Russian Fish Company could face fine as part of FAS cartel crackdown

PaRR Strong evidence

Russian Fish Company, a leading fish distributor in the country, could face fines of up to 15% of its annual revenues in the relevant sector, as part of a wider cartel crackdown on cartels in the fish distribution industry in Russia, said local antitrust lawyers.

Nikolay Voznesenskiy, head of the Competition and Antitrust Practice at Goltsblat BLP, the Russian practice of London-based law firm BLP, said that if the cartel charges are proved, standard Russian turnover fines in such cases normally amount to around 8% of segment annual turnover.

However, in this case, the fine may be even higher, because 8% is normally regarded as a starting point for such cases, said Nadia Goreslavskaya, an associate from Baker & McKenzie. She added that if FAS identifies aggravating circumstances, the fine could increase.

On 23 October, FAS, Russia's competition regulator, launched proceedings over alleged competition law violations in the Norwegian fish supply sector. The proceedings were against the Russian Fish, Atlant-Pacific, Severnaya Company, and SK Retail, for violating Point Three and Part One of Article 11 of the Defence of Competition Law, by operating a cartel to divide the market.

In a written statement, FAS announced that it had started cartel proceedings following an investigation into the Norwegian salmon and trout supply market, which took place between March and June 2012.

The investigation found that the four companies had divided Norwegian salmon and trout distribution within Russia and then signed strategic partnerships with companies in the Norwegian fish export sector, according to the FAS statement.

However, a Russian Fish spokesperson told PaRR that these partnerships were solely for marketing purposes and did not include any agreements on sales and/or volumes.

The company spokesperson said that FAS had incorrectly based its initial claims on the company's financial reports. The spokesperson noted that FAS, in its claim, says that after the “marketing agreements” were signed in May, Russian Fish's sales volumes went up, but in fact, sales volumes went down in 2Q12, the quarter in which these agreements were signed, the spokesperson said.

The spokesperson added that the company would be in a position to comment further on the start of the investigation in around two weeks, when Russian Fish expects to receive an official document from FAS. He added that it normally takes up to two weeks to receive documents by post in Moscow.

However, a sector analyst at Russian investment group Aton said the sales figures cited by the Russian Fish spokesperson are not sufficient, because the effect of the partnership agreements was likely to become evident later, not in May, when they were signed. The analyst also said that the company’s financial reports show that the group’s sales volumes and revenues improved significantly after the third quarter, compared to the beginning of the year.

Goltblat’s Voznesenskiy also noted that the consequences of a cartel are not necessarily of interest to FAS, as the agency’s main task is to see if a cartel had in fact been formed, regardless of the immediate sales impact.

The main task for FAS is instead to determine whether Russian companies agreed to sign strategic agreements with each other, Voznesenskiy said. FAS is unlikely to base its decision on financial reports by Russian Fish and such evidence would not be a priority for this investigation, he noted.

Cartels are of special interest to FAS at the moment as they are regarded to be the worst violations of competition law for which there is no need to prove adverse consequences for the market, said Nadia Goreslavskaya of Baker & McKenzie. Cartels also entail criminal charges which have been poorly enforced to date, she added. A cartel case appears to be the right platform for FAS and the Russian Police to fulfill their enforcement powers in relation to criminal charges, she said. The Russian fish industry has been under intense scrutiny for several months, as reported. FAS also recently launched an investigation into a Pollock fishing cartel.

by Natalia Lapotko in London

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