekaterinburg Municipal Bank. According to the correspondence attached to the case materials, LLC Western Union cancelled Agreement No. 200 of 13.12.1999 as of 1 December 2001 in connection with the use by OJSC Yekaterinburg Municipal Bank of the Anelik system, which violated item 4.2.8 of the Agreement (letters of 10.03.2001 and 01.11.2001 No. 1302/1-01).

The terms of the Model Agreement concluded by LLC Western Union with Russian banks, as well as its actions of the implementation of item 4.2.8 of the agreement, restricting market access to other financial organisations and preventing the development of other payment systems, allows to qualify LLC Western Union's market behaviour as unfair competition.

Art. 15 of the Law on Protection of Competition prohibits unfair competition on the market of financial services between financial organisations, manifested in the actions aimed at gaining advantages in conducting entrepreneurial activity, concluding agreements contradicting Russian Federation law and normal business practice and can inflict of have inflicted damage on other financial organisations - competitors on the market of financial services.

According to Art. 15 of the Federal Law on Protection of Competition on the Market of Financial Services, the share of a financial organisation on the market is totally irrelevant for all forms of unfair competition during the conclusion of agreements.

The purpose of including item 4.2.8 in the model agreement is the restriction of development of other payment systems conducting the transfers of physical persons' finances without the opening of bank accounts on the Russian Federation market and restriction of market access to other financial organisations - organisers of such systems, which constitutes a violation of Art. 6 of the Law on Protection of Competition, as well as Art. 10 (1) of the RF CC prescribing the frameworks for exercising civil rights, and inflicts damage on other financial organisations - LLC Western Union competitors (the banks refuse to conclude agreements with other organisers of payment systems or cancel such agreements on demand of LLC Western Union under the threat of cancellation of the agreement with the latter).

Art. 15 of the Law on Protection of Competition prohibits unfair competition on the market of financial services between financial organisations, manifested in the actions aimed at gaining advantages in conducting entrepreneurial activity, concluding agreements contradicting Russian Federation law and normal business practice and can inflict of have inflicted losses on other financial organisations - competitors on the market of financial services, or damaged their business reputation.

To qualify unfair competition, it is sufficient to establish the fact of unlawful activities or agreements of a financial organisation within the frames of its entrepreneurial activity, and the possibility of unfavourable implications for other market participants in the form of losses or damage to business reputation.

Considering the goals and market implications of the said actions of LLC Western Union, they constitute unfair competition prohibited by Art. 15 of the Federal Law on Protection of Competition on the Market of Financial Services.

The opportunity of providing a maximum spectrum of services to clients is vital for competitive struggle of credit organisations. The conclusion of agreements with different payment systems on the transfer of physical persons' money enables a credit organisation to extend the list of provided services, attract a wider spectrum of clients with different needs and financial opportunities.

The examination and comparison of different payment systems by the Commission, specifically, Western Union and CONTACT, has demonstrated that these systems are not identical and have a number of technological, organisational, and other distinctions.

However, the criterion of similarity of the transfer system is the possibility of online transfer of money, rather than the agency form of relations between the parties.

Item 4.2.8 of the model agreement does not allow the banks to act as the agent or representative of other companies on online transfer of finances during the period of validity of the agreement. However, LLC Western Union sends notices to the banks on cancellation of the agreement in all cases of use by the latter of other payment systems than Western Union.

The banks, upon the receipt of such notices, were sending explanations to LLC Western Union that the relations between the banks and an organiser of another payment system are neither representative not agency, as well as explanations that the work of the systems CONTACT and Anelik is based on working through correspondence accounts of banks participating in a particular system, which does not prompt a conclusion about similarity of the CONTACT and Anelik money transfer systems with the Western Union system.

However, despite the arguments presented by the banks, LLC Western Union cancelled agreements with the banks that insisted on their position without further negotiations and explanation of their position concerning the interpretation of item 4.2.8 of the agreement.

Proceeding from the above, the Russian MAP has lawfully qualified item 4.2.8 of the Model Agreement concluded by LLC Western Union with Russian banks as a contractual term aimed at restricting other financial organisations' access to the market of services of physical persons' money transfers without opening bank accounts and resulting in restriction of the development of new payment systems on the market and, as a consequence, the restriction of competition.

The interpretation by the Applicant of articles 6, 8, 9, and 15 of the Law on Protection of Competition on the Market of Financial Services as exempting all agreements of financial organisations whose aggregate share on the market is less than 10% from the sphere of antimonopoly regulation and, as a consequence, a lack of the antimonopoly authority's right to adopt decisions on this category of cases is ungrounded.

The LLC Western Union argument that the civil law does not impose direct bans on including similar provisions in all types of agreements is unfounded, as such bans are imposed by the administrative law, specifically, the Federal Law on Protection of Competition on the Market of Financial Services.

In keeping with Art. 1.1 of the Russian Federation Code of Administrative Offences of 20.12.2001 (hereinafter - the RF CoAO), the antimonopoly legislation is not referred to the legislation on administrative offences. At the same time, the RF CoAO does not envisage restriction of competition and unfair competition as an unlawful, guilty actions entailing responsibility, and hence, cannot be defined as an administrative offence. On the basis of the above, the Applicant's conclusion concerning the violation of articles 4.5 and 24.5 of the Code by the Russian MAP during the initiation and consideration of case No. 2 06/121-03 is groundless and does not comply with the legislation.

The Rules of Considering Cases of Violation of the Antimonopoly Legislation and other laws and regulations, approved by Order of the Russian MAP No. 707 of 15.09.2000 are not applicable to credit organisations. In accordance with item 1.2 of the Rules of Considering Cases, these Rules do not regulate the procedures for considering cases of violation of the antimonopoly legislation by credit organisations on the market of banking services. As LLC Western Union is a non-banking credit organisation concluding competition restrictive agreements with other credit organisations, the Rules of Considering Cases are not applicable. Consequently, the conclusion made by LLC NPO Western Union DP Vostok on the violation of the Rules of Considering Cases by the Russian MAP is unjustified.

In keeping with Art. 201 (3) of the RF APC, if the court of arbitration determines that the appealed non-regulatory act of a public authority is consistent with the law or another regulatory legal act and does not violate the rights and lawful interests of the Applicant, the court shall pass a decision to dismiss the presented claim.

The appealed decision is consistent with the law and does not violate the Applicant's rights and lawful interests.

On the basis of articles 3, 6, 15, 22, 23, 28, and 30 of the Federal Law on Protection of Competition on the Market of Financial Services, guided by articles 1-13, 27, 29, 64-68, 71, 75, 81, 110, 152-155, 162, 167-171, 176, 180, 181, 197-2001 of the RF APC, the court

HAS DECIDED:

To dismiss the claim of LLC NPO Western Union DP Vostok to the RF Ministry for Antimonopoly Policy and Support of Entrepreneurship on invalidating the decision and instruction of the RF Ministry for Antimonopoly Policy and Support of Entrepreneurship on case No. 2 06/121-03 dd. 10.09.2003.

The decision can be appealed with the appeals instance of the Moscow City Court of Arbitration within a month from the date of its issuance.

Judge V.Kh. Voronin

To the Federal Arbitration Court of the Moscow District

107808, Moscow, 18, Akademika Sakharova pr.



Applicant: Limited Liability Company

NPO Western Union DP Vostok

Address: 5, 1st Tverskaya-Yamskaya St.,

125047, Moscow

The public authority whose decision is appealed:

the Russian Federation Ministry of Antimonopoly Policy

and Support of Entrepreneurship

Address: 123995, Moscow, 11,

Sadovaya Kudrinskaya St., GSP-5


Arbitration court issuing the appealed decision:

The Moscow City Arbitration Court

Appeals Instance

107996, Moscow, 10, Novaya Basmannaya St.



