Russian Supreme Court Plenum Resolution No. 2 dated 4 March 2021 “On Certain Issues Arising in Courts Applying Antitrust Law”

30.03.2021

Legal Update No 839

Bryan Cave Leighton Paisner (Russia) LLP (formerly Goltsblat BLP in Russia) advises that on 4 March 2021 the Supreme Court of the Russian Federation (the Court) adopted Plenum Resolution No. 2 On Application of Antitrust Law (the Resolution).

In particular, the Resolution addresses the following:

  1. general rules for antitrust law application, including correlation between antitrust and civil regulations;

  2. abuse of dominance;

  3. anticompetitive agreements and concerted practices;

  4. unfair competition;

  5. antitrust violations by public authorities;

  6. public procurement;

  7. antitrust authority powers;

  8. contesting antitrust authority acts or decisions; and

  9. private antitrust enforcement.

The Resolution coming into force abolishes Supreme Commercial Court Plenum Resolution No. 30 dated 30 June 2008, except for the clauses related to administrative liability (Clauses 10-10.3, Clause 17).

Below are the most interesting, in our opinion, clarifications provided by the Resolution.

  1. Determining dominant position

  2. Legal interests of dominant undertakings and causal link between their market position and actions

  3. No protocol of disagreement or other objection by the “disadvantaged” party to the agreement does not evidence absence of abuse

  4. Assessing the behaviour of a group of companies

  5. Разграничение картелей и иных действий на торгах, которые не формируют картель

  6. Applying the antitrust requirements to public procurement

  7. Differentiating between vertical agreements and coordination

  8. Approaches to proving unfair competition

  9. Orders of antitrust authorities may not expressly indicate prices, volumes or conditions for selling goods to a specific buyer

  10. Antitrust authorities may not issue orders to undertakings that were not parties to an antitrust case

  11. Antitrust remedies must be proportionate to the antitrust violation and be aimed at curing its consequences

  12. Alternative means of complying with warnings

  13. New evidence in a court case and market assessment

  14. Specifics of lawsuits filed by antitrust authorities

  15. How to assess a refusal to challenge decisions or orders issued by antitrust authorities

  16. Approaches to dealing with claims by antitrust authorities

  17. Approaches to dealing with private antitrust actions

 

I. Determining dominant position

When determining whether an undertaking holds a dominant position on the market account should be taken of the market share of its competitors on the market, potential competitors and consumers.

In applying the criteria set out in Part 1, Article 5 of the Competition Law, including assessing the possibility for new competitors to enter the market, courts may also consider further arguments:

- administrative barriers (such as the need for a licence or permit to carry out any type of activities, the obligation to obtain the owner’s consent to use IP products);

- significant economic advantages of the undertaking (like access to natural resources, production technologies, capital markets);

- the fact that the investment to be made by the undertaking’s business partners is big or unusual in nature, if they purchase products from other suppliers.

No new competitors emerging on the market during the reviewed period, does not, in itself, evidence that market entry barriers are high.

Courts may also consider whether consumers are able to resist the undertaking’s market power, for example, as a result of a significant market share of their own and/or their being commercially important for the supplier (Clause 8).

As for collective dominance, the Court emphasises the importance of determining whether all collectively dominant undertakings can influence the market conditions together (collective market power). If only one undertaking has market power, Part 3, Article 5 of the Competition Law does not apply. It is clarified that collective dominance and individual dominance on the same market may not be simultaneously established. The Court explains that, if an undertaking is considered to be dominant on the market together with any other undertakings, this does not exclude its individual dominance, subject to Part 1, Article 5 of the Law, on other markets (Clause 9).

At the same time, the Court says that a non-commercial organisation may also be deemed dominant. Specifically, the requirements on undertakings, as per Article 10 and 14.1–14.8 of the Competition Law, may cover professional associations of undertakings to the extent decisions of such non-commercial entities might affect the general market conditions and members of such a non-commercial entity might derive income from supplying goods on the market (Clause 6).

II. Legal interests of dominant undertakings and causal link between their market position and actions

The Court notes that, in assessing abuse of a dominant position, the courts shall consider the undertaking’s legal interests, which may be pursued by any market player irrespective of its market position, such as economic efficiency (cost efficiency) of its business (Clause 11).

