Segmentation of Russia's light vehicle market to speed up antitrust

09.06.2014

PaRR

Antitrust investigations in Russia should move faster once regulators reclassify the light vehicle market, lawyers say.

Russia's antitrust agency, Federal Antimonopoly Service (FAS), is going to segment the light vehicle market by the end of the year, an agency spokesperson told PaRR.

It is likely that segmentation will be based on class of cars and/or their price, said Anton Subbot, a lawyer at Baker & McKenzie in Moscow. Such segmentation will make FAS enforcement more proportionate and targetfocused, said Subbot.

Segmentation based on price and class is most likely, Andrey Zakataev, a competition lawyer at Antimonopoly Law Office agreed.

The regulator is currently researching this market, as PaRR previously reported.

The results of this investigation are due to be published at the end of 2014, said the spokesperson, adding that after that the precise criteria of segmentation will be revealed.

No matter what the segmentation will be like, FAS will be able to conduct its investigations more efficiently, said Vitaly Dianov, a senior competition lawyer at Goltsblat BLP.

Once completed, the analytical framework for defining the market - which is the most difficult question in market analysis - will be in place. In the future, regulators will just have to collect data such as sales volumes in a particular segment, Subbot explained.

FAS is likely to identify new dominant players in the sector as a result of this analysis, said Vitaly Dianov, a senior competition lawyer at Goltsblat BLP.

Russia’s Avtovaz has already been classified as dominant, said Dianov, adding that this time FAS may give foreign companies the same designation. However, such a decision could be quite controversial and will depend to a certain extent on how small the newly defined markets will be, he added.

Automobile producers are some of the most active investors in Russia, said Andrey Nikitin, the head of the Agency for Strategic Initiatives at the 11th Annual RBCC Business Forum in London last week. For example, FolksVagn and Peugeot Citroen invest in Tatarstan region and Kaluga Oblast, which have a clear programme of attracting foreign investments, he added.

Relationships between automakers and dealers

If FAS continues with this strategy, the regulator is likely to differentiate between wholesale and retail car sales, said Evgeny Bolshakov of Egorov Puginsky Afanasiev & Partners’ antitrust practice. Then FAS will concentrate on the relationship between automobile companies and dealers.

Between 2011 and 2012 FAS initiated several cases dealing with automobile companies which imposed unfavourable conditions on their distributors, said Bolshakov, adding that such cases were not closed and that there could be a ‘new wave’ of similar investigations after the market study is complete.

In December, FAS launched a case against distributor Mercedes Benz RUS because of indications of violations of antitrust law.

In June, FAS closed an investigation because Mercedes brought itself into compliance with the Competition Law.

FAS has been active in the automotive sphere recently, Subbot noted. The agency has recently released a decree regulating automakers’ relationships with car dealers.

The regulator has also set up an arbitration tribunal to deal with car industry disputes.

The head of the FAS department reponsible for the supervision of the industrial and military sectors, Maxim Ovchinnikov, noted that an arbitration tribunal aimed at solving disputes between car distributors, official car dealers and independent service stations before they reached court would be set up to ensure that the principles of the code were effectively enforced.

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