Case No. A40-47677/03-12-495

of invalidating the decision and instruction

of the RF MAP of 10 September 2003


CASSATION CLAIM

On 14 April 2004, the Moscow City Arbitration Court passed a decision on the claim filed by LLC NPO Western Union DP Vostok (hereinafter - the Company) for invalidating the decision and instruction of the RF Ministry of Antimonopoly Policy and Support of Entrepreneurship (hereinafter - the RF MAP) on case No. 2 06/121-03 of 10.09.2003 (hereinafter - the MAP Decision and Instruction, accordingly). The said Decision of the Moscow City Arbitration Court dismissed the Company's claim.

On 21 June 2004, the appeals instance of the Moscow City Arbitration Court issued a ruling (hereinafter - the Ruling of the appeals instance, or the Ruling) on case No. A40-47677/03-12-495 dismissing the Company's appeal against the decision of the first instance court of 14 April 2004.

The Company believes that the Ruling of the appeals instance and the Decision of the first instance court should be cancelled for the following reasons:

(1) The Decision of the first instance court and the Ruling are unlawful, as the courts have improperly interpreted an applied the norms of substantive law and committed a number of violations of the processional law;

(2) The Decision of the first instance court and the Ruling are groundless, as the conclusions concerning the circumstances of the case did not correspond to the evidence in the case; the court has not examined the materials of the case;

(3) During the issuance of the Ruling of 21 June 2004, the Court of Appeals has not examined the arguments of the appeal in full volume;

(4) The rulings of the first and appeals court instances have violated the rights of third parties not involved in the case.

I. INPROPER USE OF THE NORMS OF SUBSTANTIVE LAW

1. Misinterpretation of the notion of «agreement restricting competition on the market of financial services» (Art. 6 of the Law on Protection of Competition on the Market of Financial Services)

The Company believes that the courts of the first and appeals instances have misinterpreted and, consequently, improperly considered applicable the norm of Art. 6 of the Federal Law «On Protection of Competition on the Market of Financial Services» No. 117-FZ of 23.06.1999 (hereinafter - the Law). In particular, the Ruling of the appeals instance stipulates:

»The analysis of the contents of the said item of the model agreement [i.e. item 4.2.8] shows that it restricts the rights of a bank participating in the Western Union system to cooperate with other payment systems.»

The court pointed out furthermore that »as a result, the banks ... are restricted in their access to other payment systems … without cancelling the agreement with the Applicant.» In this connection, the court of appeals made a conclusion that »item 4.2.8 of the agreements under consideration is aimed at restricting access to the market of financial services for both the banks using the money transfer systems and the organisations offering such systems and competing with LLC Western Union…»

Similar conclusions are made in the Decision of the first instance court. Specifically, page 3 of the first instance Decision says that »the banks are not free in their choice of a counterparty,» and a general conclusion is made that item 4.2.8 of the Model Agreement «compels the banks to refuse from mutually beneficial cooperation with other payment systems organisers.»

Therefore, the courts of the first and appeals instances have made a direct conclusion that the elements of actions restricting competition in the form of restriction of other financial organisations' access to the market of financial services are present only in the Company's activities. Consequently, in the courts' opinion, the Company by its unilateral actions erects barriers to the activity on the market of financial services of both its counterparties and third parties.

At the same time, these conclusions rule out a possibility of applying Art. 6 of the Law, including for the following considerations:

Art. 6 of the Law is applicable exclusively to agreements and concerted actions on the market of financial services which result or can result in restriction of competition, including in the form of restricting other financial organisations' access to the market or eliminating them from the market. It is quite obvious that by «other» financial organisations the Law means financial organisations that are not parties to such agreements. Agreements between market participants aimed at restriction of competition can be qualified as such only if relevant market participants are acting in their mutual interests, thus violating the interests of other market participants, but do not violate the interests of one of the parties, as presented in the Decision of the first instance court and the Ruling of the court of appeals - the Russian banks, because in this case it is hardly possible in general to speak of an agreement expressing the common will of its parties. If the court, making a conclusion that such agreements at the same time violate the interests of one of the parties to such an agreement , the application of Art. 6 is improper. Art. 6 of the Law is not applicable to actions taken by one financial organisation unilaterally, including (as stated by the RF MAP and by the appealed court acts) the actions connected with imposing unprofitable contractual terms on a counterparty.

In other words, the conclusion of agreements that restrict or can restrict competition and imposing unprofitable contractual terms on a counterparty are two absolutely different violations of the legislation on competition on the market of financial services and, therefore, the application of Art. 6 in a situation where a market participant, in the opinion of the RF MAP and/or the court, imposes unprofitable contractual terms on its counterparties, is absolutely groundless.

2. Misinterpretation of the terms of application of Art.6

2.1. Terms of application of Art. 6 of the Law

The Company believes that the first instance and appeals court have unjustifiably widely interpreted the application terms of Art. 6 of the Law, which led to its improper application and issuance of an unlawful Decision of the first instance court and Ruling of the appeals instance.



Specifically, Art. 6 of the Law prohibits agreements and/or concerted actions of financial organisations that result or can result in restriction of competition on the market of financial services. Consequently, proper application of Art. 6 of the Law requires the establishment of the following circumstances:

(a) agreements or concerted actions of entities each of which is a participant of the financial market, i.e. joint agreements or actions that pursue the objectives beneficial for all participants in such an agreement or concerted actions; and

(b) this agreement and/or concerted actions have or can have a negative effect on the competitive environment.

In other words, Art. 6 of the Law bans agreements between financial organisations meeting both criteria of the legal provision hypothesis: (a) according to the will of the parties to these agreements, they are aimed at competition restriction, including the setting (maintenance) of prices, restricting market access, etc. (subjective criterion), and (b) at the same time result or can result in restriction of competition on the market of financial services (objective criterion). Therefore, each individual agreement between financial organisations can be prohibited by Art. 6 of the Law only if it simultaneously meets both the objective and subjective criteria prescribed by Art. 6.

2.2. Lack of an agreement aimed at restricting competition

As already mentioned in section 1 of this cassation claim, the courts of the first and appeals instances have arrived at the conclusion that the Company committed actions aimed at restriction of competition, but not that the Company and Russian banks have concluded an agreement rendering services to consumers within the Western Union network of money transfers pursuing a common objective of competition restriction. Thus, the court has substituted the notion of «agreements between financial organisations,» which constitutes an improper interpretation of the subjective applicability criterion of Art. 6.

2.3. Need to establish the fact of competition restriction

Moreover, the courts at the first and appeals instances have also misinterpreted the second criterion of applicability of Art. 6 to the case under consideration. Specifically, the court of appeals has come to the following conclusion:

»According to the analysis of Art. 6 of the Federal Law on Protection of Competition on the Market of Financial Services, this legal provision imposes an unconditional legal ban on agreements restricting competition on financial markets and considers the forms of agreements specially stipulated by it as its individual cases, i.e. as agreements which, in accordance with the said Law, are already considered as resulting or capable of resulting in competition restriction» (our underlining).

Reference to an «unconditional legal ban» was made by the courts of the first and appeals instances to justified the dismissal by the courts of the Company's argument that the conclusion about «restriction of competition» by the Company and its counterparty banks cannot have been made otherwise than on condition of conducting a market (market share) analysis for the purpose of establishing a possibility of exerting a real influence on the market.