So, the Court indicates that, in assessing refusal to deal by a dominant undertaking, courts may take into account (a) existence of an objective possibility for this undertaking to produce or sell goods, including subject to the external conditions under which its functions on the market; (b) economic feasibility of producing goods (entering into the agreement) on the terms and conditions offered by the counterparty, subject to the limited resources available to the undertaking (Clause 16).

In Clause 12, the Court emphasises that violation by a dominant undertaking of civil or any other laws does not per se evidence that the undertaking abuses its dominance. In this context, courts should pay attention to whether it was possible for an undertaking to act in a specific way without being dominant on the market.

The Court follows this principle in relation to certain types of abuse like excessive or predatory pricing. The Competition Law does not preclude price competition between dominant undertakings and other market participants. So, in assessing the behaviour of a dominant undertaking, the court may take into account existence (absence) of any legal economic (commercial) interest on the part of the undertaking in temporarily reducing the price other than market foreclosure. Specifically, the court may give consideration to whether this temporary price reduction is seasonal in nature, other market players use similar price competition methods or a new market participant triggered this reduction.

III. No protocol of disagreement or other objection by the “disadvantaged” party to the agreement does not evidence absence of abuse

The Court notes that tying and/or discrimination by a dominant undertaking may take place both before or after entry into an agreement containing unfavourable or discriminatory conditions (Clause 15).

Courts should bear in mind that conclusion and/or execution of an agreement with a dominant undertaking without any objections by the counterparty upon entering into it (for example, without a protocol of disagreement with unfavourable or discriminatory conditions) does not prevent offer of such conditions by a dominant undertaking from being qualified as abuse. At the same time, the Court does not specify if they may be qualified under Clause 3, Part 1, Article 10 (tying) or Clause 8, Part 1, Article 10 (discrimination) of the Competition Law.

IV. Assessing the behaviour of a group of companies

The Court specifies that the legal framework of a group of companies and the relevant special rules may not apply to an undertaking that is formally part of the group but operates on the market independently if other group members cannot affect its actions because of no contractual, corporate or organisational means are available (Clause 7).

The Court also notes that the exemption for groups foreseen for cartels applies only with respect to group members controlled by the same person or if one of the parties controls the other. For example, if wholesalers are controlled by the same person and establish a group with it, the agreement between such wholesalers should not be treated as violating the bans under Clause 3, Part 1, Article 11 of the Competition Law, even if this agreement triggers allocation of sales regions and consumer categories. If the exemptions under Parts 7 and 8, Article 11 of the Competition Law do not apply to the undertakings, being members of the same group, the FAS of Russia must, to prove an anticompetitive agreement, establish that they are, in fact, competitors (Clause 28).

V. Distinguishing cartels from other behaviour in public procurement procedures

The Court points out that similarities in the behaviour of several undertakings do not prompt the conclusion that there is an anticompetitive agreement (Clause 21). It should be considered if there were any other reasons for the undertaking to select this type of behaviour, for example, whether this behaviour meets the relevant conditions established (changed) on the market or results from an identical assessment of the market by undertakings, etc.

In Clause 24, the Court emphasises the necessity of assessing causal links between actions by tender participants and price hikes, reduction or maintenance at tenders. For example, attention should be paid to whether the achieved price reduction (hike) is customary for tenders for certain products. It is also noted that involvement of several undertakings aimed at having the tender recognised as successful and unrelated to price hikes, reduction or maintenance does not constitute a violation under Clause 2, Part 1, Article 11 of the Competition Law.

VI. Applying the antitrust requirements to public procurement

Article 17 of the Competition Law establishing antitrust requirements on public procurement does not, for example, apply to sole source procurement under Federal Law No 223-FZ “On Procurement of Goods, Work and Services by Certain Legal Entities” or tenders held under the Civil Code or other special legislation (i.e., the Insolvency (Bankruptcy) Law). It is also clarified that Article 17 does not apply if actions of the tender arranger/procuring entity or participant are qualified under Articles 10, 11 and 16 of the Competition Law.

The Court provides a new interpretation of a “conflict of interest” in public procurement. In the meaning of Clauses 1, 2 and 4, Part 1, Article 17 of the Competition Law, the tender arranger, the procuring entity, their employees and other persons to which they may give binding instructions or otherwise direct their actions, i.e., exercise so-called “actual control”, are prohibited from participating in tenders. The Court indicates that in identifying this control, courts should verify how significant the person’s influence was on decisions relating to participation in the obligatory procedure or competitive procurement (Clause 40).

