MEETING OF MIKHAIL MISHUSTIN WITH MAXIM SHASKOLSKY, HEAD OF FAS RUSSIA

Head of FAS informed Prime Minister about the organization of control over unjustified increases in prices for socially important goods, tariffs for utility resources, as well as work to reduce administrative pressure on business and control over digital commodity platforms

M. Mishustin: Dear Maxim Alekseevich!

You are leading FAS Russia, an agency that actually has all the necessary tools to monitor and, among other things, respond to possible unjustified price increases for socially important goods. This is a very important function and task, especially under sanctions restrictions. And the well-being of our citizens directly depends on your systematic work.

Here, I would probably name three priority areas.

The first is, of course, medicince, especially vital medicine. The second direction is products. This is also very significant for all people. And the third very important area is construction materials, since here an increase in prices can negatively affect the pace of housing construction. This worries almost everyone who is planning to purchase a new home or is making renovations.

We see that many large retail chains behave responsibly and do not increase prices for socially important goods. I think this is very correct. Of course, this practice should not only be encouraged, but also actively developed and disseminated in our regions.

The authority's area of special attention is tariff regulation.

What is the overall situation in these areas? I would especially like you to stop at artificially inflating prices, if this is recorded by FAS. What are you doing about it?

M. Shaskolsky: Dear Mikhail Vladimirovich!

Indeed, the closest attention is paid to work in food and non-food commodity markets. Last year and this year, constant control over pricing was ensured on socially significant commodity markets, including in new constituent entities of the Russian Federation.

Most of our product markets are highly competitive, with a large number of participants, so antimonopoly measures are not applied here. In this situation, work is underway to increase the social responsibility of manufacturers and retail chains. As a result of our agreements, retail chains voluntarily reduce markups on so-called first-price goods, the most affordable in each product category.

Thanks to the work we carried out, we were able to reduce the average cumulative level of markups of 11 largest federal retail chains in 25 categories of socially important food products for 2022 by 8 %, and for the entire monitoring period - by 15 %. And today, the practice of responsible pricing and limiting markups on socially important food products proposed by FAS Russia has been supported by about 98 more regional retail chains, as well as many non-chain stores.

In addition, at the proposal of FAS Russia, the companies Detsky Mir, M.Video, Citylink, and DNS locked prices for certain categories of the most popular non-food products. And, according to retail chains, there is currently no shortage of these goods.

To further disseminate this practice, the Government of the Russian Federation adopted a resolution prepared by FAS Russia on the admissibility of agreements concluded by state authorities of the constituent entities of the Russian Federation with economic entities in order to stabilize prices for goods included in the list of socially significant ones. This measure provides regional authorities with the opportunity, if necessary, to take prompt measures to stabilize prices, to enter into agreements with business entities on price containment and voluntary commitments to limit trade markups.

It is important to say that the problem of providing domestic agricultural producers with fertilizers at affordable prices has been solved. Joint work with colleagues from ministries made it possible to develop trade and sales policies, agree on the required level of prices for fertilizers, the procedure for their indexation, and the percentage of remuneration for distributors. All major fertilizer manufacturers have developed such trade and sales policies and agreed with us. And we monitor their compliance.

Currently, prices are fixed at the level of average prices in May–July 2021 with indexation of only 10 %.

In addition, FAS Russia continues to work to ensure equal access of agricultural producers to subsidies from the budget. We analyzed 417 regulatory legal acts of the regions that regulate the provision of subsidies to agricultural producers to reimburse the costs of production and sale of grains and raw milk.

Seven warnings were issued to the authorities of the constituent entities of the Russian Federation.

An important decision of the Government of the Russian Federation, which made it possible to give a new impetus to the development of small and medium-sized businesses, provide consumers with goods at affordable prices, and eliminate shortages, was the permission of parallel imports.

To date, the list for parallel import includes more than 50 groups of goods - from shoes and clothing to transport. This measure also made it possible to stabilize, and in some cases even reduce prices, and expand the range of imported products.

Parallel import is used in most of the world's leading economies. This mechanism reduces the market power of the rights holder and allows multiple importers to compete with each other.

For medicines, price regulation and control is carried out in relation to medicine included in the list of vital and essential ones

In 2022, we analyzed 9 thousand prices for medicines, of which 8 thousand were agreed. For the first half of 2023 - 4.5 thousand prices, of which 3.8 thousand were agreed. Uncoordinated prices were recognized as unreasonable and withdrawn. Work on them continues.

We also conduct a constant comparative analysis of prices for vital and essential medicines with prices in reference countries. And if we see that our prices are higher, then we notify manufacturers of the need to reduce these prices.

Since the beginning of 2022, upon notification of FAS Russia, pharmaceutical companies have reduced 155 maximum selling prices for medicines by an average of 14 %.