It should be mentioned that in the Company's opinion, Art. 6 of the Law does not, in principle, set any criteria or procedures for evaluating the influence of agreements on the competitive environment, therefore, the conclusions made by the court that the said article envisages certain types of agreements which do not require an analysis and evaluation of the state of the competitive environment is not based on the Law. Considering that in keeping with Art. 3 of the Law competition is interpreted as a certain state of a concrete market, where the participants' actions mutually restrict the possibility of each of them to render a unilateral influence on a relevant market, ant conclusion on the presence or absence of competition can be made exclusively on the basis of assessment of the consequences of the influence of financial organisations on such market.

Moreover, making a conclusion about the presence of some «unconditional» legal bans in the Law as well, the courts have disregarded and failed to analyse the correlation of provisions of Art. 6 of the Law and other norms of substantive law, allowing the conclusion of agreements restricting some or other subjective rights in accordance with the will of their parties. In particular, the courts have misinterpreted provisions of Art. 1007 of the RF Civil Code. Paragraph 2 of Art. 1007 of the RF CC stipulates, in part, that an agency contract can contain provisions introducing an agent's obligation »not to conclude similar agency contracts with other principals, which should be implemented on the territory fully or partially coinciding with the territory indicated in the agreement.»

During the hearings of case No. 2 06/121-03 of violation of the antimonopoly legislation and subsequent proceedings on the Company's claim against the RF Decision and Instruction issued on this case at the court of the first and appeals instances, the Company proved that agreements concluded by it with the banks participating in the Western Union system of money transfers are mixed agreements including the elements of agency contracts and, hence, relevant provisions of the RF CC on agency contracts are applicable to such agreements, including the provisions of Art. 1007 of the RF CC.



Taking into consideration the aforementioned provisions of the 2nd paragraph of Art. 1007 of the RF CC, as well as provisions of Art. 1 of the RF CC, in accordance with which civil rights can be restricted only to the extent in which it is necessary «for purposes of ensuring protection … of the rights and lawful interests of other persons,» it is apparent that Art. 6 of the Law cannot contain any «unconditional» or «absolute» ban on conclusion of agreements which are in full conformity with other substantive legal norms, specifically, the norms of the RF CC, as this would cause a legal collision between the RF CC and the Law. On the contrary, the frameworks and terms of application of Art. 6 have strictly prescribed dimensions. The application of Art. 6 of the Law on Protection of Competition on the Market of Financial Services is possible only in case of establishment of the fact of restriction or possible restriction of competition on the market of financial services. In other words, any restriction of the rights of the parties to the agreement is out of the question until the exercising of these rights by the parties results in restriction of competition and, hence, results in a violation of lawful rights and interests of other participants of the market and consumers of financial services.

The Russian legislation does not consider provisions restricting the right of the principal or the agent to conclude agreements with other counterparties (so-called exclusiveness provisions) as unconditionally contradicting the legislation or creating restrictions to competition, as it would otherwise mean an automatic ban on the application of provisions of Art. 1007 of the RF CC to relations between the participants of financial markets, which does not correspond to reality. The Company assumes that any restriction of application of Art. 1007 of the RF CC on the basis of the Law is admitted only in the presence of qualifying criteria determined by the Law. In this case, provisions of item 4.2.8 of the Model Agreement cannot be recognised as restricting competition on the market on the basis of a formal criterion (i.e. exclusively on the basis of the fact that such agreements are formulated as exclusiveness provisions), as the inclusion of such provisions in agreements is directly envisaged by civil law. Therefore, the application of restrictions stipulated by Art. 6 of the Law is possible only if the agreements (or relevant parts of agreements) between financial organisations meet the second qualifying criterion, namely, when such agreements »result or can result in restriction of competition on the market of financial services…» and the existence of such competition restriction is proven with respect of a concrete market.

During the settlement of disputes, the courts of the first and appeals instances have disregarded the circumstance that in the process of consideration of the case of violation of the antimonopoly legislation No. 2 06/121-03 the RF MAP Commission for considering this case had to conduct an evaluation of the competitive environment of the market for the purpose of establishing the fact of a possible competition restriction as a consequence of the Company's actions, but, nevertheless, has failed to fulfil this task. The duty to examine the competitive environment was directly assigned to the Commission by Order of the RF MAP of 31 March 2003 No. 86. The said Order approved the Methodological Recommendations for Conducting an Analysis and Evaluation of the State of the Competitive Environment on the Market of Financial Services, setting a number of criteria and methods of evaluating the competitive environment in the course of exercising control over agreements and concerted actions or financial organisations, in accordance with requirements of Art. 6 of the Law. According to the Recommendations, the conducting of such an evaluation of the competitive environment is obligatory in all cases of exercising control over agreements or concerted actions of financial organisations.

Therefore, the courts of the first and appeals instances could not have made a conclusion on the application of Art. 6 of the Law in this situation without establishing the circumstances of real influence of provisions of item 4.2.8 of the Model Agreement and agreements based on it between the Company and banks participating in the Western Union money transfer system on the market of financial services.

2.4. Practice of Application of Art. 6 of the Law on Protection of Competition on the Market of Financial Services

It should be mentioned that the RF MAP (presently - the RF FAS) has demonstrated and continues demonstrating an amazing inconsistency in its approach to establishing the circumstances enabling the application of Art. 6 of the Law. E.g. on 8 August 2004, the full text of the Decision of the Moscow City Court of Arbitration of 24 June 2004 on case No. A40-20887/04-94-2U on appealing against Decision of the RF MAP on the violation of Art. 6 of the Law on Protection of Competition on the Market of Financial Services by OJSC Rosgosstrakh and LLC Rosgosstrakh-Accord was placed on the RF FAS website (Annex No. 6). It is noteworthy that the decision adopted on this case (and based on provisions of Art. 6 of the Law, as in case of the Company) mentions an analysis of the state of the competitive environment on the relevant market conducted within the frameworks of consideration of the case of violation of the antimonopoly legislation by the RF MAP. Specifically, the decision on case No. A40-20887/04-94-2U says:

»The analysis of the state of the competitive environment on the insurance market of the Republic of Bashkortostan, taking into consideration the market concentration characteristics - the concentration ratio (CR) and the Herfindahl-Hirschman Index (HHI), conducted within the frameworks of consideration of case No. A40-20887/04-94-2U by the RF MAP has shows that concerted actions of insurance companies […] and legal entities […] resulted in restriction of competition on the insurance market of the Republic of Bashkortostan.



As a result of concerted actions, the concentration level on the market of insurance services in the Republic of Bashkortostan in general has transferred from moderately concentrated to highly concentrated, which is confirmed by an enhancement of the concentration ratio (CR) from 60.6% to 74.4% and the Herfindahl-Hirschman Index (HHI) from 1470 to 2452. Moreover, a significant increase of HHI is observed on the property insurance market - by 194 points (from 2101 to 2295), on the liability insurance market - by 549 points (from 3175 to 3724), and on the life insurance market - by 2740 points (from 2786 to 5526).» (p. 6 of Annex No. 6).

It is apparent that neither the RF MAP not the court proceeded from some «unconditional» or «absolute» ban on conclusion of agreements between legal entities during the consideration of this case (although, according to the text of the court decision on case No. A40-20887/04-94-2U, such agreements (concerted actions) were, in the RF MAP opinion, aimed, among other things, at dividing the market according to the territorial principle, as well as eliminating other organisation from it, i.e. were also included in the list of potentially banned agreements directly mentioned by Art. 6). To justify the lawfulness of applying Art. 6 to the concrete case, an analysis of the competitive environment has been conducted. However, in the case of the Company, the RF MAP has openly neglected the requirements of the Law and Methodological Recommendations, thus applying the norms of the legislation to the Company selectively and with bias, which is inadmissible. The Company has never argued against the fact that the Law authorised the RF MAP to conduct an analysis of the competitive environment on the market of financial services, but this does not mean that the RF MAP has a right to substitute such analysis with blunt statements concerning the restriction of competition.

