FAS Russia shares practice on cases of price discrimination at the OECD

On November 30, 2016 the FAS Russia’s delegation intervened at the roundtable of the OECD Competition Committee on the topic "Price discrimination".

Prior to the speech, the Chairman of the Committee Frédéric Jenny expressed a particular interest in the provisions of the Russian legislation, which prohibit discrimination by economic entities and public authorities, and to the logics underlying  these provisions. To illustrate the Russian experience in the field of price discrimination, he proposed to address the case that FAS Russia initiated in 2014 in relation to the previously existing Federal Tariff Service (FTS), on «innovation» carriages.

In his speech Andrey Tsyganov, head of the FAS Russia's delegation at the OECD events and deputy head of the authority, said that in accordance with the Federal Law "On Protection of Competition» No. 135-FZ (hereinafter - «Law on Protection of Competition") setting different prices for the same goods that is not justified economically, technologically or otherwise is prohibited for economic entities holding a dominant position, for business entities entering into agreements between themselves, as well as to the authorities.

Andrey Tsyganov said that the most prominent examples of application by the FAS Russia of the antimonopoly law’s provisions include the three "waves" of antitrust investigations against oil companies which created discriminatory conditions on the market, including through different rates for individual retail companies, as well as cases on agro-industrial and transport markets.

While commenting on the FAS Russia's case against the Federal Tariff Service (FTS), Mr. Tsyganov said that this is not a classic example of the case on price discrimination in the understanding of his colleagues from foreign competition authorities, to whom discriminatory conditions are applied mainly by economic entities with a dominant position on the market. The case’s appearance is based on the peculiarity of the Russian antimonopoly legislation involving the ability to control actions of the authorities.

FTS's decision became an example of the application of the provisions on the prohibition of the establishment of discriminatory conditions by the authorities (Articles 15, 16 of "Law on Protection of Competition"). FTS set prices for certain categories of wagons not on the basis of a universal principle, but on an individual basis, which created discriminatory conditions for operators of railway rolling stock, as well as for rolling stock manufacturers.

A part of the "innovative" wagon companies enjoyed a discount of a smaller size. As a result of the discriminatory nature of the "innovative" rebates, the FAS Russia in 2014 had to require to cancel them.

Already during the proceedings, in June 2015, the Federal Tariff Service was abolished by the decree of the President of the Russian Federation and its functions were transferred to the FAS Russia. As a result of the institutional reform the FAS Russia’s functions include control over compliance with the antimonopoly legislation, procurement, advertising, foreign investment, the tariff regulation function was added.

Andrey Tsyganov told that the FAS Russia has initiated a serious reform of tariff regulation, designed among other for putting an end to the discriminative nature that now can be observed in the Russian tariff policy, which is unacceptable from the point of view of the competition authority, as well as for developing measures to ensure the attractiveness for investment and technical development of infrastructure sectors including the rail transport.

The delegation’s head also noted that earlier the tariff policy in Russia had a non-transparent character and was subject to "manual" control, which set the risk of creating unjustified privileges for individual participants and discrimination for others.

Chairman of the OECD Competition Committee also addressed to Mr. Tsyganov with a question on the approach applied by the FAS Russia in cases of price discrimination, if the latter has a positive impact on a market or consumers. Here the FAS Russia’s deputy head said that the agency seeks to apply an individual approach with weighing positive and negative effects of actions by subjects on the state of competition and welfare of consumers, in order to distinguish efficient price-setting practices of price discrimination from the discrimination that is prohibited by the law.

The Russian antimonopoly agency encourages companies to adopt and implement into its activities the FAS Russia’s recommendations, specifying the conditions under which the actions of companies on applying pricing policies are most unlikely to be considered as a violation of the competition legislation.