FAS and the Corporate Counsel Association

The Round Table discussed antimonopoly regulation in retail, the financial sector, the latest enforcement trends in advertising and unfair competition

On 6 June 2017, FAS representatives took part in an already traditional Round Table organized by the Corporate Counsel Association (CCA).

Deputy Head of FAS Andrey Kashevarov discussed the findings of the monitoring and verification of retail chains and suppliers. In particular, FAS was concerned with the establishing practice related to disproportionate fines to the benefit of retail chains and discounts required from suppliers.

Deputy Head of FAS pointed out that the trade legislation can result in new amendments to the law if the nature of relations does not change. He emphasized: “For example, the law may limit the size of fines included in the contracts. Self-regulation of the market remains the priority for us”.

Andrey Kashevarov said that FAS is considering a possibility of including representatives of regulators (the Ministry of Industry and Trade, FAS, etc.) as members of the Inter-Sectoral Expert Council (IEC). He proposed to make IEC decisions mandatory for all market participants regardless of membership, and grant powers to IEC to impose fines upon violators.

Deputy Head of FAS Department for Control over Social Sphere and Trade, Ekaterina Uryukina, continued the regulation theme. She outlined the issues of applying the norms of the Law on Trade to information disclosure. The FAS representative stated that companies may reduce risks through devising and observing commercial policies. Similarly, market participants may be guided by recommendations on developing commercial policies, drafted by FAS for the particiapnts of the pharmaceutical market. FAS emphasized that information disclosure will create conditions for non-discriminatory access of suppliers to retail chains and outline approaches of the antimonopoly body to proving discriminatory conditions, created by retail chains for food products suppliers, in marketing services, and FAS cases against large retail chains such as “Metro Cash & Carry”, “Achan”, “Lenta”, etc. Considering the goods returning conditions in the contracts between retail chains and suppliers, she explained that “FAS does not aspire to prohibit returns as such, and intends to keep the current legislative design of the prohibition for imposing such conditions. It is expedient to provide that the price of returned goods should depend on the remaining shelf life (the price should go down proportionally to the shelf life expiration)”.

The participants discussed antimonopoly regulation on financial markets. Lilia Belyaeva, Deputy Head of FAS Department for Control over Financial Markets, presented several measures included in the new Road Map on developing competition on the market of financial services and aimed at preventing violations.

Alexandra Nesterenko, CCA President, emphasized that FAS is strengthening cooperation with the Bank of Russia. On 10.05.2017 Head of FAS issued an order approving the Road Map  on “Developing competition on the market of financial services” that specifies measures on devising proposals towards preventing abuse of dominance by creditors on the market of consumer loans; unfair competition between banks on the market of retail deposits; reducing impact of the dominant representatives of insures upon competitors’ operations and the state of competition on the OSAGO market [mandatory vehicle owner liability insurance]; as well as preventing other violations of the antimonopoly law by financial organizations subordinate to the Bank of Russia due to possible legislative definition of FAS institution of conclusions regarding the draft rules of professional activities, devised by professional associations of financial organizations, and for the basic standards of operations of financial organizations devised by self-regulated organizations on the financial market.

In the near future the Bank of Russia will provide electronic information on an ongoing basis to FAS about the work of financial and other organizations subordinate to the Central Bank of Russia. Alexandra Nesterenko believes that simplifying the procedure for obtaining information by the antimonopoly bodies, necessary to analyze the state of competition on the market of financial services, will reduce the administrative costs for financial organizations executing FAS requests.

Lilia Belyaeva pointed out that one of the typical violations, for instance, on the market of banking services, is unfair competition from credit organizations, related to worsening consumer qualities of deposit accounts of physical persons after an agreement is concluded. Credit organizations often introduce unlawful prohibition for deposit replenishment (or set a restrictive commission, a small allowable replenishment sum or unsustainable minimum replenishment sum), reduce the percentage accrued on deposit replenishments, etc. As the speaker underlined, in some cases banks justify their actions by the regulations of the Bank of Russia to limit operations on attracting funds on deposits, which was separately verified by FAS and was not confirmed in all investigated cases, and the bank actions were recognized as unfair competition acts.

