ANDREY TENISHEV: CARTEL IS PICKPOCKETING BUT THROUGH DIFFERENT METHODS AND AT A DIFFERENT SCALE

FAS officers discussed judicial practice and cartel investigation, the importance of consolidating efforts of the authorities to pursue the National Competition Development Plan at a workshop in Kaluga

On 28 - 29 June 2018, Deputy Head of FAS Sergey Puzyrevsky, an assistant to Head of FAS, Aleftina Timoshenko, and Head of FAS Anti-Cartel Department, Andrey Tenishev took part in a regional workshop in Kaluga.

Sergey Puzyrevsky described theNational Competition Development Plan and the Orders of the President of Russia issued to Heads of Russian regions following the State Council. The speaker pointed out at the importance of an integrated approach and consolidation of the efforts of the authorities, local self-government bodies and civil society to pursue the Plan and the Orders.

Sergey Puzyrevsky emphasized the growing role of FAS regional bodies: “Our colleagues from regional antimonopoly bodies have to play an important role. FAS Offices continue providing integrated support to local authorities, there will be various events, workshops, guidelines will be drafted. We have been already actively working in this area”, said Deputy Head of FAS. “The first intermediary results will be summed up by already 1 January 2019”.

Head of FAS Anti-Cartel Department, Andrey Tenishev discussed the danger and public harm of cartels and problems in investigations of cartel cases. “The pubic danger of cartels is not always obvious. OK, auction bidders agreed not to reduce the price and get government contracts, where is the damage? I’ll try to explain it this way. In some foreign jurisdictions cartels are a type of fraud. For example, 10,000 were pick-pocketed, it’s a fraud, a criminal case will be opened upon the fact and the police will search for the thief. A second example – all stores in a town agreed to increase refrigerator prices by 10,000 RUB not because it is economically justified but simply because they made such arrangements. In this case 10,000 RUB were also seized from your pocket, just in a different manner, and not just one person suffered but everyone who bought the fridge. The damage scale is incommensurable. But the facts are that only nine criminal cases were opened for the entire Russia in 2017, 15 criminal cases – in 2018, and no a single sentence was passed in recent years. At the same time we open up to 400 antimonopoly cases on anticompetitive agreements every year and make roughly the same number of decisions. The overall sum of administrative fines vary from 2 to 4 billion RUB annually”, said the speaker.

Head of FAS Anti-Cartel Department advised his colleagues from regional OFAS to show social importance and public danger of an anticompetitive agreement, its harm for the economy of a region of Russia in general in every decision: “It will be clearer for the Court what it is about and what consequences may an agreement incur. It is not just collusion for the sake of collusion, but a dangerous agreement for the national economy in general and for a particular region, town, auction and a government customer”.

Andrey Tenishev pointed out that the contract price often decreases by 20 – 22 % from the original contract price and sometimes the “discount” may reach 40 %. In case of bid-rigging the price goes down by maximum 0.5 % of the announced contract price. Extrapolating this percentage to the total procurement amount (25 trillion RUB in 2017), the damage to the economy is colossal. At the same time, price reduction does not influence the quality and deadline for executing a contract.

“We conducted a special study to check whether government contracts were executed or the price reduction was a damping. No, contracts were executed on time without any quality concerns”, commentedHead of FAS Anti-Cartel Department.

Andrey Tenishev specially emphasized soaring cartelization of procurement on the national scale. FAS exposes the bulk of anticompetitive agreements at auctions for road construction and medicine procurement. “Russia is on the first place in the world for the number of cases against cartels and anticompetitive agreements. It is not good or bad, it’s the country specifics: we have 85 subjects of the Federation, numerous local markets, millions of procurement procedures and property sale procedure. Such a big number of cartel cases is objective. At the same time Russia is on the 17 place in the world by the amount of fines imposed for cartels”, stated the speaker.

Among the issues associated with investigating cartel cases, the speaker mentioned absence of a unified approach to defining cartels and a continuous violation.  “Our enforcement practice shows that cartels are continuous violations: today economic entities have made arrangements about all the auctions that they wish to win. The number of such auction in our cases reach 500-700, the record was a case covering 1300 auctions and in 2018 we have exposed a cartel attempting to посягнувший more than 2500 auctions! It means that cartels are often illegal operations of companies that last for years, and it would be wrong to fragment it by individual episodes and separate auctions. Courts, however, sometimes apply a different approach and we lose the period of limitation in investigating cases and holding the violators administratively liable. In my opinion it is a serious issue”, summed up Andrey Tenishev.

The Chairman of the Commission of the Civic Chamber of the Russian Federation on civil control and interaction with the civic chambers of the authorities, a Presidium member of the Association of Russian Lawyers, Vice-President of the Russian Federal Chamber of Lawyers, Vyacheslav Grib gave a report on “Interaction between the authorities and civil society institutions towards improving competition”.

There was also a book presentation: “Antimonopoly regulation in the digital epoch. How to protect competition under the conditions of globalization and the forth industrial revolution”.

Participants discussed controversial issues of enforcement of the law on procurement and the antimonopoly law, judicial practice on cartel cases, and some other issues.