Explanatory Note to the Draft Federal Law «On Amending the Code of the Russian Federation on Administrative Violations»

The draft of the Federal Law «On Amending the Code of the Russian Federation on Administrative Violations» (further on referred to as the Bill) is designed to facilitate observation of the antimonopoly legislation and increase the level of responsibility of the market players for violating the legislation. 

Amendments and additions to the Code (CoAV):

Increase the sanctions for violating the antimonopoly legislation;

Introduce the new types of corpus delicti into the antimonopoly legislation in the CoAV;

Introduce additional grounds for defining the rate of administrative fines - the amount of proceeds of the sale of goods (works or services).

In the existing Code of the Russian Federation on Administrative Violations (further on referred to as the Code) separate types of corpus delicti of administrative violations of the antimonopoly legislation are described in Chapter 19 of the Code: «Administrative Violations of the administrative order». 

Practically all administrative violations of the administrative order, described in Chapter 19 of the Code, incur administrative responsibility in form of penalty calculated as a multiple of the minimum wage. 

The existing level of administrative sanctions for violating the antimonopoly legislation make the state antimonopoly control ineffective and do not actively stimulate fair market behavior of economic agents and observation of the antimonopoly legislation. 

On the one hand, the high level of administrative sanctions for violating the antimonopoly legislation is justified by considerable economic benefits obtained through monopolistic activity, on the other hand, - by heavy negative consequences of such violations for the economy in general. 

According to the concept underlying the amendments, certain violations of the antimonopoly legislation are punishable by administrative penalties, the amount of which should be a multiple of proceeds of the sale of goods (works or services). Therefore, the Bill adds a new clause to Part 1 Article 3.5 of the Code introducing possibility of calculating the administrative penalty as a multiple of proceeds of the sale of goods (works or services), as well as to Part 6, fixing the limit to the administrative penalties calculated as a multiple of proceeds of the sale of goods (works or services).

At the same time, the Bill states that some violations of the antimonopoly legislation should incur disqualification, which is believed to be a modern and timely leverage to ensure efficiency of prohibitive antimonopoly measures introduces by the state. 

As economic agents gain high proceeds by breaching the antimonopoly legislation, attempts to violate it happen on a regular and systemic basis. At the same time, decisions on behalf of legal entities are made by concrete physical persons - the company's managers, or, in terms of the Code - officials of legal entities. The decisions are made by the officials personally and deliberately, in particular, taking into account the negative impact of such actions and decisions upon the national economy and ordinary consumers. 

Disqualification of the company's officials should become an efficient negative reputation factor, which would prove that the guilty persons are unfit, from professional as well as moral and ethical point of view, to carry out the executive duties over a legal entity. In line with the above mentioned, and to ensure observation of the antimonopoly legislation, the Bill introduces personal responsibility for breaching the antimonopoly legislation in form of disqualification. 

At the same time, the Bill propose a new edition of Part 2 Article 19.5 of the Code that specifies the sanctions for failure to execute within the scheduled period a lawful determination or a decision of the federal antimonopoly authority or its territorial offices, depending on the violation of the antimonopoly legislation that resulted in issuing a decision or a determination. 

Article 19.8 of the Code establishes responsibility for failure to present petitions, notifications (applications), data (information) to the federal antimonopoly authority and its territorial offices as well as the natural monopolies regulators. Violations of the antimonopoly legislation, however, clearly have specific features. Moreover, introduction of sanctions for breaching the antimonopoly legislation and legislation on natural monopolies in different parts of Article 19.8 is objectively determined by the increased sanctions for violating the antimonopoly legislation. In this respect, the Bill introduces appropriate amendments to Article 19.8 of the Code. 

The Bill also imposes responsibility for most dangerous, from the economic point of view, violations of the antimonopoly legislation - abusing dominant position on the market, entering into restricting competition agreements and concerted actions. The amount of sanctions for the above violations is established by the Bill as a percentage of proceeds of the sale of goods (works or services), determined according to the new Tax Code. Such a principle conforms to the antimonopoly practice in the USA and the state-members of the EC. 

Thus, the Bill introduces new types of corpus delicti of administrative violations - abusing dominant position on the market, entering into agreements restricting competition, concerted actions, and unfair competition. Actions that constitute objective side of the above listed violations, do not breach administrative order and, as a consequence, there are no grounds to include the given types of corpus delicti into Chapter 19 of the Code. To add a new Chapter 19-prim to the Code would upset the existing Code structure while containing only 3 new types of corpus delicti and therefore is considered unreasonable. Thus, the Bill includes such types of corpus delicti into Chapter 14 of the Code «Administrative Violations in Entrepreneurial Activities» in separate Articles 14.31-14.33. Taking into account higher jeopardy of restricting competition agreements or concerted actions, the fact of entering into agreement or committing concerted actions is recognized as violations, that is, - when an economic agent has entered into agreement or committed concerted actions restricting competition and unacceptable under the antimonopoly legislation. 

The power to impose administrative penalties for new types of corpus delicti should be given to the federal antimonopoly authority and its territorial offices as envisaged for existing types of corpus delicti of the antimonopoly legislation with the right to transfer, if necessary, the relevant cases for judicial examination (Part 2 Article 23.1 and Article 23.48 of the Code). Therefore, the Bill introduces appropriate additions to Part 2 Article 23.1 and Part 1 Article 23.48 of the Code.

Adopting the Bill would create workable mechanisms of the state influence upon violators of the antimonopoly legislation. Moreover, high administrative penalties and personal responsibility of officials are some of the most effective measures of protection, which is an important factor to ensure sustainable market turnover and economic development. 

Implementing the Bill would not require additional budget provision and more members of staff of the antimonopoly authority.