Arbitration Court confirmed a cartel at auctions for supplying vital and essential medicinal drugs

“Moscow Arbitration Court dismissed a claim of a pharmaceutical distributor “BSS” Ltd. to invalidate a decision and injunction of Moscow OFAS. Earlier FAS recognized a cartel between “BSS” Ltd. and “AMT” Ltd. at auctions for supplying drugs for the needs of state agencies

In January 2017, the regulator established thatat the auctions for the overall sum over 144 million RUB “BSS” Ltd. and “AMT” Ltd.acted in the interests of each other.  The cartel between these companies led to maintaining prices at 107 auctions in 11 regions of Russia.

As a result of the cartel, “BSS” Ltd. won 95 auctions with 0% - 1% reduction of the initial (maximum) price and 3 auctions with 1.5% - 5% reduction of the initial (maximum) price. The total auction sum exceeded 403 million RUB.

“AMT” Ltd.won7 auctions with 0.5% - 1% reduction of the initial (maximum) price and on 2 auctions reduction was 3% and 5.5% of the initial (maximum) price accordingly. The total auction sum was over 6 million RUB.

The list of medicinal drug procured by public institutions included vital drugs, such as insulin, and drugs for treatment of cancer, diabetes, various antibiotics.

Moscow OFAS found that the companies violated Clause 2 Part 1 Article 11 of the Law “On Protection of Competition” that prohibits anticompetitive agreements and issued an injunction to prevent competition-restricting actions.

“BSS” Ltd. disagreed with FAS decision and injunction and filed a lawsuit against the regulator. The Company insisted that “AMT” Ltd. being an independent economicentity, is subordinate to “BSS” Ltd. and effectively is a supporting unit of this company.

Thus, according to “BSS” Ltd., the companies are in the same group of persons, falling under exceptions specified in Article 11 of the Law “On Protection of Competition”, and their actions at auctions cannot be a cartel.

As the antimonopoly body established, contrary to the claimant’s position, the formed scheme is nothing but a cartel, which by no means falls under the exceptions specified in the Law “On Protection of Competition”, as insisted by “BSS” Ltd.

Under Parts 7 and 8 Article 11 of the Law “On Protection of Competition”, the prohibition of competition-restricting agreements between economic entities does not cover the agreements between economic entities – members of the same group of persons if one of such economic entities establishes control over another economic entity or if such economic entities are under control of the same person.

In the course of 107 auctions “BSS” Ltd. and “AMT” Ltd. did not fall under the above exceptionsand neither the antimonopoly body, not the Court considered the fact of concluding a trust agreement and an agency agreement between the companies the grounds for applying Parts 7 and 8 Article 11 of the Law “On Protection of Competition”.

The antimonopoly body points out that such actions by “BSS” Ltd. and “AMT” Ltd., when companies participate in auctions for several months to supply vital and essential medicinal drugs for public and municipal needs, eliminate other bidders from competition for contracts.