FAS pushes for amended cartel definition
Russia’s competition authority, the Federal Antimonopoly Service (FAS), has proposed amendments to eliminate the discrepancy in different definitions of a cartel in Russian competition law and the country’s criminal code, Andrey Tenishev, head of the cartel division at FAS, told PaRR. A definition given to a cartel in antimonopoly law will be integrated into criminal law, he explained.
The definition of a cartel was introduced into Russian competition law in 2011. At the time, it was defined as an illegal agreement between “economic entities that sell products” in the same market, which results or may result in the establishment and maintenance of prices, refusal to enter into a contract with a particular customer (the socalled boycott), or abandonment of the production of goods for which there is a demand.
Article 178 of criminal code defines cartel as the prevention, restriction or elimination of competition through agreements between entities which restrict competition.
Elimination of this discrepancy as well as other amendments to Article 178 of the criminal code put forward by FAS were already passed at the first reading at parliament. The Russian Parliamentary Legislation Committee reportedly postponed further reading for the second time on 7 October.
Amendments also include the exclusion of repeated abuse of dominance from offences implying criminal sanctions and increase of major criminal fines from the present range of RUB 5m to RUB 25m to RUB 10m to RUB 40m.
FAS is also proposing that criminal investigations can be launched only after FAS has carried out an investigation. The Ministry of Internal Affairs (MVD), the General Prosecutors' office and the Russian Investigative Committee were reportedly against these proposals.
FAS considers more cartel cases than MVD initiates under Article 178 of the criminal code, Tenishev said. For example, in 2012 FAS initiated 75 cases under Article 11 (1) of Competition law, whilst MVD initiated only five cases under Article 178 of the criminal code, Tenishev said.
Given Russia’s membership in the Customs Union with Belarus and Kazakhstan, cartel definitions and sanctions in those countries may also be influenced, as the three member states aim to introduce single competition law rules, said Sergey Maksimov, deputy head of the legal department at the FAS.
On 24 October in Minsk, heads of Belarus, Kazakhstan and Russia, also referred to as the Supreme Eurasian Economic Council (EEC), signed an order on model competition law that has provisions on abuse of dominance, unfair competition, anti-competitive agreements and cartels.
The model law was planned to be approved before 1 July 2013, an EEC spokesperson told PaRR earlier. Russian competition law was taken as an example for the model law, because it was recognised as more modern and developed than in other two countries.
Model law is a simplified construction to understand similarities and differences between legislation of the three countries, Maksimov noted. It is a prototype of a future legal act, he added. Later it would be called Competition Law of the Customs Union or Competition Code, he said. The order is a recommendation, the EEC spokesperson said.
Issues related to creation of a single competition policy in the Customs Union are not resolved yet, Maksimov said. Antitrust enforcers in the three member countries impose different sanctions for cartels, he said. For now, sanctions are being “conceptualised”, he added.
Some drastic differences between competition policies of member states can be removed, Maksimov said. First of all, differences between criminal and administrative sanctions for violations of antimonopoly legislation will be removed, he added, though when it will happen is not clear. Next year a single conceptual system can be established, Maksimov said.
Belarusian legislation does not contain a definition of a cartel, said Dennis Turovets, a managing partner at a Minsk office of EPAM. However, competition law prohibits any forms of concerted practices, he added.
In Belarus, companies may be fined up to 10% of revenues in a market where a violation took place. Executives of companies that concerted prices may face fines ranging from RUB 9200 to RUB 46 100; an “entrepreneur” may face a fine of RUB 46 100 – 92 200; and individuals may also be imprisoned up to five years.
In Kazakhstan, cartelists can be sanctioned 10% of revenues acquired illegally and have illegal profits confiscated, said Denis Lim, a lawyer at Baker & McKenzie in Moscow. In cases of repeated violation of competition law, cartelists can be sanctioned 20% of revenues acquired illegally and have illegal profits confiscated. They may also face criminal sanctions in such cases, he added.
In Russia, cartelists may face both administrative liability – a fine or disqualification – and criminal conviction – a fine or imprisonment.
FAS can impose a turnover fine on them up to 15% from revenues in a market where violation took place and, in bid-rigging cases, up to 50% from the starting price of the respective tender, said Anton Subbot, a lawyer at Baker & McKenzie in Moscow. In addition, FAS may require a company to disgorge the revenues it received as a result of violation. Individuals, typically top executives, who were not directly involved in forming or executing a cartel, may face an administrative fine of up to RUB 50 000 or even an administrative disqualification for up to three years. However, individuals who were directly involved in a cartel may face up to six years of imprisonment and a disqualification up to three years, Subbot added.
by Natalia Lapotko in London
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