In 2023, FAS Russia continued to participate in negotiations between the Circle of Good Foundation and pharmaceutical manufacturers on the supply of medicines unregistered in the Russian Federation. We managed to reduce prices on a number of expensive medications by an average of 49 %. As a result, the estimated savings amounted to about 8.6 billion rubles. Reducing prices for medicines purchased by the Circle of Good Foundation makes it possible to provide children with serious illnesses with additional medicines, medical products and the necessary amount of medical care. We continue this work with the fund.

As you noted, the building materials market is also socially significant. When checking pricing in 2022, we identified violations of antimonopoly legislation through abuse of a dominant position in the markets of flat glass, wood building materials, aerated concrete blocks, linoleum, and hot-rolled flat products.

Based on the results of the consideration of cases, rulings were issued to ensure competition, contain prices, and develop trade and marketing policies aimed at ensuring the priority interests of Russian consumers. As a result, the pricing policy of companies has become more restrained and cautious. We see a refusal to follow the price of the so-called export alternative on the domestic market and a reduction in prices for a number of materials.

This work continues in 2023. For example, we identified signs of violation of antimonopoly legislation in the market of raw materials for the production of ceramic tiles, where antimonopoly response measures have also been taken.

We closely monitor mobile communication tariffs, receiving a large number of requests from consumers. Cellular operators occupy a dominant position. For this reason, we are reviewing tariff increases to ensure they are economically justified. If we see an increase in revenue and at the same time a decrease in costs, failure to implement investment programs, or an increase in costs in areas not related to the provision of communication services, we issue an order to operators to either review tariffs and reduce them to economically justified ones, or cancel the increase altogether.

In general, state regulation of tariffs, as you noted, is one of the priority areas of work of FAS Russia. And the main principle here is the need to achieve a balance of economic interests between regulated organizations and consumers. The infrastructure still needs updating, investment, repair, and reconstruction, but the pace of tariff changes should take into account the interests of consumers.

Legislation is currently being improved to attract investment in the energy and housing and communal services sectors. Government of the Russian Federation has approved the concept of long-term tariff regulation. On August 31, you signed a resolution of the Government of the Russian Federation on agreements on the conditions for carrying out regulated activities, approving the mechanisms for implementing regulatory agreements in the electric power industry and providing for the establishment of long-term tariffs for a period of at least five years. This will increase the investment attractiveness and reliability of the industry.

At the same time, we are working to identify and eliminate economically unjustified costs. In 2023, we conducted 57 scheduled and unscheduled inspections and another 14 inspections jointly with the Prosecutor General’s Office. We checked 1 thousand tariff decisions made by regional regulators and issued 58 rulings to exclude economically unjustified costs. As a result, 9.27 billion of economically unjustified expenses, taken into account by regulatory authorities as part of the required gross revenue, were excluded.

This work allows us to reduce the tariff burden on consumers, primarily citizens. It should be said that we have 28 thousand regulated organizations that have a total gross revenue of 5 trillion rubles. In this situation, we decided to significantly increase the scope of work to identify economically unjustified expenses and decided to give the regional offices of FAS Russia the authority to independently conduct inspections of regional regulatory bodies. Previously, these powers fell within the exclusive competence of the central office of FAS Russia.

We have developed a draft document, it has been submitted to the Government; we expect that such a measure will lead to a more noticeable result in excluding unreasonable expenses from tariffs for consumers.

M. Mishustin: It is obvious that the demand for domestic goods is growing and will continue to grow. And in this regard, pricing is a very important factor.

Our consumers, citizens of Russia, should be reliably protected from unscrupulous suppliers of goods and services. And of course, FAS Russia in this sense is, one might say, a barrier on the path to dishonesty.

As for the level of payment for utilities and electricity, you are absolutely right in saying that it must be economically justified. To find a balance between the interests of service providers and large industrial, other enterprises and people, citizens who consume these resources.

Another priority task of the authority is to reduce administrative pressure on business.

To stimulate business activity, small and medium-sized businesses should be supported first. Creating conditions for the uninterrupted operation of such enterprises and industries is a very important task.

To do this, it is necessary to increase the efficiency of supervision in this area, including in the field of government procurement. Since government orders largely shape the work profile of small and medium-sized businesses.

It is very important to monitor the emergence of cartels whose actions may limit competition. It is the restriction of competition that is an obstacle for small and medium-sized businesses, as colleagues talk about when meeting with members of the Government.

How is work organized in these areas?

M. Shaskolsky: Mikhail Vladimirovich, on behalf of the President and the Government of the Russian Federation, the authority has implemented a number of measures aimed at reducing the administrative burden. For example, the threshold values have been increased from 400 million to 800 million rubles for transactions requiring prior approval. This measure is permanent. There are temporary measures - until the end of this year, the procedure for approving transactions with assets from 800 million to 2 billion rubles has been simplified. Such transactions can now be made without prior approval, but with notification to the service. At the same time, we retained the mechanisms of antimonopoly control. Having considered the notification, FAS Russia may issue ruling to take actions aimed at ensuring competition. In general, it should be noted that there is a high level of business activity and competition when controlling economic concentration, that is, when enterprises or companies are acquired. In 2022, we reviewed 1,164 applications, which is more than in 2021. And for a number of transactions, applications were received from several applicants.