2.5. Misinterpretation and improper application of Art. 6 of the Law by the courts of the first and appeals instances

As applied to case No. 2 06/121-03 of the alleged violation by the Company of the antimonopoly legislation, no similar analysis of the state of the competitive environment has been conducted within the frames of the RF MAP hearings or in the course of the proceedings in the court at the first and appeals instances on the Company's claims for invalidation of the RF MAP Decision and Instruction, despite numerous appeals of the Company to the RF MAP and the court (including in the form of petitions to the court at first instance for conducting a market analysis). Instead this analysis was actually substituted by an unfounded reference to the existence of «unconditional» legal bans, allegedly not requiring an analysis of the competitive environment of the market.



Therefore, the courts of the first and appeals instances have actually recognised valid the fact that the RF MAP (RF FAS) can ignore legal requirements of obligatory analysis of the competitive environment on the market of financial services exclusively at its own discretion, thus violating the provisions of Art. 6 of the Law establishing the grounds for imposing the bans envisaged by this article.

Therefore, the provisions of item 4.2.8 of the Model Agreement and agreements between the Company and banks participating in the Western Union money transfer system based on it do not meet any of the two criteria of applying Art. 6 of the Law and, hence, Art. 6 of the Law was not applicable to this case.

3. Non-application of Art. 5 of the Law

In conditions when the courts at the first and appeals instances have made a conclusion directly excluding the application of Art. 6 that the Company's actions infringe the interests of both the banks participating in the Western Union money transfer system and other organisations offering the services of money transfers to physical persons without the opening of bank accounts, the RF MAP should have examined the possibilities of applying Art. 5 of the Law in its part prohibiting the inclusion in agreements of conditions obviously unprofitable for the counterparties and complicating other organisations' access to the market, taking into account that such restriction of civil rights and freedom of agreement may be applied exclusively to organisations occupying a dominant position on a relevant market.

It should be mentioned in this connection that the RF MAP has originally initiated a case against the Company precisely for the violation of Art. 5 of the Law. This case (No. 2 05/809-01) was initiated by the RF MAP on the application of OJSC Russlavbank of 26 July 2001. In the course of consideration of this case it has become evident that the decision against the Company could not have been issued on the basis of Art. 5 of the Law in the absence of a proper analysis of the Company's market share. After July 2002, no more hearings were conducted on the case, no decisions were issued, but the case was not dismissed.

On 5 May 2003, the same Applicant (OJSC Russlavbank) filed a new application to the RF MAP (No. 0101-16/1616), in which it directly indicated that the grounds for such address to the RF MAP was a «lack of information on the formerly initiated case» (i.e. case No. 2 05/889-01), and requested the RF MAP to initiate a new case on the basis of Art. 6 of the Law. OJSC Russlavbank has not presented a single new argument and not supplemented the application with a single new evidence, referring to the fact that all the necessary evidence on the case have already been attached to the materials of case No. 2 05/809-01.

Therefore, case No. 2 06/121-03, being formally initiated under a new number by Determination of Chairman of the RF MAP Commission for considering the case of violation of the antimonopoly legislation S.N. Dudkin of 24 June 2003, was in fact absolutely identical to case No. 2 05/809-01 as to the subject of the case and parties in proceedings, was initiated on the application of the same person (OJSC Russlavbank) and on the same grounds and was based on the same materials as case No. 2 05/809-01. In other words, reference to Art. 5 was formally substituted with reference to Art. 6, but the overall approach of the RF MAP to the case remained unchanged.

Another piece of evidence confirming that during the adoption of the Decision and Instruction the RF MAP was not in fact guided by Art. 6 of the Law prohibiting competition restrictive agreements was the fact that although a number of credit organisations were attracted to participate as parties to the case of violation of the antimonopoly legislation case No. 2 06/121-03, the RF MAP issued the Instruction to terminate the violation of the antimonopoly legislation of 10 September 2003 only to the Company, including in it a demand to introduce amendments to agreements concluded by the Company with Russian credit organisations which were not parties to the case of violation of the antimonopoly legislation case No. 2 06/121-03. This was another confirmation of the fact that the RF MAP considered only one party (namely, the Company) as a person violating the antimonopoly legislation. Similar conclusions on the presence of elements of a violation of the antimonopoly legislation only in the Company's activity were also made by the first instance court. The court of appeals, in its turn, has also disregarded an obvious contradiction with the law of the fact that the violation of a legal ban on conclusion of agreements was detected in the actions of only one party to the agreement.

Moreover, the court of appeals has not analysed the requirements of the RF MAP Instruction according to which the Company is obligated to exclude from the Model Agreement offered as a basis for discussion and coordination of concrete terns with the banks willing to join the Western Union system, the provision similar to item 4.2.8 in the form which the RF MAP qualified as contradicting the antimonopoly legislation. However, the Model Agreement is nothing more than a basic draft agreement and cannot by itself be qualified as agreement or collusive actions.

Consequently, this part of the Decision and Instruction are applied to agreements nonexistent at the time of adoption of the Decision and Instruction. Therefore, this part of the RF MAP Decision or the court decisions cannot be based on provisions of Art. 6, which prohibits already concluded agreements. This is one more proof of the fact that the RF MAP and the courts of the first and appeals instances considered the Company as the only party violating the antimonopoly legislation, which ruled out the application of Art. 6 of the Law.

In a situation where the courts had grounds to assume that the Company was capable of unilaterally «imposing» contractual terms unprofitable for its counterparties and restricting market access, i.e. actually having grounds to suspect the Company's market dominance, the RF MAP had to examine the Company's market share and decide the issue of whether the Company was occupying a dominant position on the relevant market, and examine the possibility of applying provisions of Art. 5 of the Law to the Company's actions. The application of Art. 6 of the Law in a situation where the court had grounds to suspect the Company's market dominance was absolutely unjustified.

Therefore, the Decision of the first instance court and Ruling of the court of appeals supporting such unlawful conclusions of the RF MAP contradict provisions prescribed by articles 5 and 6 of the Law on Protection of Competition on the Market of Financial Services, which is a motive for cancelling the Decision of the first instance court and Ruling of the court of appeals in accordance with Art. 288 (2) of the RF APC.


Federal Arbitration Court of the Moscow District

107808, Moscow, 18, Akademika Sakharova pr.



Applicant: LLC NPO Western Union DP Vostok

5, 1st Tverskaya-Yamskaya St., 125047, Moscow



The public authority whose decision is appealed:

the Russian Federation Ministry of Antimonopoly Policy

and Support of Entrepreneurship (the Russian MAP)



on succession rights:

the Federal Antimonopoly Service (the Russian FAS)

123995, Moscow, 11, Sadovaya Kudrinskaya St.



Case No. KA-A40/8549-04


Response of the Russian FAS

To cassation claim of LLC NPO Western Union DP Vostok against the Decision of the Moscow City Arbitration Court of 14.04.2004 and Ruling of the Moscow City Arbitration Court of Appeals of 28.06.2004 on case No. A40-47677/03-12-495

The Russian FAS has considered the cassation claim of LLC NPO Western Union DP Vostok (hereinafter - Western Union) against the decision of the Moscow City Arbitration Court of 14.04.2004 and the Ruling of the Arbitration Court of Appeals of 28.06.2004 on case No. A40-47677/03-12-495 (hereinafter - legal acts on the case), and regards the legal acts on the case as lawful and justified and the demands set forth in the cassation claim as not subject to satisfaction.

