REPORT OF THE HEAD OF THE FAS RUSSIA ON THE STATE OF COMPETITION IN THE RUSSIAN FEDERATION
Igor Artemiev: Dear Mikhail Vladimirovich! Dear members of the Government!
On behalf of the Federal Antimonopoly Service of the Russian Federation let me present the 14th Annual Report of the Federal Antimonopoly Service on the state of competition in Russia.
Three years ago, a famous Decree of the President of the Russian Federation, the first in the history of our country, “On the Main Directions of the State Policy on the Development of Competition” (hereafter – the Decree) was issued, which approved the first National Plan for the development of competition in the Russian Federation for 2018-2020. This plan will be completed in December 2020.
Pursuant to the Decree, the Government has approved 18 sectoral programs covering almost the entire economy, and competition development plans have been approved in each of these specific sectors.
Under the leadership of the President, the State Council was held, where specific instructions were given to all governors. The work done jointly with the Ministry of Economic Development following the results of the State Council allowed us to approve the so-called regional standard for the development of competition, which is already absolutely modern and corresponding to present-day realities.
Among such successful measures, which can be attributed to last year, to implement the decree – and generally speaking, with the release of the Decree, the final formation of the legal framework for Antimonopoly policy in our country was completed – I would first note the adoption of Federal Law No. 485, which introduced a general prohibition on the creation and operation of unitary businesses in competitive markets. As a result, the number of these businesses decreased by 18% in just one year after the adoption of the law, plans for the reduction and transformation of these businesses have already been approved in 16 regions, and this work is in the final stage in 51 more regions.
In the field of healthcare, which is favorable for a competitive environment, there have been significant changes. Critical mechanisms have been put in place to reduce the price of life-saving drugs. On the basis of numerous methods approved by the Government, we and the Ministry of Health have revised more than 1 thousand marginal prices for vital drugs, that is, the most necessary for people, which has led to a general reduction in these prices by an average of 40%. This is a very important result.
Besides, a large-scale re-registration of previously approved prices in accordance with new approaches and the adoption of relevant new amendments to the Law “On Circulation of Medicines” has also begun. And this is already leading to a reduction in these prices in real terms.
What is fundamental in this area? For the first time, the concept of “interchangeability” was clearly, accurately and unequivocally formulated in the Federal Law “On the Circulation of Medicines”, and this is now done on the basis of clinical studies in relation to the reference drug.
Next. Last year, internet roaming was finally canceled in the territory of the Russian Federation, which led to a 10-fold reduction in tariffs for roaming services. Consumers saved more than 6 billion rubles. At the same time, our telecommunications companies not only did not lose, but even won due to the increase in traffic, as we mentioned in our forecasts.
There was also a big problem in the Housing and Public Utilities. On the basis of the old law of the 1990s, regions and local governments could easily exceed the limit set by the Government for tariff growth. If the Government set it, for example, at 3-4% in recent years, then the corresponding growth could reach 100% or more in the regions.
By making changes to the law on Housing and Public Utilities and the Law “On Electric Power Industry”, it was possible to reduce the corresponding increase in tariffs and put them under control by more than 91%. Accordingly, this story and the tariff bacchanal associated with the unmanageable and uncontrolled growth of tariffs in the regions is coming to the end.
The Government has also approved methods for comparing analogs using cost reference values, and these standards are currently being implemented. This is a very large-scale reform that will have a positive impact on equalizing the conditions of Russian regions in energy, water supply, sanitation and other areas.
Due to the fact that the Government has reduced the fee for the negative impact on the environment when locating solid municipal waste, the tariffs of regional operators have been significantly reduced. In the field of gas supply, a transition to market pricing was ensured through the formation of exchange prices and indicators. I’d like to say that the most important thing here is not even what these indicators give us. Most importantly, we have granted independence to all consumers of gas and oil products. If they cannot reach an agreement with a natural monopoly and there are barriers and obstacles, they can easily buy the necessary goods on the exchange.
The Government Decision No. 305 on reducing the maximum period of connection to the relevant infrastructure systems and gas distribution networks was adopted. In the electric power industry, Russia ranked seventh in the Doing Business rating in 2019 for connecting to electricity. Innovative pricing mechanisms were introduced during peak hours for electrical loads.
Very important Government decisions on the development of competition are related to decisions in the field of the electric power industry, when the procedure for calculating the cross-subsidization rate was established, which provided the basis for the gradual reduction of this subsidization.
State regulation of prices, tariffs and fees for a number of services of natural monopolies in ports and for services related to the use of inland waterway infrastructure has been almost completely excluded. The result is the development of competition between ports.
The rapid development of exchange trading showed record rates in 2019. In fact, it was true for gas, the chemical industry, and the forest. The geography of deliveries and nomenclature has expanded dramatically. Our exchange is one of the most successful competition development projects.
In 2019, the independent publication Global Competition Review recognized the Russian federal antimonopoly authority as one of the most effective, we were included in the top ten out of 140 antimonopoly agencies around the world.
The regions are actively involved in the development of competition. 100% of regions approved key indicators of competition development. 100% of the regions have approved a new Road Map. 100% of regions have made changes to the regulations on executive authorities. 100% of the regions adopted acts on the organization of antimonopoly compliance.
The Decree of the President, which I have already mentioned, which is a fundamental act of strategic planning in terms of the adoption of Federal Laws, has not been implemented. Based on the highest values of the Constitution of the Russian Federation, we must first of all take care of the health and life of our citizens, and if foreign companies inflate the prices of vital drugs while holding a patent, the Russian State, as is customary around the world, should have the right to allow Russian laboratories to produce appropriate drugs, saving human lives by paying a fair royalty to the patent holder.
The relevant law on Reforming the Legal Regulation of Natural Monopolies has not been adopted.
And for the first time in our history, the proposed law on the Basics of Tariff Regulation in Russia has not been adopted. We still cannot say exactly what should be mandatory in the tariff, what should never be in the tariff, in which case rationing is carried out and according to what formulas.
In total, 40% of the Road Maps approved by the Government have not been implemented to date. This means that half of the activities of the national plan are currently not implemented. We have only a few months until the end of this year to implement this.
Our Competition Law states that when it comes to intellectual property rights, it is not subject to antimonopoly laws. There is no such restriction in the law of any of the countries.
The Government of the Russian Federation has significantly reduced its ability to conclude and implement regulatory contracts. Have already passed the relevant meeting with Andrey Removich (Belousov). This issue will be resolved.
In conclusion, I thank the Government for what has been done over the past period, and I would like to ask you, dear Mikhail Vladimirovich, if possible, to add only one element to the draft decision: to draw attention of all the federal-level executive governmental bodies involved in the implementation of national projects to the need for the strictest implementation of the Decree of the President on development of competition in the country.
This should be taken into account just as to solve the problems of new construction and the introduction of new facilities, so to create better social conditions for our citizens, and to develop competition itself, which will automatically bring additional benefits to our economy.