FAS representative stated that in spite of a considerable number of investigated cases, the antimonopoly bodies continue receiving complaints. “FAS and the Bank of Russia plan to draft a joint informational letter summarizing unfair competition practice”, reported Lilia Belyaeva.

As another violation typical for the banking services market, Lilia Belyaeva mentioned anticompetitive agreements between universal, full-service banks and the banks specialized on loans for purchasing cars of particular brands. According to the speaker, such agreements are concluded in order that a universal bank opens  borrowers’ accounts for more convenient servicing of the autoloans granted to the latter by a partner with a simultaneous obligation of a universal bank not to “steal” such customers, offering its own autoloans. In other words, with an obligation to partially refuse to compete with a partner. Lilia Belyaeva pointed out that in recent years FAS exposed this kind of violations following all such inspections and later Courts supported decisions on such violations.

Considering the antimonopoly enforcement practice on the insurance market, FAS representative emphasized several typical violations, including abuse of dominance on the OSAGO market, particularly, by imposing additional paid financial and other services upon policy holders; agreements between insurers on imposing or reducing the scope of sales of OSAGO services as well as unfair competition  between insurers participating in tenders for concluding OSAGO contracts, where insurers  underrate the insurance premium in breach of the regulatory acts issued by the Bank of Russia, which makes them tender winners.

Lilia Belyaeva mentioned some decisions about insurance companies made by FAS regional bodies that were reviewed by FAS Appeal Collegium upon receiving complaints. Since some decisions were reversed and there are other issues, particularly, in eliminating the exposed violations, according to the speaker,  FAS plans, among other matters, to draft the relevant explanations to the regional antimonopoly bodies, that will in general transform the approach to suppressing certain violations on the OSAGO market.

Lilia Belyaeva also paid special attention to interaction between credit and insurance companies. First of all, FAS representative informed the Round Table participants about the changes to the General exceptions with regard to the agreements between credit and insurance organizations, approved by No. 386 Decree of the Government of the Russian Federation of 30.04.2009. Describing some discrepancies between the document and the procedures for cooperation with insurers applied by banks, Lilia Belyaeva highlighted the following ones: (1) requirements to the insurers that are irrelevant for assessment of their financial soundness and solvency as well as the requirements that are directly specified in the General Exceptions as unacceptable, for example, as additional requirements or adjusting the overall evaluation of insurers  (such as, for instance, the level of business activity, absence of tax liabilities regardless of the amount of indebtedness, credit rankings, branch networks); (2) failure to observe restrictions on the regularity of verifying insurers; (3) requirements to submit documents for an inspection without necessity, and other discrepancies.

FAS also plans to make changes to defining the dominant position of financial organizations, particularly, direct indication of possible recognition of different types of financial services as substitutes, as well as financial and non-financial services, if it is confirmed by the results of analyzing the state of competition. The speaker stated that all acts in this field enable this and the amendments to the rules are made upon requests from credit organizations.

Next, Yana Sklyarova, Deputy Head of FAS Department for Control over Advertising and Unfair Competition, reviewed changes introduced by the “forth antimonopoly package” in regulating unfair competition and outlined the established practice of applying the new norms. In particular, she pointed out that as planned, expanding the institution of warnings to unfair competition acts considerably reduced the number of initiated cases. As for the most widespread types of violations, the speaker emphasized that “majority of violations are related to breaching the exclusive rights and confusing” and gave examples of some investigated cases.

Then, Nikolai Kartashov, Head of FAS Department for Control over Advertising and Unfair Competition, shared the main regulatory and enforcement trends in advertising, pointing out that protection of small and medium business is on the central place in legislative drafting activity. The highest number of violations in the field of advertising is committed in the financial sector. A lot of violations by pharmaceutical companies also are exposed.

Finally, FAS representatives answered questions raised by the Round Table participants. The discussion of CCA members and FAS representatives, as pointed out by the Round Table participants, was informative and useful for both parties.