ANATOLY GOLOMOLZIN ON IMPROVING THE LAW UNDER THE CONDITIONS OF DIGITAL ECONOMY
Deputy Head of FAS presented a report to the Committee of the Russian Federation on Economic Policy during parliamentary hearings about establishing a common system of legal support for developing the digital sphere. Anatoly Golomolzin talked about developing digital economy in the competitive environment
At the outset, Deputy Head of FAS pointed out the work that is being carried out under the frame of two orders of the President of the Russian Federation.1
First, he described the practice of antimonopoly enforcement.
“Roaming in the Russian Federation was abolished trough investigating antimonopoly cases. The rates applied when travelling in Russia have become as affordable as in the “home” region – they reduced from 2.5 to 10 times. Consumers save at least 6 billion RUB annually. Not only prices were reduced by multiple times in the course of antimonopoly cases but the traffic also increased proportionately, and as a result communications provides have won rather than lost", informed Anatoly Golomolzin.
He pointed out that due to the measures adopted, consumption of communications services in Crimea by travelling individuals increased by an order for internet access services, and even exceeded the level of home consumption. FAS practice is formalized in the law on communications2.
“Russia has experience of investigating case against global digital giants such as Google, Microsoft, Apple – the international leaders. Only seven years ago, in 2011 four companies representing the industrial world were on the top of the list of the largest firms, now all five leaders on capitalization are digital companies. The annual capitalization growth of digital giants is impressive: around 30% - 60%. In some sectors (including energy, banks, etc.) new digital companies occupy the dominant positions, exercising significant influence upon the real sector of the economy”, continued the speaker.
According to Deputy Head of the Antimonopoly Service, investigations of cases on violating the antimonopoly law have gone through considerable changes in recent years and FAS practice illustrates the need to adjust the work of the antimonopoly bodies as well as the regulatory environment.
“Market power on digital markets determines use of big data, algorithms, pools of intellectual property rights, zero transaction costs, network effects. Markets concentrate around platform solutions and are multisided; income monetization is formed in the adjacent sectors. Conditions of deals, mergers and acquisitions are changing, and the nature of the antimonopoly law is changing”, added Anatoly Golomolzin.
Deputy Head of FASemphasized that to respond to the modern realities, FAS has drafted the “fifth antimonopoly package”, refining the tools used by the antimonopoly authority and setting a number of directions towards improving the antimonopoly law. In particular, it concerns clarifying the concept of dominant position on the market, advancing the procedures for exposing and suppressing antimonopoly violations and merger & acquisition control procedures.
Then Anatoly Golomolzin described the necessary tools and supporting non-discriminatory access to the markets of applications for Russian developers:
“Turnover on US platforms is 6 times higher than similar sites in the Asian region and 10 times higher than the Europeans. If national economies insufficiently enjoy opportunities of the digital economy, then those countries, transnational corporations that actively promote in the field of digital economy, gain an undeniable advantage at the global scale. Global companies obtain competitive advantages for promoting own applications and services, particularly, using product tying”.
He explained that to fulfill the Road Map, FAS Expert Council on Information Technologies formed an open Working Group and put forward a concept of a draft law on setting the requirements for pre-installing Russian applications, removability of applications for subscriber devices sold in Russia. Drafting the proposals, FAS took into consideration, in particular, its own experience of investigating antimonopoly cases.
“For instance, fulfilling the conditions of the settlement with FAS, Google now provides and will be providing for five years possibility to install search browsers from Russian vendors on mobile devices through “a window of selection” that cannot be ignored. Now users choose out of three search engines - Google, Mail and Yandex in the selection window. As a result, the share of Yandex – a Russian vendor on the search market increased from 37% to 52%. These data confirm efficiency of the pre-installment channel”, commented Anatoly Golomolzin.
He added that “in view of the performance specifics of the global applications market, FAS believes that the best way to ensure non-discriminatory access to the market is introducing a requirement to pre-install Russian applications with particular functionalities at the stage of device production. For the information security purposes, full removability of service applications without compromising the functionality of service software is essential. It is absolutely important that that both measures are fulfilled simultaneously – pre-installment (particularly, in the form of a “selection window”) and consumer right to remove applications”.
Deputy Head of FASemphasized that on 19 November the draft law on pre-installments3 was passed by the State Duma in the third reading.
Anatoly Golomolzin also discussed development of exchange trading.
He stated that exchange trade is one of the key elements of state competition policy and reminded that № 618 Order of the President of the Russian Federation “On the main directions of the state policy for competition development” of 21 December 2017 emphasized the importance of the work in this area.
Deputy Head of FAS outlined the efforts of FAS Exchange Committee formed by the Bank of Russia, FAS and the Federal Tax Service to develop exchange trade and create objective market indicators and expand markets.
More than 400 price indices are published on the exchange regularly, including oil and petrochemicals quotations. The current annual scope of trade on the physicals market in Russia is around 1 trillion RUB, on the market of derivatives – approximately 20 trillions RUB. We have reached these indicators practically in 10 years, which improved the situation significantly, and put some sectors to order”, pointed out Deputy Head of FAS.
Anatoly Golomolzin explained that the problems of regulatory framework for exchange trade on the domestic market are practically solved, but additional amendments to the law are required in the part of creating equal conditions for exchange trade on the domestic and foreign sites. It will facilitate establishing one of the world financial centers in Russia.