The Court specifies that, if the parties amend the contract concluded following the obligatory procedures or competitive procurement, this might qualify as bypassing Article 17 of the Competition Law. This would be the case if the material conditions of the contract, such as the contract price, were amended and there were grounds for believing that, if the contract had been originally offered on the amended terms, different entities would have taken part in the tender and/or the contract would have been concluded with another participant. In this case, the amendment is deemed void.

VII. Differentiating between vertical agreements and coordination

The Court points out the voluntary nature of prohibited vertical agreements, meaning that, if the agreement was forced on one of the parties, it may not be qualified as an anticompetitive vertical agreement.

The Court also specified that a supplier’s instructions to sellers regarding their relations with consumers might be treated as unacceptable coordination of economic activity. This includes cases when such instructions are implemented under the terms of a civil law contract and/or owing to the sellers being economically dependent on the supplier.

The Court emphasises that it is not permitted to qualify an undertaking’s behaviour as both an anticompetitive agreement and coordination of economic activity at the same time.

VIII. Approaches to proving unfair competition

In proving unfair competition, both the special criteria under Articles 14.1-14.7 of the Competition Law and the general criteria under Clause 9, Article 4 of the Competition Law and Article 10-bis of the Paris Convention for the Protection of Industrial Property must be met.

At the same time, the Court notes that, if the general and special criteria are not met together, violation of the legislation in itself, including by using IP products and means of identification, does not evidence unfair competition.

Further, the Court differentiates between the signs of discrediting and those of misleading, saying that discrediting means distribution of false information about competitors while misleading - about the undertaking itself.

It is maintained that the forms of unfair competition are not limited to those envisaged by the Competition Law. Other forms of unfair competition may be set out in sectoral legislation (i.a., sports regulations). Contrary to previously established practice, the Court introduces that, if there is a special prohibition on unfair competition in sectoral legislation, the courts shall establish all the unfair competition criteria determined both by the general and sectoral legislation. For example, the criteria for unfair competition under Article 20.1 of the Federal Law “On Physical Culture and Sports in the Russian Federation” are equally covered by the Competition Law, so the relevant actions might be recognised as unfair competition if they met the criteria specified in Clause 9, Article 4 of the Competition Law, subject to Article 10-bis of the Paris Convention for the Protection of Industrial Property (Clause 32).

IX. Orders of antitrust authorities may not expressly indicate prices, volumes or conditions for selling goods to a specific buyer

As a result of an antitrust case or merger control, an antitrust authority may order an undertaking or any other person to change its behaviour on the market, including in relation to other market participants. Even so, it may not insist that the parties include any specific price, volume or sales conditions in the agreement. This Court’s interpretation is of importance for those law enforcement precedents when an antitrust authority has actually resolved civil law disputes between undertakings by issuing excessively detailed orders (Clause 47).

The Court specifies that, having considered antitrust cases on excessive or predatory prices, an antitrust authority may issue an order not to apply such prices to counterparties (consumers) in general. This means that, when issuing orders on excessive or predatory price cases, an antitrust authority is not entitled to calculate the price or indicate acceptable profitability.

X. Antitrust authorities may not issue orders to undertakings that were not parties to an antitrust case

Subject to Part 2, Article 9 of the Law, if a group of companies violates the antitrust legislation, orders may be issued to several members of the group. Yet only group members may be given orders that were involved in an antitrust case and are legally and actually capable of remedying the antitrust violation. The Court specifies that orders may not be issued to companies of the group that did not participate in the antitrust case.

At the same time, the Court notes that, as per Article 51.2 of the Competition Law, an antitrust authority may revise remedies contained in the issued order.

XI. Antitrust remedies must be proportionate to the antitrust violation and be aimed at curing its consequences

If it is determined that the antitrust remedies are disproportionate to the antitrust violation or to the goal of the antitrust order, such remedies may be overturned by a court in full or in part. Disproportionate remedies violate the rights of the orders’ recipients and their legitimate interests in business and other economic activities.