Western Union applied to the Moscow City Arbitration Court with a claim for invalidating the Decision and Instruction of the Russian MAP of 10.09.2003 on case No. 2 06/121-03 of violation of the antimonopoly legislation (hereinafter - the Russian MAP Decision and Instruction).

The 14.04.2004 session of the Moscow City Arbitration Court has lawfully established that the Russian MAP Decision and Instruction were issued legally and justifiably and do not violate the rights and lawful interests of Western Union, therefore there are no grounds for invalidating the non-regulatory acts of the Russian MAP. The Decision of the Moscow City Arbitration Court of Appeals of 28.06.2004 left the said Decision of the Moscow City Arbitration Court without change, and the appeal filed by Moscow City Arbitration Court was dismissed.

In the opinion of the Russian FAS, the legal acts on the case were issued reasonably and in strict compliance with the norms of substantive and processional law, therefore there are no grounds for invalidating the legal acts of the first and appeals instance courts stipulated by Art. 288 of the Russian Federation Arbitration Processional Code (hereinafter - APC).

1. The circumstances significant for the case were fully ascertained and established by courts of the first and appeals instances on the basis of the evidence of the case, and conclusions presented in the legal acts on the case appealed by Western Union correspond to the circumstances of the case.

1.1. The conclusion made by courts of the first and appeals instances that item 4.2.8 of Western Union's agreements with banks restricts competition conforms to the circumstances of the case and is made on the basis of a complete and comprehensive examination of the evidence presented by the parties.


In the process of consideration of the issue of validity of the disputed acts of the Russian MAP, the courts have established that the Decision of the Russian MAP contains a lawful and justified conclusion that this contractual item violates Art. 6 of the Law.

In accordance with item 4.2.8 of the Model Agreement concluded between the Applicant and the banks for purposes of cooperating in the sphere of service provision to physical persons on money transfers without the opening of bank accounts, the banks are prohibited to cooperate with other companies offering the services of online money transfers in forms similar to those used in the Western Union system represented on the Russian market by the Applicant. In the event of violation of this item of the agreement by the bank, Western Union unilaterally cancels the agreement.

The analysis of the contents of this item of the Model Agreement, which was also conducted by the courts, has shown that it restricts the rights of a bank participating in the Western Union system to cooperate with other payment systems. This fact is not denied by the Applicant itself (page 7 of the statement of claim against the Russian MAP Decision). Moreover, the Applicant names as one of the purposes of including item 4.2.8 in the Model Agreement the securing of a bank's interest in promoting to the market only one company and its money transfer system, as well as ruling out the possible competition on the part of organisers of other transfer systems which have a more flexible system of conducting settlements with the banks page 4 of LLC Western Union application to the Russian MAP Commission). These circumstances have been established by the courts and reflected in the legal acts on the case.

The presence of item 4.2.8 in the Model Agreement prevents the banks from concluding agreements on the transfer of physical persons' money with organisations offering other payment systems. As a result, the banks are not free in their choice of a counterparty- money transfer system organiser and owner, which was noted by the court instances.

Therefore, the banks using the Western Union system are restricted in the access to other similar systems offered by other financial organisations, as this would lead to the cancellation of the agreement with LLC Western Union. The banks using other payment systems are also restricted in their access to the Western Union system, because in this case they would have to refuse from cooperating with other organisations offering other payment systems.

At the same time, organisations competing with LLC Western Union and offering different payment systems (e.g. such as Anelik and CONTACT) encounter market entry barriers, as their potential counterparties that maintain contractual relations with LLC Western Union cannot conclude agreements with them without risking to lose contractual relations with LLC Western Union. However, the Applicant does not encounter such a barrier, because the terms of agreements offered by its competitors do not contain conditions similar to item 4.2.8.

The above considerations suggest that item 4.2.8 of the agreements under consideration is aimed at restriction of access to the market of financial services both to the banks using money transfer systems and the organisations offering such systems and competing with LLC Western Union, which was lawfully reflected in the courts' conclusions.

Having made these conclusions, the courts of the first and appeals instances have also examined the validity of the arguments presented in the Decision of the Russian MAP concerning the banks' interest in cooperating both with LLC Western Union and with organisations offering other money transfer systems.

As a result of the examination of the materials of the case of violation of the antimonopoly legislation and explanations made by the persons participating in the case, the Commission of the Russian MAP has established that the banks offering to physical persons the service of money transfers without the opening of bank accounts are interested in a maximum extension in the number of points on the territory of countries of the world in which such transfers can be made. This interest is caused by the obvious fact that the number of consumers of this service will be the greater the wider becomes the territorial coverage where such transfers are possible.

According to the materials of the case examined by the Russian MAP Commission and later presented to the court, before entering the Russian market, the Western Union international system of settlements has been created and functioned in different countries of the world for a considerable period of time and currently covers the territories of more than 195 countries of the world and the territories of 82 out of 89 Subjects of the Russian Federation. The Russian companies competing with LLC Western Union can reach a similar coverage only after a considerable period of time given serious financial investments. These conclusions are reflected in the legal acts on the case.

At the same time, financial organisations competing with LLC Western Union can offer to their counterparties - the banks, and hence, the consumers an even greater extension of the coverage, as well as different terms of settlements, different tariff rates, etc. As a result, the consumer would have an opportunity to choose a payment system depending on their requirements and resources.

However, the presence of item 4.2.8 in the banks' agreements with LLC Western Union compels the banks to refuse from cooperation with other payment systems organisers in favour of the Western Union system, because otherwise LLC Western Union unilaterally cancels the agreement with the bank, which has been established by the Russian MAP Commission and the courts (more details below).



Therefore, the terms of item 4.2.8 of the agreements under consideration restrict market access to organisations - other payment systems organisers with a lesser territorial coverage than LLC Western Union, which in its turn reduces the opportunities of the banks offering similar services to extend the spectrum of their services.

At the same time, Russian Federation law does not envisage a possibility of such restriction of an organisation's right of access to the market of financial services of money transfers.

As justly indicated by the courts with reference to Art. 1 (2) of the Russian Federation Civil Code (hereinafter - CC), civil rights, including the freedom of agreement, can be restricted by a federal law. Such a restriction is imposed by Art. 6 of the Law, prohibiting the conclusion of agreements that result or can result in restriction of competition.

Art. 6 of the Federal Law «On Protection of Competition on the Market of Financial Services» No. 117-FZ of 23.06.1999 (hereinafter - the Law) does not allow and invalidates in the established manner any forms of agreements between financial organisations aimed at restricting other financial organisations' access to the market of financial services of eliminating them from it.


Proceeding from the above, the Russian MAP, and later the legal instances, have lawfully qualified item 4.2.8 of the Model Agreement concluded by LLC Western Union with Russian banks as a contractual term aimed at restricting other financial organisations' access to the market of services of physical persons' money transfers without opening bank accounts and resulting in restriction of development of new payment systems on the market, and as a consequence - restriction of competition.

1.2. The courts' conclusion on the presence of elements of unfair competition in the Applicant's actions is justified.


Art. 15 of the Law prohibits unfair competition on the market of financial services between financial organisations manifested in:

(1) actions aimed at gaining advantages in exercising entrepreneurial activity,

(2) conclusion of agreements or conducting concerted actions between each other or with third parties,

which contradict Russian Federation law (including the antimonopoly legislation) and normal business practice and can inflict or have inflicted losses on other financial organisations - competitors on the market of financial services, or damaged their business reputation.