Regarding support to developing digital economy in competitive conditions, Anatoly Golomolzin stated:
“Not all issues necessary for efficient development of digital economy are being solved successfully”.
He clarified that with digitalization of the global economy, a direct impact of transnational corporations upon competition on Russian markets is increasing. In the IT, sector the effect of global markets is significant, particularly, because they have the basic platforms, large databases, price algorithms and IP pools.
“Software, databases, control systems are recognized as results of intellectual activity. The latter are protected by law. In IT, software, being results of intellectual activity, are introduced in circulation, but when such actions are exercised in the territory of the Russian Federation they are exempt from the general rules of competition protection4”.
“The current norms do not establish equal conditions of competition for foreign and Russian suppliers on adjacent markets in the IT field. Internationally, there are no exemptions from the norms of the antimonopoly law applied to the intellectual property rights. In other countries (including the EU, the US, Japan) there is some specifics with regard to the procedure of applying the antimonopoly law to actions and agreements on exercising exclusive rights for results of intellectual activity”, informed Anatoly Golomolzin.
“To protect competition on Russian IT markets and taking into account the international experience, the procedure should be determined for applying the antimonopoly law to actions and agreements on exercising exclusive rights for results of intellectual activity”, added Anatoly Golomolzin.
Another item for the speaker was ensuring access of communications operators and internet providers to apartment houses5,6.
“Taking about development of digital economy, one should not forget about the effects for our population: if a person lacks a possibility to receive modern services of proper quality at affordable prices – i.e., under competitive conditions – people will not be able to take advantage of the benefits of digital economy”.
Deputy Head of FAS explained that “since the issue is not regulated, FAS keeps receiving numerous complaints from physical persons that they cannot choose a communications provider in apartment blocks, the costs of communications services provided by a single communications provider are high and the quality is poor, and managing companies commit abuses in the part of providing access to the common house property of the owners when rendering communications services to the residents of apartment blocks”.
Anatoly Golomolzin also focused on eliminating administrative barriers and excessive procedures:
“In the context of the “Digital Economy” Project, 5G networks will be rolled out in Russia, which means construction of a lot of base stations. The existing administrative, timing and economic barriers for obtaining permit documentation can have an adverse effect upon the speed of construction and commissioning the equipment”.
He clarified that “to execute the Road Map of the “Digital Economy” Project, the timeline for obtaining permits should be decreased, and procedures for operators obtaining sanitary-and-epidemiological inspection certificates on project documentation and commissioning simplified. Process automation, including integration of accounts in an e-flow system, linking the information systems of Roscomnadzor [the Federal Service for Supervision of Communications, Information Technology and Mass Media] and Rospotrebnadzor [the Federal Service for Surveillance on Consumer Rights Protection and Human Well-Being] (a pilot project on information collaboration); analyzing regulatory acts are also necessary”.
Finally, Deputy Head of FASfocused on e-commerce.
“E-commerce is one of the markets transformed as a result of developing new services. Since in the modern reality this market has become global, it is essential to achieve equal conditions for foreign and Russian sellers to operate on the market”, commented Anatoly Golomolzin.
He informed that to execute the relevant item of the Order, FAS submitted proposals to the President of the Russian Federation on amendments to the law designed to enable equal conditions for online operations of companies in Russia.
“There is no unified approach or universal solution of the problem in the world, although the attention of regulators in many countries to this aspect proves its sharpness”, concluded the speaker.
References:
1 № 204 Order of 07.05.2018 that approved the National goals and strategic objectives of developing the Russian Federation till 2024 in the part of advancing digital economy, particularly through a system of legal regulation of digital economy based on a flexible approach in each sphere as well as civil transactions on the basis of digital technologies.
№ 618 Order of the President of the Russian Federation of 21.12.2017 approved 2018-2020 National Competition Development Plan. The Order states that improving antimonopoly regulation under the conditions of digital economy and economic globalization in order to efficiently suppress cross-border antimonopoly violations and enhance competitiveness of Russian companies on the world markets is one of the fundamental principles of the state policy for competition development. System-wide measures include also development of exchange trade, eliminating digital inequality, particularly through abolishing roaming in Russia.
To fulfill the National Competition Development Plan, № 1697-r Decree of the Government of the Russian Federation of 16.08.2018 approved 2018 - 2020 Action Plan (“Road Map”) for developing competition on 18 sectoral markets. Regional Road Maps are adopted by the subjects of the Russian Federation covering from 33 to 41 markets.
2 On 1 June 2019 № 527-FZ Federal Law “On amendments to Articles 46 and 54 of the Federal Law “On communications” of 27.12.2018 came into effect, formalizing obligations of providers to set common tariff conditions when subscribers travel and are in the network of their home operator and provide free incoming voice connections when subscribers are within networks of any operators in Russia.
3 № 757423-7 “Draft law on pre-installments” (an initiative of members of the parliament).
4 Part 4 Article 10, Part 9 Article 11 of the Federal Law “On Protection of Competition”.
5 Road Map on “Telecommunications” includes measures enforcing nondiscriminatory access of communications providers to apartment houses in order to install communications network with the purpose of rendering communications services to the residents.
6 On 24 December 2018 a draft law was submitted to the State Duma of the Russian Federation upon an initiative of a member of the Federation Council L. Boikova – “On amendments to the Federal Law “On communications” and other legislative acts of the Russian Federation in the part of enforcement of the population for access to telecommunications services”.