Resource type: Country Q&A
Status: Law stated as at 01-Jun-2013
Jurisdiction: Russian Federation
1. What (if any) merger control rules apply to mergers and acquisitions in your jurisdiction?
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:
Separate thresholds trigger the procedures for preliminary consent and subsequent notification to the Russian regulatory authority for anti-trust matters, the FAS.
Merger control in Russia is regulated by the FAS.
2. What are the relevant jurisdictional triggering events/thresholds?
The following types of transactions are covered by Russian merger control:
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:
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:
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).
3. What are the notification requirements for mergers?
Prior approval and subsequent notifications are mandatory if the triggering conditions and thresholds are met (see Question 2).
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.
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.
The acquirer(s) (or founder(s) of a new undertaking) are responsible for filing the prior approval or subsequent notification with the FAS.
Notifications must be made to the FAS.
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.
The filing fee for obtaining preliminary consent is about EUR500. The fee should be paid by the applicant (see above, Responsibility for notification).
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.
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.
5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?
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.
No information is automatically kept confidential. The applicant must officially notify the FAS of the need to keep materials confidential.
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.
6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?
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.
Third parties do not have access to filed documents/information.
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.
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:
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:
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 meet the merger control requirements may result in one or both of the following:
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.
See above, Failure to notify correctly.
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?
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.
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.
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.
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:
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).
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:
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:
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.
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):
The government can approve block exemptions (general exemptions). Currently, block exemptions are only applicable to:
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.
16. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?
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:
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.
The statute of limitation for administrative violations of the Competition Law is three years from either:
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.
17. What are the notification requirements for restrictive agreements and practices?
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.
In certain cases it is possible to obtain informal guidance before formal notification. However, informal guidance is not recommended for subsequent notifications.
Either party to the transaction can submit the draft agreement (or already implemented agreement) for clearance.
The FAS is the relevant responsible authority.
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.
There is no filing fee.
18. Who can start an investigation into a restrictive agreement or practice?
The FAS can start an investigation on its own initiative.
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?
Complaints from third parties should include, among other things:
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.
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.
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:
Anti-monopoly proceedings will result in the FAS issuing either:
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:
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.
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):
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.
24. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?
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:
Companies may be held administratively liable in relation to:
The above actions are punishable as follows (Article 14.32, Russian Administrative Offences Code):
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:
Fines can be forcibly recovered by the relevant enforcement authorities.
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:
Criminal penalties include the following (among others) (Article 178, Russian Criminal Code):
Some of the above penalties can be applied together. If there are aggravating circumstances, more severe penalties will be applied.
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):
Criminal immunity. Leniency for a criminal offence will be granted to an individual if all of the following conditions are met:
Depending on the alleged infringement and the content of the agreement, the court can invalidate either:
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?
Private damages claims are possible but are quite rare in practice. Private anti-trust damages claims in Russia can be either:
In both actions, the claimant must prove the amount of harm caused, which follows the compensatory principle under the law of tort.
There are no special procedures or rules. In terms of procedure, private anti-trust damages claims are subject to general rules of the:
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?
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 parties can appeal to Russian courts if they can prove that the FAS decision and/or order affects their rights and legitimate interests.
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:
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:
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).
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.
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:
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:
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:
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.
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).
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?
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:
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.
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:
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.
39. Are there any proposals for reform of competition law?
The following reforms have been proposed: