Andrey Kashevarov: we will continue enforcement of the Law on Trade

On 20 March 2017, FAS Expert Council on Developing Competition in Retail Trade summed up the results of the first monitoring of observing the amendments to the Law on Trade and announced some proposals on modernizing the trade law.

Following the instructions from theGovernment of the Russian Federation, FAS completed a preliminary analysis of applying the amendments to the Law on Trade that had come into force on 15 July 2016. FAS verified supply contracts between retail chains and food products suppliers concluded or renewed after 15 July 2016 and their conformity to the Law on Trade and the antimonopoly law.

Presenting the findings, Head of FAS Department for Control over Social Sphere and Trade, Timophey Nizhegorodtsev, pointed out that in the course of the inspection FAS regional bodies had most frequently (439 supply contracts, 34% of the total number of exposed violations) revealed signs of violating Part 7 Article 9 of the Law on Trade: failure to adjust the contracts with suppliers in line with the statutory requirements. Around 22% of the total number of exposed violations (282 supply contracts) had signs of violating Part 4 Article 9 of the Law on Trade, in the part of obligating food products suppliers to pay remunerations over the statutory 5%.

“The inspection showed that regional and municipal retailers committed the most part of direct violations of the trade law. We continue controlling observance of the Law on Trade. The results of the second stage, providing for qualification of the exposed violations of the antimonopoly and trade laws, will be summed up in Q3 2017. FAS shall open cases upon all facts of violations exposed in the course of the inspections”, emphasized Deputy Head of FAS Andrey Kashevarov.

The Expert Council also looked into penalties set by retail chains upon goods suppliers. “The most frequently highlighted problem on the part of suppliers is an acute increase of fines for breaching the contracts conditions and absence of mirror fines for retail chains”, said Timophey Nizhegorodtsev. “Relationship between a supplier and a retail chain are based on the prevailing market force of a retail chain, enabling the latter to abuse its position”. Earlier the Code of Fair practices was devised for the sector, and the fines were limited to 15% of the scope of delivery. The Code, however, was not observed.

The question of returning goods also was raised. Head of FAS sectoral Department explained: ‘We cannot allow the practice when a supplier delivers goods with expiring shelf life, and then the supplier must buy-out the already supplied goods at their full costs. Expired goods cannot be returned”.

Finally, Timophey Nizhegorodtsev emphasized that FAS is in favour of improving regulation in retail field and proposes to form the Market Council with three chambers: producers, retail chains, regulators and legislators. If retailers and suppliers are unable to reach  arrangements on their own, the third chamber will make decisions at the legislative and enforcement level.

Summing up the meeting, Andrey Kashevarov pointed out that when the Intersectoral Expert Council is unable to regulate working relations on its own, it is expedient to transform it into a Market Council. He also pointed out: “If market participants cannot regulate the fine practice independently, the relevant amendments to the law are required”.