FAS outlined its experience of countering corruption investigating antimonopoly cases

A joint session of No.3 Working Group on cooperation and enforcement of OECD Competition Committee and the Working Group on countering corruption in transnationalbusiness deals took place on 14 June 2016. Co-Chairmen were Frederique Jenny, the Chairman of OECD Competition Committee, and Drango Kos, the Head of OECD Working Group on countering corruption. The key speaker was Denis Bin, a special agent of the US Federal Bureau of Investigation for countering international corruption.

Deputy Head of FAS Andrey Tsyganov presented Russian experience of cooperation between antimonopoly and the law enforcement bodies to counter fraud.

First of all, Andrey Tsyganov pointed out that anticompetitive agreements are some of the most dangerous violations of the antimonopoly law, prohibited in the Russian Federation per se (Article 11 of No. 135-FZ Federal Law “On Protection of Competition” of 26.07.2006). Under Article 23 of the Federal Law “On Protection of Competition”, FAS is assigned powers to hold the violators – physical persons, legal entities and top corporate executives and officials of the authorities liable for violating the antimonopoly law. In Russian law cartels are subject to administrative (Article 14.32 of the Code on Administrative Violations) as well as criminal liability (Article 178 of the Criminal Code of the Russian Federation). Under the national law, FAS has powers to only hold cartel participants administratively liable and cannot hold them criminally liable. Opening and investigating criminal cases upon the facts of violating the antimonopoly law as well as holding participants of anticompetitive agreements criminally liable is the competence of the Ministry of Interior of the Russian Federation.

“In this context cooperation with the law enforcement bodies is necessary in the part of holding cartel participants criminally liable”, pointed out Andrey Tsyganov.

Then Andrey Tsyganov talked about developing cooperation between FAS and the Ministry of Interior. In 2004 FAS and the Ministry of Interior issued a joint No. 878/215 Order “On approving the Regulations on the procedures for cooperation between the Ministry of Interior of the Russian Federation and the Federal Antimonopoly Service (FAS Russia)”.

In accord with it, to expose, prevent and suppress anticompetitive actions and violations of the antimonopoly violations, the Parties plan, organize and carry out joint measures to inspect commercial and non-profit organizations and companies.

FAS timely informs the Ministry of Interior on all facts of economic, tax and other violations exposed in the course of their activities, provides analytical information, timely sends all necessary materials on violations with elements of criminally punishable anticompetitive actions to open criminal cases, delegate their employees to participate in procedural actions and events to check commercial and non-profit organizations.

The Ministry of Interior, in its turn, informs FAS about violations exposed in the field of antimonopoly law, the law on natural monopolies, the law on public procurement, and advertising, provides officers of the law enforcement bodies for practical assistance to FAS to carry out inspections to suppress unlawful actions preventing execution of official duties by FAS staff. The Ministry of Interior undertakes measures to establish location of the violators and offer practical help in collecting and formalizing evidence of violating the antimonopoly law.

Officers of the Ministry of Interior participate in nearly every FAS unscheduled inspections; cooperation takes place at both the federal level as well as the level of the subjects of the Russian Federation. For instance, in 2013 FAS together with the Ministry of Interior carried out unscheduled inspections (dawn raids) against 14 Russian companies – agents of the largest world shipping lines. Inspections of the shipping line agents exposed facts of synchronized and similar mark-ups set by the shipping companies to the freight rates (GRI) for the services for container shipping in the Southeastern Asia, the Far East – Northern Europe (including St Petersburg) in 2012-2013, that can be indicative of an agreement on the market of marine and ocean shipping prohibited by Clause 1 Part Article 11 of the Federal Law “On Protection of Competition”. The investigation of the case is completed and the agreement participants are recognized as violators of the antimonopoly law.

In 2012 the Investigation Committee of the Russian Federation and the Federal Antimonopoly Service (FAS Russia) signed an Agreement on Cooperation.  FAS also cooperates closely with the General Prosecutor’s Office of the Russian Federation on a broad range of issues including collaboration in investigating cartel cases as well as the Federal Security Service of the Russian Federation.

In Russian practice there is a precedent of holding officials criminally liable. In May 2014, Novgorod District Court supported the FAS decision and sentenced an official to 3 years 8 months of suspended imprisonment with a 4-year probation period without the right to be involved in particular activity for 2 years 6 months and 300,000 RUB fine for violating the antimonopoly law:  coordinating an open auction for the right to conclude a government contract to construct a river bridge.

Andrey Tsyganov said that FAS performs a function to control public defence procurement. It is an important function to counter corruption and bid-rigging.

The Russian Federation has a common procedure for competitive bidding for state and municipal property, and determined an integrated web-site to publish information about such tenders. A single national portal for publishing information about public and municipal procurement is established: www.zakupki.gov.ru. E-auctions are introduced. 5 specialized e-sites public and municipal procurement are formed. Registration on e-sites is done electronically; contracts are signed electronically using e-signatures. The transparent personified system of participating in tenders reduces abusing. Such an electronic system enables to identify bid-rigging more efficiently.

In spite of developing modern approaches, in the course of control over public procurement and state property sales, FAS exposes a lot of bid-rigging violations (Article 11 the Federal Law “On Protection of Competition”) and, what is more dangerous in terms of corruption – collusion between tender organizers and one or several participants to make sure that a predetermined entity would win (Article 16 the Federal Law “On Protection of Competition”). In such cases, the materials are also forwarded to Ministry of Interior, and if there are signs of serious violations - to the Investigation Committee or the Federal Security Service.

Another FAS objective in countering corruption is control over state assistance in the form of subsidies, particularly, it concern subsidizing to agricultural producers. FAS finds it necessary to ensure a situation when the subsidies to support agricultural producers are allocated in a transparent manner and reach the end addressee, to gain the most return from the support mechanisms. FAS started active inspections as to how the funds allocated to support agricultural producers in the subjects of the Russian Federation are spent.

FAS outlines that the main obstacles for obtaining subsidies are excessive requirements for subsidies, non-transparent selection criteria for grants, uncertainty of the deadlines for submitting documents, as well as requesting documents on a fee-paid basis. Last year FAS regional Offices opened over 40 cases on granting subsidies to agricultural producers. Some of those cases can have elements of corruption and improper use of budgetary funds, thus the law enforcement bodies initiated criminal proceedings.

“FAS performs an entire set of functions designed to counter unlawful actions, particularly, corruption, of economic actions as well as the authorities. These functions are performed under the frame of inter-departmental interaction”, summed up Andrey Tsyganov.

Representatives of competition authorities from Sweden, Israel, Brazil, Italy, Canada, Mexico, the US, Austria, Lithuania, Indonesia and Korea shared experiences in countering corruption in investigating cases on violating the antimonopoly law.