Competition law in Russian Federation: overview

19.07.2013
  • Competition law in Russian Federation: overview

Resource type: Country Q&A
Status: Law stated as at 01-Jun-2013
Jurisdiction: Russian Federation

  • Merger control

1. What (if any) merger control rules apply to mergers and acquisitions in your jurisdiction?

  • Regulatory framework

Merger control in Russia is regulated by Federal Law No.135-FZ on Protection of Competition (Competition Law). Merger control can be exercised in two ways:

  • The Federal Antimonopoly Service (FAS) issues preliminary consent for the merger or acquisition.
  • The FAS must receive subsequent notification of the merger notification after the transaction is completed. This requirement will soon be abolished (see Question 2, Thresholds: Subsequent notification).

Separate thresholds trigger the procedures for preliminary consent and subsequent notification to the Russian regulatory authority for anti-trust matters, the FAS.

  • Regulatory authority

Merger control in Russia is regulated by the FAS. 

  • Triggering events/thresholds

2. What are the relevant jurisdictional triggering events/thresholds?

  • Triggering events

The following types of transactions are covered by Russian merger control:

  • Mergers or consolidations between Russian companies.
  • Acquisitions of more than 25%, 50% or 75% of the voting shares in a Russian company.
  • Acquisitions of more than 20% of all fixed assets and/or intangible assets in Russia.
  • Acquisitions of more than 50% of the voting shares in a foreign company that have supplied at least EUR25 million into Russia during the last year.
  • Acquisitions of more than 50% of the voting shares in a foreign company that have a subsidiary in Russia.
  • Incorporation of a Russian company, if the share capital is paid for by the shares in a Russian company or, in some cases, a foreign company or by Russian fixed assets and/or intangible assets.
  • Thresholds

Separate thresholds trigger the procedures for preliminary consent and subsequent notification to the FAS. The thresholds are based on the total value of the assets or total sales revenue of the companies involved in the transaction (and, in most cases, of their respective groups).

Preliminary consent. Companies will trigger the requirement for preliminary consent to the FAS if, before the completion of the transaction, any of the following are applicable:

  • The aggregate value of the assets of the acquirer (and its group) and the target company (and its group) exceed EUR175 million.
  • The total global sales revenue of the acquirer (and its group) and the target company (and its group) during the previous calendar year exceeds EUR240 million, and the total value of the assets of the target company (and, in some cases, its group) exceed EUR6.5 million.
  • One of the companies involved in the transaction is listed in the official Register of Companies with a market share exceeding 35% on the relevant product market (irrespective of the above thresholds).

Subsequent notification. Companies will trigger the requirement for subsequent notification to the FAS if, after the transaction is completed, any of the following are applicable:

  • The aggregate value of the assets of the acquirer (and its group) and the target company (and its group) exceed EUR10 million.
  • The total global sales revenue of the acquirer (and its group) and the target company (and its group) during the previous calendar year exceeds EUR10, and the total value of the assets of the target company (and, in some cases, its group) exceed EUR1.5 million.
  • If one of the companies involved in the transaction is listed in the official Register of Companies with a market share exceeding 35% on the relevant product market (irrespective of the above thresholds).

However, the requirement for subsequent notification will soon be abolished by a federal law which is currently pending in the State Duma (that is, the Lower Chamber of the Russian Parliament) (see Question 39).

  • Notification

3. What are the notification requirements for mergers?

  • Mandatory or voluntary

Prior approval and subsequent notifications are mandatory if the triggering conditions and thresholds are met (see Question 2).

  • Timing

Preliminary consent must be obtained before completion of the deal, merger or incorporation. Subsequent notifications must be filed within 45 days of the merger, acquisition or incorporation closing date.

  • Formal/informal guidance

Any company can apply to the FAS for official clarification on matters relating to merger control. These requirements will be considered within 30 days of their submission to the FAS.

  • Responsibility for notification

The acquirer(s) (or founder(s) of a new undertaking) are responsible for filing the prior approval or subsequent notification with the FAS.

  • Relevant authority

Notifications must be made to the FAS.