Amendments have been made to the Code of Administrative Offences. For small and medium-sized businesses, it is allowed to reduce the amount of fines to half of those imposed for anticompetitive agreements.

Until 2023, a notification procedure for providing preferences to small and medium-sized businesses is provided.

The implementation of warning and precaution mechanisms also helps reduce administrative pressure on business. By applying these preventive measures, we have managed to reduce violations of antimonopoly legislation by half over the past five years.

As part of control and supervisory activities, 1,239 rulings were made on violations of antimonopoly legislation, 2,000 warnings were issued based on signs of violations, of which 89 % have already been executed.

As you noted, cartels cause harm to the economy. As part of the work to suppress cartels in 2022, 305 cases were initiated, 292 rulings were made on violations of antimonopoly legislation, and 960 decisions were issued totaling more than 5 billion rubles. The leaders in the number of violations identified remain the areas of road construction, housing and communal services, pharmaceuticals, and real estate.

FAS Russia is constantly working to monitor public procurement, which in many ways is a mechanism for developing competition. As part of control in the field of government procurement, in the first half of 2023, 23 thousand complaints were considered, of which 43 % were considered justified. 16 scheduled and 5,440 unscheduled inspections were carried out. 8,600 remedies were issued to eliminate violations of the legislation.

In some regions, there is an increase in competition in the field of government procurement. If in 2022 in only 10 regions the number of participants per purchase was three companies, then in 2023 three or more companies per purchase are already observed in 24 regions of the Russian Federation. There is a direct correlation between the number of participants and budget savings during government procurement. The best results of budget savings were shown by the Lipetsk region, Chelyabinsk region, and Kamchatka Territory.

We continue to improve legislation on public procurement. In 2022, changes aimed at combating so-called professional complainants came into force. As a result, in 2022 we received about 37 thousand complaints - this is 30 % lower than in 2021. This is due to provisions in the law that have made it more difficult for professional complainants to interfere with competition procedures. Now additional requirements are imposed on procurement participants: experience in contract execution of at least 20 % of the initial purchase amount. Organizations that do not comply with this cannot file complaints and interfere with procurement.

The number of complaints recognized as justified has increased, so it is clear that market participants have adapted to the requirements of the legislation.

We continue to work in areas, including within the framework of the implementation of the National Competition Development Plan for 2021–2025.

M. Mishustin: It is very important to carefully monitor ensuring equal access to the public procurement system. Because holding open competitive tenders is one of the most important, key factors that contribute to the efficient spending of budget funds.

One more topic that I want to discuss. New forms and formats of trade are now very actively spreading. Already today, marketplaces and corresponding aggregators are overtaking traditional stores in terms of turnover. And today, digital platforms are regulated as part of improving legislation.

The fifth antimonopoly package came into force in September. This is a fairly serious law that introduces a number of certain restrictions in relation to both large marketplaces and aggregators.

How does your authority organize control over the activities of such companies?

M. Shaskolsky: Mikhail Vladimirovich, with the increase in the market power of digital monopolies, one of the most important tasks is protecting consumers in digital commodity markets. Therefore, FAS Russia developed changes to the legislation, which came into force on September 1. This is the so-called fifth antimonopoly package. Now the law on protection of competition establishes a set of conditions under which the owner of a digital platform will be considered to occupy a dominant position.

First, the network effect makes it possible to influence the market. That is, the more buyers and sellers there are in the market, the stronger the market power of the platform owner.

Secondly, the share of transactions concluded between buyers and sellers in this product market exceeds 35 %.

And the third condition is that the digital platform’s revenue in the relevant product market exceeds 2 billion rubles.

In these cases, the fifth antimonopoly package will work.

If digital platforms do not comply with the provisions on abuse of dominant position, antimonopoly measures will be taken accordingly.

I note that antimonopoly restrictions do not apply to small digital platforms with revenues of less than 2 billion rubles.

Dear Mikhail Vladimirovich, I would like to thank the Government of the Russian Federation for its work in adopting the fifth antimonopoly package. This has significantly expanded our ability to protect consumers in digital markets.

M. Mishustin: It is evident that digital platforms will play an increasingly significant role in the country’s economy. This is a promising direction, which is based on innovative solutions that our entrepreneurs, one way or another, implement directly into everyday life. Their use is not only convenient and comfortable, but also promises serious financial benefits for the consumer. This is also very important. Therefore, it is necessary to approach regulation and enforcement as responsibly as possible, so that, first of all, the consumer, as you rightly said, is protected. And I want you to deal with it effectively.