On adoption of the procedure of market analysis and assessment of the condition of competition in the commodity market (the FAS Russia order of 25.04.06 N108)

On July 27, 2006 the RF Ministry of Justice registered (N8121) the FAS Russia order of April 25, 2006 N108 «On adoption of the procedure of market analysis and assessment of the condition of competition in the commodity market» (hereinafter referred to as - procedure of analysis). The Document will come into force in August 2006 (10 days after the date of its official publication in «Bulletin of statutory acts» N32 of August 7, 2006).

The FAS Russia order of April 25, 2006 N 108 is a new drafting of the pre-existing Procedure of market analysis and assessment of the condition of competition in the commodity market which was adopted by the RF MAP of 20.12.1996 N169 (registered by the RF Ministry of Justice on 10.01.1997 N1229). For the time of its creation the mentioned document was a considerable step forward in organization and methodical support of the antimonopoly authority's activities. Ten years' practice proved fundamental correctness of the chosen approaches to the analysis of the condition of competition in the commodity markets. Current procedure shortcomings, internal contradictions and imperfection of the existing document became evident as the market structure became more complicated and experience of conducting relevant analysis was gained.

At present activity of the Russian antimonopoly authority is mainly oriented at prevention of violation of the antimonopoly law. Change of the direction of application and of the requirements to the document was determined by juridical practice expansion and application of the Procedure of market analysis and assessment of the condition of competition in the commodity market as the basis for decision-making on application of some particular articles of the RSFSR law of 22.03.1991 N948-1 «On Competition and Limitation of Monopolistic Activity in Commodity Markets» (hereinafter referred to as - competition law). The new Procedure of analysis is primarily intended for examination of the cases of abuse of dominant position in the market by an economic entity and the cases of agreements (concerted practices) restricting competition. It is also used during implementation of state control over creation and reorganization of commercial and non-commercial organizations, as well as in the case of acquisition of stocks (shares) in the authorized capital of commercial organizations and in other cases. It is used when issuing directions on compulsory de-merger (separation) of commercial and non-commercial organizations executing business activity and while forming the Register of economic entities whose share in the particular commodity market exceeds 35% as well as in other cases where there is need in analysis and assessment of the condition of competition in the commodity market or of an economic entities' position in this market. It is also applied in the following cases: preparation of conclusions about the consequences of the influence of special protection measures, antidumping measures and compensational measures on competition in the RF home market; conclusions about presence or absence of restriction of competition in the commodity market during establishment of tariffs, change or abolishment of customs-tariffs as well as during introduction of non-tariff measures; defining of validity of provision of benefits which give prior conditions to a separate economic entity or to several economic entities in comparison with other economic entities operating in the same market; defining of the influence on competition of acts, actions, agreements or concerted practices of the federal bodies of executive authority, the public authority of the RF Subjects, the bodies of local self-government and other bodies or organizations exercising the functions of the above-mentioned authorities.

Decision-making in the cases of violation of the antimonopoly law as well as defending of the antimonopoly authorities' position in court require that there are no contradictions in defining the key characteristics of the commodity markets and position of economic entities in the course of the analysis of the competition environment in the commodity market and in the course of the court hearings. Thus terminology is specified in the new Procedure of analysis. The following notions are introduced: seller and customer; potential seller and potential customer; wholesale and retail markets; adjoining markets and vertically integrated economic entities that are interchangeable in producing goods. The Procedure of analysis defines peculiarities of conducting analysis in the case of monopsony (supposed possibility of a customer to restrict competition in the commodity market) and in the case of operation in the market of the vertically integrated economic entities. A new part defining time frame of the analysis was introduced too.

Internal contradictions of the pre-existing document were eliminated in the course of preparation of the new drafting of the Procedure of analysis. For example, now defining of the economic entities operating in the market should be done after determination of the scope of the market. The necessity to make merchandising examination at defining product limits of the commodity market is also eliminated together with the necessity to reveal all sellers of the particular commodity in the commodity market which is being examined. Hierarchy criteria, which help to make unequivocal decision on determination of the scope of the commodity market even if the interested parties' opinions differ, were introduced. The following criterion of determination of the scope of the commodity market is eliminated: «Each of the customers of the singled out group has the right to purchase the commodity from any of its sellers». This criterion caused the problem of border territories. The ideology of the text has been changed and now if the norms are dispositive it is clearly indicated. Possibilities for conducting reduced analysis of the commodity market and for working out review of the condition of competition environment in the commodity market are defined.

At the same time the new Procedure of analysis provides for larger formalization of procedural questions of the analysis. The norm that »in each particular case the procedure of assessment of condition of the competition environment can be changed» is excluded. Stages and «sub-stages» for defining of a commodity market's characteristics are introduced. Rigid structure of analytical report is provided. It makes possible to algorythmizate the process of analysis and to raise the quality of the work.

The new Procedure of analysis is brought closer to the modern international practice of such analysis. It provides for the possibility of conducting «test on hypothetical monopolist» (SSNIP methodology) which is the basis criterion for determination of the scope of the commodity market in the USA and in the EU member-states. The provision that the commodity market volume is defined only by the volume of sales of the commodity is excluded and the list of indicators for defining of this characteristic of the commodity market is extended. The norm concerning the price deviation for 10% while defining the scope of the commodity market is spread not only at geographical borders (as it was in the previous drafting) but at the commodity scope of the commodity market. 

A number of changes that are not of principal character will be introduced in the FAS Russia order of April 25, 2006 N108 «On adoption of the procedure of market analysis and assessment of the condition of competition in the commodity market» in connection with the adoption of the RF law N135-FZ «On Protection of Competition» on July 26, 2006.