  • Form of notification

There is no official form of application in Russia. However, there is a list of information and documents which must be provided to the FAS. Charter documents of the parties involved, balance sheet, data on purchases of main materials and sales of the goods produced by the acquirer and the target are among the required documents. The notification must be in Russian.

  • Filing fee

The filing fee for obtaining preliminary consent is about EUR500. The fee should be paid by the applicant (see above, Responsibility for notification).

  • Obligation to suspend

Preliminary consent must be obtained before completion of the deal, merger or incorporation. Therefore, the transaction should be suspended pending the outcome of the FAS's investigation.

  • Procedure and timetable

4. What are the applicable procedures and timetable?

The application to the FAS should be provided together with the information and documents required by the Competition Law. All documents should be provided in hard copy. If the package of documents is not complete, it may be returned to the applicant.

When obtaining preliminary consent, the FAS has a basic period of one month to review the application from receipt of a complete filing (Phase I). The FAS may open a second stage investigation (Phase II) lasting a maximum of a further two months (three months in total). If the FAS decides to issue a decision on conditions precedent that must be implemented by the parties before its final clearance decision (see Question 8), the FAS can postpone the final decision and set the period for implementing said conditions which could be up to nine months. In the latter case, the total period for obtaining preliminary consent could be a maximum of 11 months.

The subsequent notification procedure does not stipulate any review term. Since it is not a clearance procedure but simply a notification requirement, the FAS is not officially required to issue any decision. If the FAS believes that the transaction restricts competition, it can issue an obligatory order to the parties within the reasonable time (within one year) upon receipt of notification. However, this is an extremely rare and unlikely scenario.

  • Publicity and confidentiality

5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?

  • Publicity

Phase I. During Phase I of the FAS analysis, applications to the FAS are generally not disclosed publicly. However, intra-group transactions can be cleared by a simplified procedure if the group chart is disclosed to the FAS one month prior to the transaction. In such a case, the FAS will make the group chart publicly available on its website.

Phase II. If the FAS proceeds to Phase II, due to concerns on competition restriction and the need to obtain additional information, the FAS will disclose the fact of the application (including the parties, the essence of the deal and so on) in order to invite third parties to provide information to the authorities.

  • Automatic confidentiality

No information is automatically kept confidential. The applicant must officially notify the FAS of the need to keep materials confidential.

  • Confidentiality on request

The parties can request confidentiality in relation to certain confidential information. In practice, the filing and the final decision of the FAS cannot be treated as confidential information. There is no requirement to provide reasons for requesting that materials be kept confidential.

  • Rights of third parties

6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?

  • Representations

Phase I. The Competition Law does not expressly allow the legal possibility for third parties to provide information on the possible effect (negative or positive) of the transaction during Phase I.

Phase II. It is legally possible for third parties to provide information on the possible effect of the transaction at Phase II. In this case, the FAS makes a public request to third parties to provide information concerning the transaction in question and any person has the right to submit any information that might be of use (though the provision of such information in obligatory) to the FAS in analysing the transaction and the relevant market.

  • Document access

Third parties do not have access to filed documents/information.

  • Be heard
  • Substantive test

7. What is the substantive test?

The substantive test applied by the FAS is whether the deal does or could lead to the restriction of competition. The Competition Law provides a list of criteria to be used when assessing whether competition will be restricted, like reduction in a number of economic entities in the market, unjustifiable reduction or increase in price, to give a few examples, though this is not an exhaustive list. The most common reason for refusing to clear a transaction is where the transaction creates or strengthens the dominant position of an undertaking.

One important consideration the FAS will make in applying the substantive test is whether the market share of the new dominant entity will exceed 50% of the market or not. If the 50% threshold is exceeded, the FAS either refuses consent or issues a strict behavioural and/or structural order. 

  • Remedies, penalties and appeal

8. What remedies can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?

The FAS can set conditions precedent for a transaction to be cleared. These conditions may be:

  • Behavioural (for example, to gain access to production facilities, to sell the relevant property to a third party and so on).
  • Structural (for example, to change the group structure).

Once the conditions are met, the applicant must provide the FAS with relevant documents confirming that the conditions have been fulfilled. Until this time (which must not take longer than nine months), the clearance procedure is suspended.

