THE STATE DUMA APPROVED A DRAFT LAW ON BANNING UNITARY ENTERPRISES IN COMPETITIVE MARKETS IN THE FIRST READING

The goal of the draft law is to reject an archaic form of unitary enterprise considering all social consequences of such a step

Under the FAS-drafted Law, such enterprises cannot be formed on competitive markets and unitary enterprises operating on competitive markets*, will be transformed into shareholding companies, which will open the markets for small business.  If operations of such enterprises are socially-oriented, they can be transformed into budgetary entities. The amendments make the relevant changes to the Law “On Protection of Competition”.

The Law is drafted to pursue 2018–2020 National Competition development Plan approved by an order of the President of Russia “On the main directions of the state policy for competition development” and the decisions made by the Government on 30 August 2018.

In accord with FAS Report on the state of competition, in 2017 no significant changed took place in Russia towards developing healthy competition. One of the reasons is maintaining state monopoly trends in the economy.

“So far, private business in many potentially competitive sectors of the economy does not exist or is underdeveloped.  In particular, state and municipal unitary enterprises prevent competition development there”, explained Deputy Head of FAS Sergey Puzyrevskiy.

On 1 2013 - 1 January 2018 the number of unitary enterprises in Russia increased nearly by 39% to about 18,500, of which more than 15,000 are formed at the local self-government level. A significant part of unitary enterprises operate on competitive markets.

FAS exposed numerous facts when ordering parties avoid applying the Law on contractual system by transferring budgetary funds in the form of subsidies to their subordinate unitary enterprises to procure goods, works, services for the customers’ needs, particularly, on competitive markets.

“Some unitary enterprises operate in competitive segments, which unfortunately leads to their monopolization. The draft Law will create equal conditions for all market participants. On 11 December 2018 it passed the first reading”, pointed out Sergey Puzyrevskiy.

*Except enterprises involved in national defence and state security of the Russian Federation; natural monopolies; life-supporting activities in the Extreme North; culture, art and preserving cultural values as well as cases directly specifies in the federal laws, acts of the President and the Government  of the Russian Federation.