ARTEM MOLCHANOV: COURTS OVERTURNED ONLY 11% OF ALL FAS DECISIONS FOR 2018-2019

Participants of the V Annual Conference - Pravo.ru discussed the most interesting cases from judicial practice in 2019

Opening the session “State and state-run companies in judicial disputes”, Head of FAS Legal Department, Artem Molchanov, pointed out: “Overall, in 2019 there were not that many amendments to the Federal Law “On Protection of Competition”, which is wonderful in terns of establishing practice. It allowed us to more confidently shape certain approaches to regulation as well as judicial practice. At the same time, we do not stop solving the tasks set for us in the part of modernizing regulation. For example, it concerns digital packages and antimonopoly regulation of relations with intellectual property. These tasks are still important and FAS continues intensive efforts in this area”.

Head of FAS Legal Department highlighted the key objectives of the Antimonopoly Service in 2019, including:

• Decreasing violations by the authorities;

• Introducing antimonopoly compliance by the authorities;

• Suppressing cartels;

• Developing preventative tools (warnings and admonitions);

• Introducing in-house appeal;

• Issuing explanations of FAS Presidium (17 explanations).

Moving to judicial appeals of FAS decisions, Head of FAS Legal Department stressed that the number is still quite high.

“For the cases investigated under the Federal Law “On Protection of Competition” in 2019, 48.4% of FAS decisions were appealed at Courts. At the same time, the number of overturned decisions remains practically unchanged. In the past two years, the figure has been 11% from the total number of FAS decisions appealed at Court. In terms of decision-making, I believe that the figure is rather good. I.e., the violation-prevention tools that we have today are quite efficient”, stated Artem Molchanov.

The speaker gave a brief review of judicial practice on antimonopoly enforcement in various fields. One of the cases investigated by FAS related to abuse of dominance by a company on the markets of liquefied hydrocarbon gas (No. А40-82871/2018 case).

“The debating point in the course of the case investigation concerned an obligation of the market participant to enter into contracts with applicants provided that all volumes of the produced gas are not contracted”, explained Artem Molchanov.

For instance, the total volume of liquefied hydrocarbon gas, produced by a company that has the dominant position, was contracted with a single entity. At the same time, the company did not respond to the offers from other market players to enter into supply contracts, which FAS recognized as a violation of Part 1 Article 10 of the Federal Law “On Protection of Competition”.

“The decision made by FAS on this case is that it is necessary to create an equal access and equal conditions for all market participants. If there are several offers or applications, there should be no discriminatory conditions for distributing the volumes of liquefied hydrocarbon gas in subsequent contracting. I.e., the needs of the market and other economic entities should be taken into account”, clarified Head of FAS Legal Department.

The speaker also described FAS cases associated with violating the antimonopoly law by the authorities.  For instance, No. 39-APA19-6 case concerned appealing regional laws and regulatory acts.

“It is not already the first case where the antimonopoly body goes to Court challenging a regional legal act that has particular restrictive rules and conditions”, emphasized Artem Molchanov.

The act of the subject of the Russian Federation assigns the powers to a company as a single contractor to provide services of hardware-software suite, carry out works to service and administer a common protected channel for access to the internet public data network, as well as works to support regional information systems. The above activities, however, are not exclusive and can be performed by any organization that possesses the relevant licenses, which is contrary to Article 15 of the Federal Law “On Protection of Competition”.

“Courts supported us in the arguments that if a market effectively is competitive, it is impossible to define exclusivity of a particular entity, including a subordinate entity. Making such decisions, a regional legislature must take into account the level of competition on such markets and do not create market entry barriers and discrimination for other economic entities”, informs Head of FAS Legal Department.

Other two cases focused on suppressing cartelization in road construction (№ А40-285879/18 case) and on the markets of medicinal drugs and medical products (№ А40-64541/19 case).

“All cases of similar scale are related to very sensitive markets, first of all, regional ones. That is why the antimonopoly authority will continue defending its ideas that are embedded in the package of initiatives for suppressing and preventing cartels. In particular, it concerns a possibility for the antimonopoly bodies to promptly receive materials obtained through investigative and search operations”, says Artem Molchanov. “Our key objective is to protect and support the interests of those market participants who intend to work legally. Anticompetitive agreements do not allow them to execute their powers and enter the market, offer their competitive advantages, provide cheaper goods with a better quality, for which end consumers have a significant demand today”.

The last judicial dispute presented to the Conference participants is related to tariff regulation, particularly, the most frequent question – whether tariffs are economically justified (№ А40-264758/2018 case). For instance, based on the outcome of an inspection designed to verify whether tariffs for electric power transmission were justified, FAS issued a warning to a grid company to remove unreasonable costs – nearly 450 million RUB as lease costs – from the necessary gross yield.

“The necessary gross yield can include only the costs that fall under the regulated types of activity and are necessary to execute it”, explained Head of FAS Legal Department. “Any subsequent markups through lease payments, i.e., additional building of revenue positions at intermediary stages, must not be included in the tariff. FAS proved it once again, and Courts supported us”.

Finally, Head of FAS Legal Department pointed out that the practice accumulated by FAS in tariff regulation formed the basis of a draft law on public regulation of prices (tariffs). It must bring the principles and approaches to the costs composition of regulated organizations to a common denominator, and determine the key rules, according to which these costs are estimated.