Andrey Tsyganov: business and FAS gradually start rearranging to work under the new rules
On 6 October 2016, the Russian Corporate Counsel Association (CCA) organized a Round Table with top officials of the Federal Antimonopoly Service (FAS Russia) and CCA members in St Petersburg.
The key speakers were Deputy Head of FAS, Andrey Tsyganov, and the Head of St Petersburg OFAS, Vadim Vladimirov.
The agenda included a wide range of issues related to developing the national competition regulation policy as well as the first results of implementing the “forth antimonopoly package”. Comments were given on possible amendments to the future “fifth antimonopoly package”.
Alexandra Nesterenko, the President of the Corporate Counsel Association, opened the meeting, pointing out that the tradition to discuss the pressing issues of antimonopoly regulation is continued in St Petersburg, where CCP has organized the first discussion with FAS representatives.
Welcoming the Round Table participants, Andrey Tsyganov suggested expanding the discussion and talking about the general progress in the national competition protection policy and direct instructions given to the Antimonopoly Service by the Government of the Russian Federation. Andrey Tsyganov informed about the meeting of the Government of 29 September 2016, where the Head of FAS Igor Artemiev presented an annual report on the state of competition and summed up the results of the Competition Week in Russia (26 - 28 September 2016). Executing the relevant Government instructions, FAS is devising a draft National Plan for Competition Development (by 1 December 2016).
Andrey Tsyganov pointed out at a positive trend in increasing the level of competition on some markets and that the current law regulating competition protection is adequately refined. Its norms can be efficient, while a real issue is actual anticompetitive conduct of market participants. State-run companies still possess the dominant share of Russian market. The issue is only aggravated by the measures that Russian authorities are devising under the general economic crisis and the policy of reorientation towards import substitution. As a result, expert estimate that annual Russian GDP losses from insufficiently developed competitive environment reach around 1.5-2%.
Talking about FAS role in developing competitive environment, Andrey Tsyganov emphasized that the FAS primary task and functionalities are aimed, first of all, to control and supervision. At the same time development of competitive markets required not only FAS interference by also deeper, radical changes in the overall state policy. According to Mr. Tsyganov, pro-competitive regulation should be initiated and devised at the level of more global policies determined on a nationwide scale, particularly, by the Government.
The next point of discussion was the need for a fundamental reform of Russian tariff policy. According to FAS representatives, the meaning of the new strategy for the future tariff policy must be stimulating a transition of natural monopolies to a competitive environment. In FAS opinion, there are regions and fields ready for such changes; for example, telecommunications services, electric power industry and oil products markets.
The second aspect of the operations of natural monopolies, that in FAS opinion should be reformed, was identified in the course of exercising control over compliance with the Law “On Procurement of Goods, Works, Services by Particular Types of Legal Entities” (No. 223-FZ). Currently a number of companies - natural monopolists procure at clearly overrated prices.
FAS representatives pointed out, however, that currently the law does not provide for such a possibility and the question whether amendments are required in this part fall beyond FAS competences and must be considered in a more comprehensive manner at the legislative level.
Then the Round Table participants started discussing the results of the amendments introduced by the “forth antimonopoly package”.
First of all, a concept of abusing market dominance is modified. The dominant position presumption does not exist any longer due to abolishing the Register of discriminatory entities. Such changes also led to the need to make relative adjustments to No. 220 FAS Order that formalizes a detailed procedure of market analyses carried out by FAS for particular violations, since now the Federal Law “On Protection of Competition” has a common rule on market evaluation.
One of substantial novelties was introducing a concept of buyers’ cartels. As Andrey Tsyganov stated, this amendment was obvious for FAS and in general it stems from the already established practice.
Business heavily criticized the amendments regarding approvals of agreements on joint efforts under Article 2 and Article 33 of the Federal Law in the first months of the norms being in effect. In practice, however, as Andrey Tsyganov emphasized, such agreements can constitute alternative options to cartels, thus, introducing control is reasonable. So far no cases of applying the new norms on adopting the Rules for non-discriminatory access have been conducted.
Special attention was put on expanding applications of the institution of warnings and admonitions. At the same time, Andrey Tsyganov emphasized that FAS endeavours to prevent applying such mechanisms excessively to avoid restricting the rights of the persons who demand compensation of damages. In this context, warnings and admonitions are not applicable to cartels.
