Arbitration Court pronounced legitimacy of the fine imposed upon “FGK” JSC for failure to execute a determination issued by the antimonopoly body

On 25 May 2017, Moscow Arbitration Court dismissed a claim of “FGK” JSC to invalidate FAS injunction to fine the company for failure to execute a determination of the antimonopoly body on a transaction with “UZB-Logistics” Ltd.

On 28 March FAS allowed a petition of “FGK” JSC on obtaining for use 100% fixed production assets of “UZB-Logistics” Ltd.

Considering the petition, FAS took into account that “FGK” JSC is a 100% subsidiary of “Russian Railways” OJSC and under the Law “On Protection of Competition” is included in the same group of persons.  In view of the dominant position of “Russian Railways” OJSC on the market of rail transportation services and the services for use of railway transport infrastructure in public use, the group of persons of “Russian Railways” OJSC и “FGK” JSC can control the process of providing railway infrastructure in public use, particularly, to rolling stock operators that compete with “FGK” JSC.

Therefore, FAS requested the companies to perform a number of actions to support competition; for example, submit to FAS economic substantiation of increased prices at least 15 days prior to such changes if the expected increase of prices (tariffs, charges, payments) for non-regulated services for providing cars (gondola cars) for carriage and related services exceed the average quarterly level by over than 7.5%. The group of persons also must justify to the antimonopoly body any increase of prices (tariffs, charges, payments) above the level set for the relevant services in the tariff / price list. “FGK” JSC did not appeal the determination under the statutory procedure and within the specified period.

In February 2017 FAS learned that from 1 June 2016 “FGK” JSC unilaterally increased the costs of services for providing rolling stock to “Olshansky Quarry” JSC and “Khmelnitsky Quarry” JSC by over 7.5% in comparison with the average quarterly price. For instance, the prices for the services of “FGK” JSC to “Olshansky Quarry” JSC increased on average by 56.6%, while the services to “Khmelnitsky Quarry” JSC became more expensive on average by 46% in comparison with Q2 of the pervious year.

In spite of a significant costs change, “FGK” JSC contrary to the determinations did not submit preliminary notification and substantiation to the antimonopoly body. Thus, the company failed to execute the legitimate determination of the antimonopoly body issued exercising the state control over economic concentration.  On 15 February 2017 FAS held “FGK” JSC administratively liable and fined the company 300,000 RUB.

Currently FAS is investigating a case against “FGK” JSC и “Russian Railways” OJSC upon signs of abusing dominance: fixing monopolistically high price for providing gondola-cars to transport construction aggregates on domestic routes.