Andrey Tsyganov: in Russia every company can estimate its future fine before committing a violation

FAS delegation took part in the Global Competition Forum of the Organization for Economic Cooperation and Development (OECD)

On 1-2 December 2016, top official of competition authorities from over 100 countries visited the Forum. OECD member-states and other countries discussed issues of competition and related economic and legal questions.

Deputy Head of FAS Andrey Tsyganov, who leads a delegation of Russian antimonopoly body at the Forum, was a speaker at the “Sanctions in Antitrust” Round Table. He focused on calculating fines for cases on abusing dominance and cartels.

In Russia abuse of dominance and anticompetitive agreements that lead or can lead to preventing, restricting, eliminating competition are prohibited by the Federal Law “On Protection of Competition” applied to all companies in all sectors of the economy.

Andrey Tsyganov said that the most significant sanctions applied by the antimonopoly body are “turnover” fines from 1 to 15% of company’s turnover on the relevant markets. In 2008-2011 FAS conducted several antimonopoly investigations against the largest vertically-integrated oil companies (“Gazprom Neft” OJSC, “TNK-BP Holding” OJSC, “Rosneft” NK” OJSC, “LUKOIL” OJSC). The companies violated the law by fixing monopolistically high prices, creating discriminatory conditions, unlawfully withdrawing goods from the market. Upon the case outcome, economic entities were forced to transfer around 20 billion RUB to the federal budget as fines.

Deputy Head of FAS detailed that in Russia the methods of calculating fines are formalized legislatively. The Code on Administrative Violations specifies cases for the minimum and maximum fines. Sometimes decisions on the size of the fines are made based on mitigating or aggravating circumstances, where each aggravating circumstance increases a fine by a certain amount.

FAS itself calculated the fine upon companies. Courts can reconsider the size of fines. In the cases investigated in 2008-2011 against oil companies, the Supreme Court of the Russian Federation supported FAS decisions after successfully going though all three lower Instances: Courts of First Instance, Appeal Courts and Cassation Courts).

“In our opinion, such, as they said here – “aggressive” enforcement to abuses by large public and private oil companies is necessary. It demonstrates a specific feature of Russian competition enforcement: an equal attitude to violators regardless of any outer factors or circumstances. Our “clients” in the cases in question were Russian and foreign companies, both public and private. The highest fine was imposed upon a company fully owned by the state. It was kind of an educational process: 10 years ago we had to deal with hundreds of violations per year on the market of oil products, and now the figure plummeted to 3-4 cases”, said Andrey Tsyganov.

Complexities in calculating fines occur in both abuses and cartel cases. The main difficulties in the dominance cases are related to defining the geographic and product boundaries, necessary to determine the size of the fine. It is also necessary to ascertain whether a particular violation affect competition, which is not always obvious.

In cartel cases the difficulty in calculating fines is to investigate and find out the collusion scheme and determine the actual distribution of guilt between cartel participants – the initiators, organizers, etc. A specifics of Russian antimonopoly law is full relief of liability for the economic entity that is the first to voluntarily report to FAS participation in a cartel, and the minimum fines for the second and third companies that submitted such information.

Andrey Tsyganov clarified that in bid-rigging cases fines are calculated based on the contract price, on which a violation was committed rather than the violators’ turnover.

Ending up, Deputy Head of FAS emphasized that Russian antimonopoly law describes the fine calculation process so clearly that any company can independently calculate its future “damage” before committing a violation and make the right decision.