Andrey Tsyganov also talked about conclusions on the case circumstances that FAS now needs to prepare on each investigated violation. A legal practice partner at “EY” (St Petersburg), Anna Kostyra, commented on the value of this change for business: primarily, better transparency of investigated cases on violating the antimonopoly law.
Andrey Tsyganov also summed up the amendments intended for the “fifth antimonopoly package”. First of all, a more detailed regulation of economic concentration is expected. Efficient and balanced criteria should be adopted to better evaluate and exercise proper control over mergers and acquisitions.
Intellectual property is another important area of possible amendments. Intellectual property rights are the rights that by definition facilitate market monopolization. According to FAS representatives, it will be more correct to remove the absolute ban for applying the antimonopoly law on regulating the intellectual property rights and implementing more balanced and detailed criteria and mechanisms of analysis. It opens more opportunities for companies to develop generic drugs and in general, helps introduce a more flexible system of regulating the IP markets.
Andrey Tsyganov highlighted the plans to introduce an amendment, allowing class actions after the antimonopoly authority establishes the fact of violating the antimonopoly law. Alexandra Nesterenko reminded that the initiative of implementing the institution of class actions in Russia had already been discussed. She explained that, within a Working Group of the Strategic Initiative Agency, the Corporate Counsel Association had managed to exclude the norms on drafting a law on class actions and multiple damages from the Road Map for Competition Development, approved on 28 December 2012. FAS, however, plans to return to this initiative and, in view of foreign experience, formulate another amendment about class actions on antimonopoly violations. A relevant Explanation is already adopted and the Guidelines for compensating damages caused by violations of the antimonopoly law are prepared.
The last, already adopted amendment discussed by Andrey Tsyganov was the competence of the Eurasian Economic Commission (ECC) on analyzing violations of competition on the cross-border markets. According to Deputy Head of FAS, so far there was no possibility to analyze particular cases investigated at the level of the Eurasian Economic Union, since the statements received by EEC were forwarded for reconsideration back to the national antimonopoly bodies.
Summing up the general results of applying the “forth antimonopoly package”, Andrey Tsyganov expressed an opinion that business and FAS gradually start rearranging to work under the new rules.
Vadim Vladimirov started with expressing gratitude to all his colleagues participating in the Round Table and the event organizers. Having outlined briefly the key novelties introduced by the forth antimonopoly package, he presented statistical data on the warnings and admonitions issued by Sat Petersburg OFAS.
Then he gave a brief overview of practical application of these institutions. For instance, Vadim Vladimirov discussed in detail practical application of warnings and admonitions in the North-West region and analyzed a number of cases on violating the laws on advertising, public procurement and competitive bidding.
He specially highlighted violations registered in insurance and banking services. For instance, a considerable share of investigated complaints in the past couple of years in the North-West region concerned imposing insurance services associated with consumer loan agreements. As for the most frequent violations of the law on contractual system (No.44-FZ), Vadim Vladimirov drew attention to a regular practice of fixing generalized requirements on the list of State Standards, without clarifying particular standards and requirements to particular goods in breach of Article 66 of the law on contractual system.
Another systemic and quite wide-spread violation is combining not functionally related works in the same lot: for instance, when construction-and- exploratory and design-and-assembly works as well as equipment supply work are combined in the same lot. Some types of work may not require initial estimates of procurement prices and as a result of combining such orders in the same lot, the overall procurement price can be unreasonably overrated. When different types of work are combined in the same lot, it unreasonably restricts participation in procurement of those legal entities that do not have special permits and licenses in all announced fields.
Finalizing the programme, Alexandra Nesterenko, the President of the Corporate Counsel Association (CCA), thanked the speakers and participants for the discussion. She said that CCA, jointly with FAS, drafted a new FAS explanation under the frame of the powers of the Antimonopoly Service on reviewing and generalizing the antimonopoly enforcement practice. The explanation covers application of Article 10 of the Federal Law “On Protection of Competition” on abusing dominance as well as the balance of Articles 9.21 and 14.31 of the Code on Administrative Violations that specify liability for such violations. Alexandra Nesterenko invited CCP members and representatives of the business community to take an active part in drafting further explanations of antimonopoly enforcement practice.