Therefore, to qualify competition as unfair, it is sufficient to establish the fact of unlawfulness of actions or agreements of a financial organisation within the frameworks of its entrepreneurial activity and possibility of unfavourable implications for other market participants in the form of losses or damage to business reputation.

In its Decision, the Russian MAP recognised as unfair competition the actions of Western Union on inclusion of item 4.2.8 in the Model Agreement, as well as the demands set forth by the company to terminate the banks' relations with other organisers of physical persons' money transfer systems without the opening of bank accounts with a similar threat of cancelling the agreement between the bank and LLC Western Union in connection with the violation of item 4.2.8 of the agreement.

In the course of consideration of the case, the Russian MAP has established that if the Applicant detects the fact of the bank's participation in other payment systems except the Western Union system, it sent written notifications to such banks on the violation of item 4.2.8 of the Model Agreement and requested to settle the issue of cooperation with a different payment system. The result of receiving such notifications was the banks' refusal from further cooperation with another money transfer system organiser. Otherwise the Applicant cancelled the agreement with this bank.

The evidence confirming these circumstances were presented to the court and duly examined, which was reflected in the legal acts on the case.

The said decisions and actions contradict Art. 6 of the Law and, hence, are illegal. There contractual terms and actions hinder market access to Western Union competitors and result in a decrease of the number of clients of these companies, thus opening an opportunity of inflicting damage (missed profits and expenses on the rehabilitation of a violated right). Therefore, there is evidence of qualifying elements of unfair competition of Western Union with respect of financial organizations promoting other payment systems on the market.

Proceeding from the above, the Russian MAP has lawfully qualified the Applicant's actions as unfair competition, which is justly confirmed by conclusions of the court instances.



2. Legal acts on the case were issued in compliance and with proper application of provisions of substantive and processional law.

2.1. The courts have justly applied the norms of the Federal Law on Protection of Competition on the Market of Financial Services.


In accordance with Art. 6 of the Law, agreements or concerted actions attained in any form by financial organisations between each other or with the federal executive authorities regulating the market of financial services, the federal executive authorities, executive authorities of the Russian Federation Subjects, bodies of local self-government and any legal entities, except agreements or coordinated actions of financial organisations with the Russian Federation Central Bank, are not admitted and shall be fully or partially invalidated in the established manner, if such agreements or concerted actions result or can result in restriction of competition on the market of financial services, among other things, if such agreements or concerted actions are directly or indirectly aimed at:

the setting (maintaining) of prices (tariffs), discounts, mark-ups, bonuses, premiums, interest rates;

increasing, lowering or maintaining auction prices;

division of the market of financial services according to the territorial principle, by the types of financial services rendered on the market of financial services or by consumers of financial services on the market of financial services;

restriction of the access to the market of financial services or elimination of other financial organisations from this market;

setting unreasonable membership criteria constituting barriers to joining payment and other systems without the participation in which the competing financial organisations could not provide the necessary financial services to their consumers enabling them to compete on the market of financial services.

The analysis of the contents of this provision reveals the following. The article prohibits agreements and concerted actions and introduces their subjective components. The article stipulates as the only condition required for prohibiting an agreement or concerted actions their actual or potential result - restriction of competition. The article further on contains an open list of the forms of prohibited agreements and concerted actions regarded as restrictive to competition on condition of their particular purpose.



Therefore, in keeping with Art. 6, if agreements or concerted actions are directly or indirectly aimed at:

the setting (maintaining) of prices (tariffs), discounts, mark-ups, bonuses, premiums, interest rates;

increasing, lowering or maintaining auction prices;

division of the market of financial services according to the territorial principle, by the types of financial services rendered on the market of financial services or by consumers of financial services on the market of financial services;

restriction of the access to the market of financial services or elimination of other financial organisations from this market;

setting unreasonable membership criteria constituting barriers to joining payment and other systems without the participation in which the competing financial organisations could not provide the necessary financial services to their consumers enabling them to compete on the market of financial services,

they shall be by force of Law be qualified as prohibited agreements restricting competition regardless of the market share of the organisations that have concluded them.

In other words, the said article imposes an unconditional legal ban on agreements restricting competition on financial markets and regards the forms of agreements specially stipulated by it as its special cases, i.e. agreements that are already qualified as resulting or capable of resulting in competition restriction by force of the Law, regardless of the presence or lack of a mutual intent of participants of such agreements, aimed at the restriction of competition.


The open nature of the list means only that agreements and concerted actions aimed at a different purpose can also be recognised as inconsistent with Art.6 of the Law, if they restrict competition.

The detection of these particular agreements requires an analysis and evaluation of the state of the competitive environment on the market in keeping with the Methodological Recommendations on Procedures for Conducting an Analysis and Evaluation of the State of the Competitive Environment on the Market of Financial Services, approved by Order of the RF MAP No. 86 of 31 March 2003.

This confirms the correctness of the conclusions of the court instances that according to the sense of the Law, agreements restricting other financial organisations' access to the market of financial services shall be qualified as restriction of competition and shall not require the identification of the financial organisation's market share or, in this case, conducting an analysis and evaluation of the state of the competitive environment, but only the establishment of the fact of such restriction of market access (the fact of existence of an agreement restricting or capable of restricting competition on a relevant market is sufficient).

The aforementioned information also suggests that the provision of Art. 5 of the Law (dominance abuse) was not applicable in this case, and therefore the Applicant's allegation concerning the violation of the norms of processional law by the court of appeals, specifically, Art. 271 of the APC, does not correspond to reality.

The conclusion of the courts at first and appeals instances that articles 8 and 9 of the Law cannot and should not be applied jointly with article 6 of the Law, because provisions of articles 8 and 9 prescribe the notification procedures for agreements between financial organisations also seems appropriate.


In keeping with Art. 8 of the Law, financial organisations must notify the antimonopoly authority if agreements and concerted actions with the participation of financial organisations whose aggregate share on the market exceeds 10%. Having received such a notification, the antimonopoly authority exercises antimonopoly control not only of the notified agreement (concerted actions), but also detects dominance and facts of dominance abuse, as well as the manifestations of unfair competition.

It should be mentioned that the requirement of a 10-percent aggregate market share was established by the law only as a condition under which the agreement participants must present it to the antimonopoly authority for approval (notify).

This does not mean, however, that agreements between financial organisations whose share on the market is less than 10% cannot restrict competition, According to the above, to recognise n agreement as contradictive to Art. 6 of the Law it is sufficient to establish the fact of an agreement that has a negative impact on the competitive environment on the relevant market, while there is no need to identify the market shares of economic entities - parties to the agreement.

Therefore, the legal acts on the case have been issued in compliance and with proper application of the norms of the antimonopoly legislation.

2.2. The norms of the Russian Federation Code of Administrative Offences are not applicable during the consideration of cases of violation of articles 6 and 15 of the Law.


The Applicant claims that the court should have applied the provisions of articles 4.5 and 24.5 of the Russian Federation Code of Administrative Offences (hereinafter - CoAO), as item 3 of Art. 30 of the Law, which is special and, hence, a priority over the provisions of Art. 2.1 of CoAO, and refers its provisions to the legislation on administrative offences. These provisions are considered erroneous for the following considerations.

In accordance with Art. 1.1 of CoAO, the legislation on administrative offences consists of the Code and the laws on administrative offences of the Russian Federation Subjects adopted on its basis.