The FAS can also issue a regulatory order together with a conditional clearance decision. This order may also be behavioural and/or structural and must be fulfilled by the parties to the transaction within a specific or an unlimited time on closing the transaction. Such an order could include, for example, the obligation to notify the FAS of, and justify, any price increase exceeding a certain percentage.

For the purposes of monitoring the fulfilment of a regulatory order, the FAS can:

  • Require the applicant to inform the FAS about progress made.
  • Request the applicant to file certain information with the FAS on a repeat basis.
  • Conduct a field audit.

The parties normally do not offer possible remedies themselves, as this is initiated by the FAS. In practice, the parties have a right to discuss the remedies suggested by the FAS. The FAS makes it known that it requires remedies either close to the end of Phase I or in Phase II, but it is not officially required to do so before the final decision is issued.
 
9. What are the penalties for failing to comply with the merger control rules?

  • Failure to notify correctly

Failure to meet the merger control requirements may result in one or both of the following:

  • The imposition of an administrative fine (a maximum of about EUR13,000).
  • Invalidation of the transaction, if the transaction does or could lead to a restriction of competition.

The limitation period is one year from the FAS becoming aware of the violation.

If the applicant is unable to fulfill the remedial undertakings, it can apply (with due reasoning) to the FAS to make changes to the given order. If the FAS does not agree to change the order, it can revoke the clearance.

There are no criminal sanctions.

  • Implementation before approval or after prohibition

See above, Failure to notify correctly.

  • Failure to observe

See above, Failure to notify correctly.
 
10. Is there a right of appeal against any decision? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties or only the parties to the decision?

  • Rights of appeal and procedure

The FAS decision can be appealed to the State Arbitration Court (effectively a state commercial court) within three months following that issue of decision by any company whose rights and/or interests were infringed by the relevant decision.

  • Third party rights of appeal

If the rights and/or interests of any third party are infringed by the relevant decision, it has the right to appeal to the State Arbitration Court. 

  • Automatic clearance of restrictive provisions

11. If a merger is cleared, are any restrictive provisions in the agreements automatically cleared? If they are not automatically cleared, how are they regulated?

The Competition Law does not provide a clear answer. However, if the acquisition is cleared, the restrictive provisions contained in the agreement provided to the FAS are also likely to be treated as cleared, unless the FAS has expressly disagreed with those provisions.

In acquisition deals, non-compete provisions are assessed in a similar way to how they are treated under EU legislation. 

  • Regulation of specific industries

12. What industries (if any) are specifically regulated?

Financial institutions, such as banks, insurance companies, brokers and so on, are specifically regulated.

Additional regulation is also provided for companies of strategic importance. There are currently 42 types of activity of strategic importance for Russia, including:

  • Arms.
  • Nuclear materials and equipment.
  • Space.
  • Aviation equipment.
  • Geological exploration of the subsoil.
  • Pipeline transportation of oil.
  • Petroleum products and gas.
  • Railway transportation.

Strategic investment control in Russia is exercised under Federal Law on Foreign Investment in Companies of Strategic Importance for National Defence and Security, dated 29 April 2008 No. 57-FZ.

Decisions to allow such investments in Russia are made by a special government commission headed by the Prime Minister of Russia, subject to mandatory applications submitted by the foreign investors. The term for consideration of an application from a foreign investor is three months, which can be prolonged for a maximum of three months (six months in total). Transactions implemented in breach of strategic control requirements are invalid. Moreover, failure to meet the strategic control requirements can result in the imposition of an administrative fine (a maximum of about EUR25,000). 

  • Restrictive agreements and practices
  • Scope of rules

13. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?

Restrictive agreements and practices are regulated by the Competition Law and, partially, by a few other laws. The Law on Trade is one example.

The Competition Law directly prohibits:

  • Anti-competitive cartels and other agreements.
  • Concerted actions.
  • Illicit co-ordination of the economic activities of counterparties.
  • Unfair competition.
  • Abuses of dominant position.
  • Bid rigging.
  • Other anti-competitive practices.

Such agreements and practices are prohibited by Articles 11 and 16 of the Competition Law. Cartels are prohibited per se and the "rule of reason" approach cannot be applied in such cases. Other practices are prohibited only in so far as they limit competition in the market.

