Russian fas publishes draft clarifications on the procedure and method for joint venture analysis
Goltsblat BLP advises that, on 4 June 2013, the Federal Anti-Monopoly Service (the “FAS”) published draft Clarifications on the Procedure and Method for Joint Venture Analysis (the “Clarifications”).
These Clarifications have been developed to define a unified approach to analysing draft joint venture agreements (the “Agreement”) to be approved by the anti-monopoly authority in accordance with Articles 27 and 28 of Federal Law No. 135-FZ of 26 July 2006 “On Protection of Competition” (the “Completion Law”) or submitted to the anti-monopoly authority for verification of compliance with the antitrust legislation under Article 35 of the Completion Law.
The Clarifications only cover Agreements between competitors or potential competitors that might trigger restricted market competition, particularly the consequences listed in part 1 and part 4, Article 11 of the Competition Law.
At the same time, the Agreement means Russian or foreign law agreements between business entities, including ones providing for establishment of a new legal entity or joint participation by the parties in an existing legal entity (the “JV”) and other agreements mediating the parties' joint operations and complying with the following criteria:
the parties to the Agreement consolidate resources and/or perform mutual investments to achieve the purposes of joint activity;
the parties share all activity-related risks;
information about the joint activity or JV establishment is publicly available.
Please note that the Clarifications have settled one of the key aspects of joint activity, namely, refusal by the parties to the Agreement to compete with each other or the JV on the commodity market on which the parties plan to operate jointly and/or establish the JV, or on adjacent markets, including withdrawal from operations on a certain territory. For example, the following may be acceptable: withdrawal from manufacturing goods similar to those manufactured by the JV or withdrawal from separate sale of goods on the relevant market or withdrawal from acquisition of shares/interest in authorised capitals of companies performing activities similar to that of the JV on the same market.
At the same time, for the non-competition clauses to be recognised as acceptable, they should comply with a number of criteria (the general acceptance criteria):
comply with the purposes of the joint activity;
cover only the markets on which the parties to the given Agreement operate within the scope of their joint activity;
be limited by the time period required for the parties to the Agreement to achieve investment payback and earn a profit;
not provide for exchange of information that might facilitate cartel maintenance or concerted practices limiting competition (in particular, information about prices, costs, capacity utilisation, production volumes, etc.).
In addition to the above general criteria, for the Agreement to be recognised as acceptable, a number of other circumstances should be also evaluated, namely: the shares of the parties to the Agreement on the relevant commodity market, the parties' ability to eliminate or restrict competition, other possible consequences of the Agreement being performed and compliance by the non-competition clauses with the purposes of the joint activity.
Under the Clarifications, Agreements that might eliminate competition are unacceptable. This may be anticipated if the parties' aggregate share on the relevant commodity market exceeds 35%, the market is highly concentrated or high entry and import barriers exist.If any of the above criteria are not observed, the risk of competition elimination is not considered as high but the Agreement might still trigger limitation thereof.In this case, additional analysis should be conducted to find out how such a limitation correlates with the positive effect of Agreement performance.
If the parties' aggregate share does not exceed 35% or the parties have not previously been players on the relevant market, in practice, performance of the Agreement may not eliminate or restrict competition.In this case, the non-competition clauses should comply only with the general acceptability criteria (see above).
Upon analysis of the Agreement, the parties may receive not only decisions on dismissal or satisfaction of their motion but also an instruction to perform actions aimed at maintaining competition and/or making the Agreement's non-competition clauses comply with the general acceptability criteria.
For detailed information about the Clarifications, please contract Nikolay Voznesenskiy or Andrey Neminuschiy.
The Presidium of the FAS approved the Clarifications on 29 May 2013.
 Article 27 of the Competition Law should be added to provide for an obligation to obtain the FAS's consent to the Agreement if the asset value reaches the relevant thresholds.
Generally, the maximum term of such restriction is 7 years. If a longer period is required, the FAS may request for additional commercial justification and hold a survey of market players and/or experts.
For all issues related to publications, news and press releases, please contact:
If you would like to receive our legal alerts and updates highlighting current legal issues relevant to your areas of interest and providing expert commentary by our lawyers, please click on "Sign Up" and fill out the form.