Therefore, CoAO does not envisage a possibility of issuing special norms by the federal laws, granted a priority over the CoAO provisions. The federal laws can only introduce amendments in CoAO.

However, Art. 30 (3) of the Law, referred to by the Applicant, does not introduce any amendments to CoAO. The edition of this item mentioned by the Applicant was adopted for purposes of its harmonisation with the new CoAO and its only difference consists in the substitution of the word «RSFSR» with the words «Russian Federation.» This item, like the former wording, stipulates that proceedings on cases of administrative offences envisaged by the Law shall be conducted in accordance with a special law - the Code of Administrative Offences. It only means that the rules of considering cases of administrative offences stipulated by CoAO are applicable to the violations of the antimonopoly legislation qualified as administrative offences by Art. 2.1 of CoAO for which CoAO imposes administrative responsibility. They include only the following offences: non-fulfilment of a legal instruction of the antimonopoly authority in time (Art. 19.5 of CoAO), non-presentation of petitions, notifications (information) to the antimonopoly authority (Art. 19.8 of CoAO). However, anticompetitive agreements (Art. 6 of the Law) and unfair competition (Art. 15 of the Law) are not qualified by CoAO as an illegal, guilty action entailing responsibility, and therefore are not covered by the definition of an administrative offence.

The power functions of the Russian MAP during the consideration of cases of such violations of the antimonopoly legislation are exercised beyond the frameworks of the procedure of imposing administrative liability and constitute special forms of state reaction.

It is also noteworthy that the list of administrative penalties is presented in Art. 3.2 of CoAO, and this list is exhaustive (closed). The issuance of an instruction by the antimonopoly authority to take actions aimed at the termination of competition restriction on a relevant market is not an administrative penalty, as per the said CoAO article.

In connection with the above, the conclusion of legal instances that the Russian MAP Commission for considering the case of violation of articles 6 and 15 of the Law could not have violated provisions 4.5 and 24.5 of CoAO seems lawful.

2.3. Legal acts on the case do not violate the rights and lawful interests of persons not involved in the case.


Western Union alleges in the cassation claim that the legal acts on the case have been issued with respect of the rights and liabilities of persons not involved in the case. This statement of the Applicant does not correspond to reality.

The appealed Decision and Instruction were issued upon the results of consideration of case No. 2 06/121-03 by the Russian MAP Commission.

According to the Decision of the Russian MAP, the following acts and actions have been qualified as inconsistent with the antimonopoly legislation:

- item 4.2.8 of the Model Agreement concluded between Russian banks and Western Union;

- the actions of Western Union on inclusion of this item in the Model Agreement;

- demands of Western Union to terminate the banks' relations with other organisers of physical persons' money transfers without opening bank accounts with a simultaneous threat if cancelling the agreement between the bank and Western Union in connection with the violation of item 4.2.8 of the agreement.

Therefore, the Decision of the Russian MAP recognised as contradicting the antimonopoly legislation the relevant item of agreements and the actions of Western Union. The Russian MAP Decision does not indicate any violations of the antimonopoly legislation by the banks.

On the basis of the above Decision of the Russian MAP, the Instruction was issued precisely to Western Union, in accordance with which Western Union should take certain actions aimed at the termination of the violation of the antimonopoly legislation. In accordance with the Russian MAP Instruction, Western Union shall:

- propose to the banks to introduce amendments to already concluded agreements;

- exclude from the terms of the Model Agreement offered for conclusion by Western Union to the banks (with which such an agreement has not yet been concluded) the item prohibiting the bank to cooperate with other organisations rendering services similar to Western Union, i.e. actually not include the provisions of item 4.2.8 of the Model Agreement in agreements that Western Union intends to conclude in the future.


Therefore, the Decision and Instruction of the Russian MAP were issued with respect of the rights and liabilities of Western Union and do not concern the rights and lawful interests of persons of other persons, including banks cooperating with Western Union.

Consequently, the legal acts on the case establishing the lawfulness and justifiability of the Russian MAP Decision and Instruction were issued in full compliance with the norms of processional law and cannot concern the rights and lawful interests of persons not involved in the consideration of this case by legal instances.


Therefore, the courts of the first and appeals instances have come to a lawful and justified conclusion that the decision of the Russian MAP of 10.09.2003 on case No. 2 06/121-03 and Instruction issued on its basis comply with the law and other regulatory legal acts, were issued justifiably, within the frames of competence of the Russian MAP, and do not violate the rights and lawful interests of LLC Russian MAP. At the same time, there are no grounds for cancelling or amending the legal acts on the case in accordance with Art. 288 of the APC.

In the basis of the above, the Russian FAS

REQUESTS

The Federal Arbitration Court of the Moscow District to leave the legal acts on the case without change, and dismiss the cassation claim filed by LLC NPO Western Union DP Vostok.


Attachments addressed to the court:

A copy of power of attorney No. IA/632 of 14.05.2004.

Deputy Head of the Legal Department O.G. Mishakov

on power of attorney No. IA/632 of 14.05.2004











FEDERAL ARBITRATION COURT OF THE MOSCOW DISTRICT

RULING

No. KA-A40/8549-04

Moscow

7 October 2004 Case No. A-40-4584/04-7-44

The Federal Arbitration Court of the Moscow District

in the composition of:

Chief justice: R.R. Latypova,

Judges M.V. Borzykin, I.V. Tubolets,

with the participation in the session:

on behalf of the Applicant - L.N. Ponusova, power of attorney n/n of 27.11.2003; O.I. Kozyr, power of attorney n/n of 27.11.2003;I.O. Zashchekin, power of attorney n/n of 20.10.2003; A.Yu. Naglis, power of attorney n/n of 20.10.2003,

on behalf of the Respondent - A.Yu. Pomko, power of attorney No. IA/1216 of 31.05.2004,

having considered at the court session of 30 September 2004 the cassation claim filed by LLC NPO Western Union DP Vostok

to Decision of 14 April 2004,

Instruction of 21 June 2004

on case No. A40-47677/03-12-495

of the Moscow City Arbitration Court

issued by V.Kh. Voronin, L.V. Ilyina, T.I. Zakharova, L.M. Barabanshchikova

on the claim of LLC NPO Western Union DP Vostok

for invalidating the Russian MAP Decision and Instruction of 10.09.2003 on case No. 2 06/121-03,

HAS ESTABLISHED:

LLC NPO Western Union DP Vostok applied to the Moscow City Arbitration Court with a claim for invalidating the Russian MAP Decision and Instruction of the Russian Federation Ministry for Antimonopoly Policy and Support of Entrepreneurship (by right of succession - the Federal Antimonopoly Service) of 10.09.2003 on case No. 2 06/121-03 of violation of the antimonopoly legislation (hereinafter - the Decision and Instruction of the Russian MAP).

The court decision of 14 April 2004, left unchanged by the ruling of the court of appeals of 21 June 2004, has dismissed the claims. The court proceeded from the conclusion that the Decision and Instruction of the Russian MAP have been issued lawfully and justifiably and do not violate the rights and lawful interests of LLC NPO Western Union DP Vostok, therefore there are no grounds for invalidating the non-regulatory acts of the Russian MAP.