All matters related to competition are subject to regulation by federal laws only and are not subject to regional lawmaking processes (Article 71, Constitution of the Russian Federation).

The FAS is the only watchdog that is:

  • Responsible for investigating and considering all aspects of competition law relating to restrictive agreements and practices.
  • Authorised to impose fines and apply other punishments to offenders.
    Criminal proceedings for cartel infringements and consecutive abuse of a dominant position are led by investigators from the Ministry of Internal Affairs. 

14. Do the regulations only apply to formal agreements or can they apply to informal practices?

The regulations apply to both formal agreements and informal practices. For example, in addition to formal agreements the FAS is authorised to investigate informal, verbal cartel agreements (Articles 4 and 11, Competition Law). Such investigations have been successfully carried out in a number of cases. 

  • Exemptions

15. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?

The following individual exemptions are applicable (Competition Law):

  • Agreements for the transfer of intellectual property rights (Part 9, Article 11).
  • Franchising agreements (Part 1, Article 12).
  • Agreements between competitors, if conducted by legal entities where one is under the control of the other, or controlled by the same legal entity/individual.
  • Agreements, concerted actions and other actions that do not eliminate competition and do not impose limitations on any party indispensable to the aim pursued, which result in, or are likely to result in, either (Parts 1 to 1.1, Article 13): 
    • improvement of production or distribution, stimulation of technical or economic progress, increasing the global competitiveness of Russian goods; and
    • consumers enjoying a fair share of the resulting benefits.

The government can approve block exemptions (general exemptions). Currently, block exemptions are only applicable to:

  • Agreements between insurers (Resolution No. 504, dated 05 July 2010).
  • Agreements between insurers and lending organisations (Resolution No. 386, dated 30 April 2009).
  • "Vertical" agreements between suppliers and purchasers (Resolution No. 583, dated 16 July 2009).
  • Research and development (R&D) agreements (Resolution No. 583, dated 16 July 2009).

Due to the unclear wording of these exemptions and the fact that several terms conflict with the Competition Law, it is advisable to refer to block exemptions with caution. 

  • Exclusions and statutes of limitation

16. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?

  • Exclusions

De minimis provisions (such as those available within the EU) are not available in Russia. However, the Competition Law will not apply to a vertical agreement if both parties to the transaction hold no more than a 20% share of any commodity market.

Restrictions on concerted actions apply to companies that hold both:

  • In aggregate, more than a 20% share of the relevant commodity market.
  • Individually, more than an 8% share of the commodity market.

Therefore, companies not reaching these thresholds are excluded from the provisions restricting concerted actions.

However, any cartel agreement between competitors cannot use any of the exemptions mentioned above.

  • Statutes of limitation

The statute of limitation for administrative violations of the Competition Law is three years from either:

  • The day the infringement occurs for a one-off action or transaction.
  • The day the continuing infringement ceases, or the FAS reveals the continuing infringement.

After this limitation period, the FAS cannot issue any accusatory decision.

In addition to the limitation period, the FAS has one year from the date of its decision to consider administrative punishment (whether to sanction a fixed fine, turnover fine, disqualification and so on). This is a separate procedure which is launched once the accusatory decision is made.

Statutes of limitations in criminal law proceedings are different and depend on the gravity of the charge. 

  • Notification

17. What are the notification requirements for restrictive agreements and practices?

  • Notification

The requirements for notification depend on the type of agreement. In certain cases, such as for franchising agreements or agreements transferring intellectual property rights, notification is not required or advisable. However, for other types of restrictive agreements it is advisable to apply for clearance if there are grounds for justifying the restrictive agreement under the general exceptions contained in the Competition Law (see Question 15).

It is not possible to obtain clearance for agreements that have already been implemented. Such an application would also run a high risk of administrative and/or criminal penalties being imposed if the FAS does not consider that agreement to be acceptable.

  • Informal guidance/opinion

In certain cases it is possible to obtain informal guidance before formal notification. However, informal guidance is not recommended for subsequent notifications.

  • Responsibility for notification

Either party to the transaction can submit the draft agreement (or already implemented agreement) for clearance.

  • Relevant authority

The FAS is the relevant responsible authority.