Courts must assess whether the remedies are proportionate on a case-by-case basis. Specifically, in assessing issued orders, the court analyses whether the remedies may trigger excessive losses for an undertaking and whether there are any other, less detrimental remedies for curing the consequences of the committed violation (Clause 54).

XII. Alternative means of complying with warnings

If undertakings challenge an antitrust case initiation order, courts shall verify whether all relevant signs of an antitrust violation were determined by the antitrust authority prior to initiating the case. If antitrust case initiation was preceded by a warning being issued, the courts must consider whether the warning was complied with at the time the case was initiated.

The Court notes that the Competition Law does not prevent an undertaking from ceasing a violation and remediating its consequences by actions other than those specified in the warning (Clause 51).

At the same time, the Court says that, in any case, an antitrust authority must be informed of the alternative actions performed and be provided with relevant evidence within the term indicated in the warning.

XIII. New evidence in a court case and market assessment

The Court reminds that commercial courts do not substitute for antitrust authorities and that they accept additional evidence only if the person, including an antitrust authority, petitioning for their acceptance justifies such evidence not having been provided during the hearing on the antitrust case (Clause 55). So, a market report prepared by an antitrust authority after the case has been heard may not be accepted as evidence by courts.

A market report constitutes written evidence and must comply with the legal requirements set out for this type of evidence. At the same time, market reports not prepared by an antitrust authority but by other specialists with relevant qualifications, including at the request of case participants, may be accepted by the court as evidence (Clause 56).

XIV. Specifics of lawsuits filed by antitrust authorities

Antitrust authorities may file lawsuits seeking invalidation of agreements/tenders or applying for agreements to be amended/terminated or mandatorily concluded.

Under Article 53 of the Commercial Procedure Code, an antitrust authority filing a claim to protect competition should prove that it is acting in the public interest. For instance, when an antitrust authority challenges a lease for additional sales premises by a retail chain (Article 14 of the Trade Law), the courts shall consider whether ruling the agreement invalid will serve the public interest.

In doing so, the courts shall take into account other possible actions to protect competition other than ruling the agreement invalid, in particular, whether a retail chain may independently terminate leases with other landlords (Clause 57). It appears that such an approach may be applied for other transactions challenged by antitrust authorities as well.

XV. How to assess a refusal to challenge decisions or orders issued by antitrust authorities

Courts considering lawsuits filed by antitrust authorities should not regard the fact that the defendants did not challenge the antitrust authorities’ decisions and/or orders as lack of action and as their acceptance of such lawsuits. The courts should review the essence of the antitrust authorities’ claims, including whether these are reasonable and based on the arguments provided by the parties and the applicable law (Clause 60).

XVI. Approaches to dealing with claims by antitrust authorities

The Court emphasises that antitrust authorities are entitled to file antitrust violation claims with commercial courts, in particular, requesting that the defendant be required to enter into or amend an agreement. In the latter case, the courts are not bound by the conditions proposed by an antitrust authority or those proposed by parties to an existing or future agreement (Clauses 57-58).

The Court notes that an antitrust authority is entitled to apply to a commercial court to enforce its order that has been ignored by the wrongdoer. This is the only way to initiate a criminal case (under Article 315 of the Russian Criminal Code) against persistent violators that ignore not only orders by an antitrust authority but also court judgements (Clause 59).

XVII. Approaches to dealing with private antitrust actions

Anyone whose rights are affected by an antitrust violation is entitled to file a private antitrust action with a commercial court. Such a person may file different actions to restore their rights, including:

  • to force the defendant to enter into an agreement;

  • to have an agreement recognised as invalid and to invoke the consequences of its invalidity;

  • to determine an antitrust violation (claiming, in particular, that the right holder’s actions constitute unfair competition); or

  • to recover antitrust damages.

As we see, the list of remedies is not limited to those specified in the Resolution (Clause 61).

The Court emphasises that protection of civil rights by administrative procedure does not preclude and is not a prerequisite for private antitrust enforcement. The Court also states that a decision by an antitrust authority establishing that a person has violated antitrust law does exempt the claimant from the need to prove the above fact or substantiate their legitimate interest in protecting their rights.

The Court indicates the possibility of a passing-on defence stating that the amount of damages claimed may be reduced by the amount of damages passed on to indirect purchasers (Clause 63).

The Court further notes that the limitation period for an antitrust damages claim is suspended for the period during which the antitrust case is examined.

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