Having disagreed with the conclusions made by the court, LLC NPO Western Union DP Vostok insists on the cancellation of the legal acts, motivating this with the allegation that the court of the first and appeals instances have misinterpreted the notion of «agreement restricting competition on the market of financial services» and, as a consequence, improperly applied Art. 6 of the Federal Law on Protection of Competition on the Market of Financial Services. In the Applicant's opinion, Art. 6 of the Law is not applicable to one financial organisation. During the consideration of the case the Commission should have conducted an evaluation of the competitive environment on the market for the purposes of establishing competition. The court has not taken this circumstance into account, therefore the court could not have applied Art. 6 of the Law without having established the circumstances connected with real influence on the market. The court has not applied Art. 5 of the Law, articles 4.5 and 24.5 of the RF CoAO, but applied Art. 15 not subject to application. The violations of articles 271 and 268 of the Russian Federation Arbitration Processional Code by the court have led to the adoption of an improper decision, which constitutes the grounds for its cancellation. In the Applicant's opinion, the decision was issued with respect of persons not involved in the case.

The Applicant's representative supported the arguments and demands of the cassation claim during the court session.


The Russian FAS representative objected to the satisfaction of the claim, considering the legal acts to be lawful and justified.

The Federal Arbitration Court of the Moscow District, having examined the materials of the case, considered the appropriateness of application of provisions of substantive law and compliance with the norms of processional law in accordance with Art. 286 of the Russian Federation Arbitration Processional Code, and found not grounds for cancelling the legal acts.

The courts of the first, and later the appeals instance have established that the Decision of the RF MAP of 10.09.2003 on case of violation of the antimonopoly legislation No. 2 06/121-03 have recognised as inconsistent with the antimonopoly legislation: item 4.2.8 of the Model Agreement concluded between Russian banks and Western Union; the actions of Western Union on inclusion of this item in the Model Agreement. Upon the results of consideration of case No. 2 06/121-03 the Commission of the Russian MAP issued the appealed Decision and Instruction.

Dismissing the claims for invalidating the said Decision and Instruction of the Russian MAP, the court, relying on a comprehensive analysis of the facts of the case, has reached a proper conclusion on their compliance with the law and the absence of the grounds for their invalidation.

Art. 6 of the Federal Law «On Protection of Competition on the Market of Financial Services» No. 117-FZ of 23.06.1999 (hereinafter - the Law) does not allow and invalidated in the established manner any forms of agreements between financial organisations aimed at restricting other financial organisations' access to the market of financial services or their elimination from this market.

In accordance with item 4.2.8 in the Model Agreement concluded between the Applicant and banks for purposes of cooperating in providing services to physical persons on money transfer without opening bank accounts, the bank is prohibited to cooperate with other companies offering the services of online money transfer in the forms similar to the Western Union system, offered on the Russian market by the Applicant. In the event of violation of this item of the agreement by the bank, LLC Western Union unilaterally cancels the agreement.

Therefore, the banks using the Western Union system are restricted in their access to other similar systems offered by other financial organisations, as this would lead to the cancellation of the agreement with LLC Western Union. The banks using other payment systems are also restricted in their access to the Western Union system, because in this case they would have to refuse from cooperating with other organisations offering other payment systems.

At the same time, Russian Federation law does not envisage a possibility of such restriction of an organisation's access right to the market of financial services of money transfer.

Civil rights, including the freedom of agreement, can be restricted only by federal law, as per Art. 1 (2) of the RF CC.

The antimonopoly authority has lawfully qualified item 4.2.8 in the Model Agreement concluded by LLC Western Union with Russian banks as a contractual term aimed at restricting other financial organisations' access to the market of services of physical persons' money transfers without opening bank accounts and resulting in restriction of development of new payment systems on the market and, as a consequence, restriction of competition.

The conclusion of the courts at the first and appeals instances that item 4.2.8 of the agreement between LLC Western Union and the banks restricts competition, is aimed at restricting access to the market of financial services both to the banks using the money transfer systems, and the organisations offering such systems and competing with LLC Western Union, conforms to the circumstances of the case and was made on the basis of a full and comprehensive examination of the evidence presented by the parties.

The court has properly applied the norms of the Federal Law on Protection of Competition on the Market of Financial Services.

The appealed Decision of the Russian MAP has recognised as unfair competition the actions of LLC Western Union on inclusion of item 4.2.8 in the Model Agreement, as well as the requirements set by the company to terminate the banks' relations with other organisers of physical persons' money transfer systems without opening bank accounts with a simultaneous threat of cancelling the agreement between the bank and LLC Western Union in connection with the violation of item 4.2.8 of the agreement.

In the course of consideration of the case, the Russian MAP has established that if the Applicant detects the fact of the bank's participation in other payment systems except the Western Union system, it sent written notifications to such banks on the violation of item 4.2.8 of the Model Agreement and requested to settle the issue of cooperation with a different payment system. The result of receiving such notifications was the banks' refusal from further cooperation with another money transfer system organiser. Otherwise the Applicant cancelled the agreement with this bank.

The evidence confirming these circumstances were presented to the court and duly examined, which was reflected in the legal acts on the case.

The said decisions and actions contradict Art. 6 of the Law and, hence, are illegal. There contractual terms and actions hinder market access to Western Union competitors and result in a decrease of the number of clients of these companies, thus opening an opportunity of inflicting damage (missed profits and expenses on the rehabilitation of a violated right). Therefore, there is evidence of qualifying elements of unfair competition of Western Union with respect of financial organizations promoting other payment systems on the market.

Proceeding from the above, the Russian MAP has lawfully qualified the Applicant's actions as unfair competition, which is justly confirmed by conclusions of the court instances.

The court instances have mad a proper conclusion that agreements restricting other financial organisations' access to the market of financial services shall be considered, by force of the Law, as restriction of competition and do not require the identification of a financial organisation's market share or, in this case, conducting an analysis and evaluation of the state of the competitive environment, but only the establishment of the fact of such restriction of market access (the fact of existence of an agreement restricting or capable of restricting competition on a relevant market is sufficient).

The argument of the Applicant filing the cassation claim about improper interpretation by the court of Art. 6 of the Law and a lack of an agreement on restriction of competition cannot be used as grounds for cancelling the legal acts, as it is aimed at a re-evaluation of the conclusions made by the courts of the first and appeals instances.

As for the arguments presented by the Applicants that the court has not examined the possibility of applying Art. 5 of the Law (dominance abuse) to the company's actions, they are inconsistent, as the court examined the Decision and Instruction of the Russian MAP within the frames of the presented claims, which did not apply this norm and, therefore, as not applicable by the court.

The conclusion made by the courts of the first and appeals instances that articles 8 and 9 of the Law cannot and should not be applied jointly with Art. 6 of the Law, as the provisions of articles 8 and 9 introduce the rules of notification of agreements between financial organisations, is also justified.

Provisions of the Russian Federation Code of Administrative Offences are not applicable to cases of violation of articles 6 and 15 of the Law.

The Applicant's argument that the legal acts on the case violate the rights and lawful interests of persons not involved in the case is also inconsistent. The appealed Decision of the Russian MAP has recognised as contradicting to the antimonopoly legislation a relevant item in agreements and actions of LLC Western Union. The Russian MAP Decision does not indicate any violations of the antimonopoly legislation by the banks. Therefore, the Decision and Instruction of the Russian MAP have been issued with respect of the rights and liabilities of LLC Western Union and do not concern the rights and lawful interests of other persons, including the banks cooperating with LLC Western Union.



Guided by articles 284-289 of the Russian Federation Arbitration Processional Code, the court

RULED:

To leave the Decision of 14 April 2004 and the Ruling of the appeals instance of the Moscow City Arbitration Court of 21 June 2004 on case No. A40-47677/03-12-495 without change, to dismiss the cassation claim of LLC NPO Western Union DP Vostok.

Chief justice R.R. Latypova

Judges: M.V. Borzykin, I.V. Tubolets

 


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