  • Form of notification

There is no officially determined form for such notification. However, there is a list of information and documents which must be provided. Charter documents of the parties involved, balance sheet, data on purchases of main materials and sales of the goods produced by the acquirer and the target are among the required documents.

The notification must be in Russian.

  • Filing fee

There is no filing fee. 

  • Investigations

18. Who can start an investigation into a restrictive agreement or practice?

  • Regulators

The FAS can start an investigation on its own initiative.

  • Third parties

Complaints from third parties can trigger an FAS investigation, if sufficient evidence is provided to the FAS. In addition, third parties can initiate civil actions against presumed infringers of the Competition Law.
 
19. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?

  • Representations

Complaints from third parties should include, among other things:

  • Information regarding the complainant and the alleged infringer.
  • The facts evidencing the infringement of the Competition Law.

If after examining the complaint, the FAS concludes that it should not initiate anti-monopoly proceedings, it will inform the complainant of its decision in writing.

The FAS will not review anonymous informal complaints.

  • Document access

If the complaint is rejected, the complainant is not entitled to access to the documents on which the FAS based its conclusion.
When the FAS commences anti-monopoly proceedings, the complainant and other third parties whose rights have been (or might be) affected by the proceedings are admitted as parties to the proceedings. This gives them full access to verbal hearings and case documents, although confidential and/or classified information cannot be accessed.

  • Be heard

The complainant and third parties can be heard during anti-monopoly proceedings.
 
20. What are the stages of the investigation and timetable?

There is no limitation on the amount of time the FAS has between investigating a matter and issuing an order to commence official proceedings. However, anti-monopoly proceedings must be closed within a maximum of nine months of the date they are officially opened.

An FAS order includes very brief information about the alleged infringement and does not set out the evidence on which the FAS has relied.

During the course of the proceedings, the FAS:

  • Conducts hearings.
  • Requests information.
  • Gathers information regarding the relevant commodity market.
  • Examines the managers of the accused company.

Anti-monopoly proceedings will result in the FAS issuing either:

  • An accusatory decision, either with or without an order to remedy anti-competitive practices.
  • An acquittal decision. 

 

  • Publicity and confidentiality

21. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?

In certain high profile cases, the FAS may make the following information publicly available:

  • A press announcement that anti-monopoly proceedings are opened.
  • A press announcement that an accusatory decision is issued.
  • A press announcement that an acquittal decision is issued.
  • Its decision (although this may be published significantly later than the FAS's decision is actually issued).
  • Automatic confidentiality

If certain information is classified by the parties to the proceedings as confidential, the FAS will treat that information as confidential. Verbal hearings concerning legal matters (de jure hearings) in the FAS are open to the public, unless the parties to the anti-monopoly proceedings apply for a closed session.

  • Confidentiality on request

The parties to the anti-monopoly proceedings can request the FAS to keep certain information confidential. However, there is no guarantee that the confidentiality veil will not be pierced later (for example, if a party contests the FAS decision in court).
 
22. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?

The FAS is empowered to (Articles 25 to 25.4, Competition Law):

  • Request all documents, information, e-mail correspondence and explanations (which can include classified information) from all parties to the transaction.
  • Conduct field inspections, including dawn raids, against all parties.
  • Access the premises of the companies in the course of a field inspection and inspect them, with the right to:
    • make hard copies of documents and photos;
    • record electronic copies and video.
  • Engage specialists and experts. 

  • Settlements

23. Can the regulator reach settlements with the parties without reaching an infringement decision? If so, what are the circumstances in which settlements can be reached and the applicable procedure?

Once anti-monopoly proceedings have been opened, the Competition Law does not allow for the possibility of reaching a settlement with the FAS. However, where a company voluntarily eliminates any infringement and its consequences, the FAS will usually terminate the anti-monopoly proceedings against the company (Clause 1, Part 1, Article 48, Competition Law).

Disputes with the FAS in State Arbitration Courts can be resolved by settling at any stage of the trial. The settlement can cover all the challenged circumstances. 

  • Penalties and enforcement

24. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?

