Russian top court sides with FAS. Vitaly Dianov comments for Global Competition Review

05.10.2018

Russia’s Supreme Court has vacated the decisions of three lower courts, which all held that the Federal Antimonopoly Service incorrectly found that the operator of a port on the Black Sea charged monopolistic prices for certain services.

The FAS accused PJSC Novorossiysk Sea Trade Port in 2015 of setting and maintaining monopolistically high prices for the handling of ore, fertilisers, containers, ferrous and non-ferrous metals, as well as oil and oil products in the port of Novorossiysk. PJSC acts as a stevedore, loading and unloading goods and transferring them from railroads and trucks to ships and vice-versa.

PJSC challenged the enforcer’s claims in the courts, three of which sided with the company. But on Wednesday the Supreme Court cancelled those three decisions and ordered a new trial, according to FAS deputy head Sergey Puzyrevsky after a hearing at the top court.

Vitaly Dianov, a partner at Bryan Cave Leighton Paisner in Moscow who defended a different port in a parallel individual probe, noted that the case has a long history, beginning after the Russian ruble plunged during the country’s financial crisis a couple of years ago.

Since the stevedores operating in Russia often charge their customers in US dollars, some Russian companies complained that prices rose in line with a more expensive exchange rate that followed the ruble’s fall, Dianov explained.

The FAS pursued many of the country’s port operators, the vast majority of which signed amicable agreements with the enforcer after initially contesting its findings in court, Dianov said. But PJSC decided to fight the competition watchdog to the end in the courts.

During its individual probes into the ports, the FAS scrutinised the market and sought to establish that there were high barriers to entry and concentration levels that showed dominance, Dianov said. But the port industry in Russia is one of the fastest-developing sectors and there is not only fierce competition within the country’s ports but also from foreign rivals as well – Finnish and other Baltic ports compete with St Petersburg, for example.

When the FAS thought it was starting to lose the case against PJSC, it changed its approach and relied less on economics, Dianov explained. As a result, the courts issued decisions in favour of PJSC, concluding that the FAS did not do enough to prove abuse of dominance, he added.

Dianov said he thinks the Supreme Court was wrong to accept the FAS’s approach. Other forces might have been at play, Dianov said, suggesting that the Supreme Court is subject to more political influence than lower courts, while also noting that Russia is struggling with its policy of downgrading the influence of the dollar on the economy.

All agencies should be doing everything they can to put pressure on businesses to stop using dollars, he said – by switching to the ruble, or at the very least conducting transactions in other currencies. It seems that the FAS used competition tools to follow this policy alongside other agencies in Russia, he said.

Another lawyer, who was not involved in the case, speculated that the lower courts may have felt that the FAS had a weak case, but the Supreme Court might have preferred to defer to the executive agency.

The high court has acted in a similar manner with the country’s oil companies, the source added. The Supreme Court’s decision is not surprising, particularly because of the current political climate and the case’s effect on a socially significant market.

The Supreme Court’s approach is unfortunate and lowers the bar for the authority when tackling antitrust violations, the source said. Courts are meant to act as quality control, he said, and ultimately if the Supreme Court says the competition authority’s case is good enough then that sets a standard where the FAS does not have to do as much to prove a violation.

PJSC did not respond to a request for comment.

By Charles McConnell

https://globalcompetitionreview.com/article/1175308/russian-top-court-sides-with-fas

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