  • Orders

The FAS has a wide range of orders at its disposal for bringing an anti-competitive agreement or practice to an end which includes (among others) orders to:

  • Terminate an anti-competitive agreement and/or concerted practice and perform actions to restore competition.
  • Cease actions in abuse of a dominant position and perform actions to restore competition.
  • Cease unfair competition practices.
  • Cease violation of non-discriminatory goods access rules.
  • Abstain from further infringements.
  • Rectify the consequences of the infringement and/or restore the status quo.
  • Enter into a relevant agreement or amend its provisions.
  • Transfer to the federal budget any income derived as a result of violating the Competition Law.
  • Fines

Companies may be held administratively liable in relation to:

  • Concluding anti-competition agreements.
  • Commencing anti-competition concerted actions.
  • Illicitly co-ordinating economic activity.

The above actions are punishable as follows (Article 14.32, Russian Administrative Offences Code):

  • A fine of between 1% to 15% of the company's revenue from the sale of goods (or works or services) for the year preceding the infringement, on the market where the law was breached.
  • A fine of between 0.3% to 3% of the company's revenue from the sale of goods (or works or services) for the year preceding the infringement on the market where the law was breached, if the company's sales revenues on that relevant market exceed 75% of the company's total sales revenues.

The relevant amount of fines is determined under complex calculation rules which set the base amount of the fine (1.65% to 8%) and an increase or a reduction for aggravating and mitigating circumstances respectively.
Fines must be paid within 30 calendar days of the FAS decision to apply the fines to the infringing company. If the fine is not paid, the infringer can face:

  • The FAS doubling the fine.
  • Administrative imprisonment of up to 15 days.

Fines can be forcibly recovered by the relevant enforcement authorities.

  • Personal liability

Administrative liability. An administrative fine of up to RUB50,000 can be imposed on an officer of the company (the general director) for anti-trust infringements. The precise fine depends on the type of infringement. An officer of the company may also be banned (disqualified) from occupying certain posts or carrying out certain activities for a period of up to three years.

Criminal liability. Officers of the company can be held criminally liable if both:

  • The officer of the company participates in cartels, or is involved in consecutive abuse by a company of its dominant position.
  • The anti-competitive agreement or practice causes substantial harm (more than RUB1 million), or accumulates substantial proceeds for the infringer (more than RUB5 million).

Criminal penalties include the following (among others) (Article 178, Russian Criminal Code):

  • A criminal fine of up to RUB500,000.
  • Compulsory labour for up to three years.
  • Imprisonment for up to three years.
  • A ban on occupying certain posts or carrying out certain activities for a period of up to one year.

Some of the above penalties can be applied together. If there are aggravating circumstances, more severe penalties will be applied.

  • Immunity/leniency

Administrative immunity. It is possible to obtain full immunity from administrative penalties for concluding anti-competitive agreements or participating in concerted actions, if all of the following conditions are met (Note 1 to Article 14.32, Russian Administrative Offences Code):

  • The applicant for leniency is the first party to inform the FAS of an anti-competitive agreement or practice.
  • At the time the leniency application is submitted, the FAS has not already received documents and information about the infringement.
  • The documents and information provided about the infringement are sufficient to evidence the infringement.
  • The applicant for leniency has ceased to continue its participation in the anti-competitive agreement or practice.

Criminal immunity. Leniency for a criminal offence will be granted to an individual if all of the following conditions are met:

  • The individual assists in uncovering the criminal offence.
  • The individual provides compensation for the harm caused by the offence or otherwise makes restitution.
  • The individual's activities do not constitute a separate criminal offence.
  • Impact on agreements

Depending on the alleged infringement and the content of the agreement, the court can invalidate either:

  • The entire agreement.
  • Certain parts of the agreement.

  • Third party damages claims and appeals

25. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are class actions possible?

  • Third party damages

Private damages claims are possible but are quite rare in practice. Private anti-trust damages claims in Russia can be either:

  • "Stand alone actions", where the claimant must prove the infringement.
  • "Follow on actions", where the claimant relies on a finding of infringement by the FAS.

In both actions, the claimant must prove the amount of harm caused, which follows the compensatory principle under the law of tort.

  • Special procedures/rules

There are no special procedures or rules. In terms of procedure, private anti-trust damages claims are subject to general rules of the:

  • Russian Arbitration Procedure Code.
  • Civil Procedure Code.
  • Class actions

The Russian Arbitration Procedure Code provides limited scope for class actions and requires all the claimants to have the "same interest" as each other and as the representative party. There is no relevant case law on this issue.
 
26. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?

  • Rights of appeal and procedure

The accused persons or entities can appeal the FAS decisions and/or orders before State Arbitration Courts. Claims should be filed with a court within three months of the decision being made or the order being issued.

  • Third party rights of appeal

Third parties can appeal to Russian courts if they can prove that the FAS decision and/or order affects their rights and legitimate interests. 

  • Monopolies and abuses of market power
  • Scope of rules

27. Are monopolies and abuses of market power regulated under administrative and/or criminal law? If so, what are the substantive provisions and regulatory authority?

Monopolies in Russia are regulated under the Competition Law.

Abuses of market power are prohibited by Article 10 of the Competition Law and are penalised under the Code of Administrative Offences.

Certain abuses of dominance behaviour is subject to criminal liability if such deeds are committed more than twice in three years (for examples of abuses of market power, see Question 29).

Abuses of dominance are penalised under the administrative law if it results in significant harm or unlawful gains (more than RUB5 million (about EUR125,000)).

In general, abuses of market power are prohibited if such actions might hinder competition or harm third parties. Certain actions constituting abuse of market power are specifically listed in the Competition Law (see Question 29). However, this list is not exhaustive.
 
28. How is dominance/market power determined?

Dominance is determined after thorough market analysis, which is conducted by the FAS under a specific set of rules developed by the FAS itself. Market analysis includes determining the:

  • Geographical and product boundaries of the market.
  • Number of competitors on the given market.
  • Market share of all the competitors on the market.

After the analysis is completed, the FAS can usually tell whether the market share of the company in question (alongside other factors, such as high barriers to market entry, the market shares of its competitors and so on) is high enough for it to be considered dominant.

There is an automatic assumption of dominance for companies with a market share of 50% or more. However, under certain circumstances companies with a market share as low as 10% may still be held to be dominant.
 
29. Are there any broad categories of behaviour that may constitute abusive conduct?

The Competition Law provides general categories of behaviour by a dominant company that constitute abuse of market power. Such behaviour includes:

  • Setting monopolistically high or low prices.
  • Refusal to supply the product or to enter into a contract.
  • Discrimination and other types of behaviour.
  • Exemptions and exclusions

30. Are there any exemptions or exclusions?

All dominant entities conducting business are subject to the regulations on abuse of market dominance.

In addition, special exemptions are available to natural monopolies (that is, operators on a market where the competition is neither effective nor desirable).

  • Notification

31. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?

There is no formal procedure for dominant companies to obtain clearance from the FAS. However, dominant companies can file a draft agreement with the FAS, and the FAS will review it for any possible violations of the Competition Law.

The FAS permits dominant companies to apply for clearance of their commercial policies (that is, its rules for dealing with their counterparties). However, the Competition Law does not set out a formal procedure for such an application.

  • Investigations

32. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?

The procedures for investigations into abuse of dominance are generally the same as for investigations into restrictive agreements and practices (see Questions 18, 21 and 23).

However, there are certain procedural differences between the two types of investigation:

  • Restrictions are imposed on on-site inspections for abuses of market power (for example, during investigations of potential abuse of dominance, the FAS cannot conduct on-site inspections without giving at least 24 hours' notice).
  • The FAS must conduct its market analysis at a certain point when investigating possible abuses of dominance (this is not necessary when cartel cases are investigated).
  • For certain types of abusive behaviour (imposition of unfavourable terms on their competitors and/or unfounded refusal to enter into a contract), the FAS must issue a warning to the dominant company before initiating administrative proceedings. If the company rectifies the infringement within the prescribed time limit, administrative proceedings are not opened.

33. What are the regulator's powers of investigation?

The FAS's power of investigation is generally the same as for investigations into market abuse or restrictive agreements or practices (see Question 22). However, the FAS cannot conduct "dawn raids" (such as on-site investigations or inspections without prior warning) when investigating possible abuses of dominance (see Question 32).

The FAS can conduct two types of inspection, which usually constitute part of an investigation into a possible violation:

  • Planned inspections. These are conducted regularly, generally once every three years and the inspected company must be given at least three days' written notice of the inspection.
  • Unplanned inspections. These are usually conducted if there is any information regarding violations of the Competition Law committed by the inspected company. When investigating a potential abuse of dominance, the FAS must give the inspected company at least 24 hours' notice of the inspection (by any means available). This requirement is not necessary when cartel cases are investigated. 
  • Penalties and enforcement

34. What are the penalties for abuse of market power and what orders can the regulator make?

The penalties for abuse of market power are generally the same as for prohibited restrictive agreements and anti-competitive practices (see Question 24).

However, the maximum administrative fine that can be imposed on the company liable for abuse of dominance must not exceed RUB1 million (about EUR25,000) if either:

  • The abuse of dominance does not result in a restriction of competition on the market.
  • The market share of the penalised company does not exceed 35%.

If the abuse of dominance involves a restriction of competition, the fine can be up to 15% of the annual revenues on the relevant market (though not more than 2% of total annual revenues). If the liable company receives more than 75% of its total revenues from this particular market, the fine must not exceed 3% of the annual revenues on the relevant market.

  • Third party damages claims

35. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are class actions possible?

This is the same as for anti-competitive agreements and practices (see Question 25). 

  • EU law

36. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law?

Not applicable.

  • Joint ventures

37. How are joint ventures analysed under competition law?

There is no formal definition of a joint venture in the Competition Law. The Competition Law uses the concept of "joint activity", which is quite vague. However, the most popular forms of joint ventures, such as setting up a new corporate vehicle and a holding company, fall within the scope of "joint activity". Certain contracts that provide for joint activities without creating a new corporate structure are also within the scope of "joint activity".

Agreements between competitors (or non-competitors) providing for joint activity can be cleared by the FAS if all the following conditions are met:

  • Implementation of the joint activities agreement cannot eliminate competition on the market.
  • No substantial restrictions are imposed on the parties to the agreement or third parties.
  • Implementation of the agreement will improve production, sale of goods or technological or economic progress or attract direct investment into Russia.
  • The final purchasers will gain benefits from the agreement equal to those enjoyed by the parties to the agreement.

If the agreement on joint activities meets the above test, the FAS may clear the activity, even when, in the absence of the joint activities, certain restrictions on competitors party to the agreements may not have been cleared by the FAS or such activity may have consequently resulted in serious penalties.

The joint ventures/activities are reviewed under the rules on restrictive agreements. They may also be reviewed under merger control rules, if they meet the thresholds for merger control.

  • Inter-agency co-operation

38. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?

The FAS co-operates closely with the anti-monopoly authorities of the CIS countries on the basis of an international treaty, dated 25 January 2000 on pursuit of a co-ordinated antimonopoly policy in the CIS countries (dated 25 January 2000).

In addition, the FAS has numerous bilateral agreements and memoranda in place with anti-monopoly authorities in various jurisdictions, including:

  • Australia.
  • Austria.
  • Czech Republic.
  • EU.
  • Finland.
  • France.
  • Hungary.
  • Italy.
  • South Korea.
  • Mexico.
  • Poland.
  • Romania.
  • Slovakia.
  • Sweden.
  • Vietnam.
  • US.

The FAS is also a member of the International Competition Network and is communicating closely with the Organisation for Economic Co-operation and Development (OECD) concerning Russia becoming part of this international organisation.

  • Proposals for reform

39. Are there any proposals for reform of competition law?

The following reforms have been proposed:

  • It has been announced that the option to provide subsequent notifications to the FAS will be abolished in the near future.
  • The FAS is keen to amend the Competition Law and Criminal Code to promote further use of criminal proceedings against those involved in cartels and managers accused of consecutive abuse of a dominant position.
  • In the next few years, it is expected that the Eurasian Economic Community (of which Russia, Kazakhstan and Belarus are member states) will become an independent supranational watchdog, with powers to investigate and consider certain aspects of competition regulation within the Eurasian Economic Community.

Contact details

For all issues related to publications, news and press releases, please contact:

Ksenia Soboleva

Head of PR and Communications

Subscription

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.