"Third Antimonopoly Package"

The long-awaited "Third Antimonopoly Package" – a comprehensive set of amendments to the Competition Law and associated legislative acts - was approved by the Government of the Russian Federation on June 28, 2011 and is now ready to be submitted to the State Duma. It is anticipated that the Third Antimonopoly Package will be adopted by this legislative authority and will come into force in autumn this year.

Maxim Boulba
Partner

CMS, Russia
+7 495 786-4000
info@cmslegal.ru

The current Competition Law was adopted five years ago. Since then, it has been the subject of two sets of major, widely-discussed amendments: the First and Second Antimonopoly Packages. Almost two years have passed since the Second Antimonopoly Package came into force, and practice has shown that a third set of amendments is required.

The current version of the Third Antimonopoly Package includes amendments to the Competition Law and the Criminal Code, as well as alterations to other industry-specific codes and laws of the Russian Federation. The most prominent of these amendments in their current wording are outlined below.

  1. Agreements between competitors which lead to or may lead to (i) fixing or maintaining prices, discounts, bonus payments or surcharges, (ii) increasing, reducing or maintaining prices during auctions, (iii) division of market by territory, volume of sales, assortment of goods/services or range of sellers or purchasers/customers, (iv) reduction or termination of the production of goods, or (v) refusal to enter into contracts with certain sellers or buyers, are prohibited and will now be defined as "cartels".
  2. Criminal liability will no longer be envisaged for concerted actions (in the absence of an agreement) or vertical agreements, but will only be applicable to agreements between competitors which restrict competition.
  3. Prohibitions of competition-restrictive agreements will not be applicable to agreements entered into by members of one "group of persons" if the parties to the agreement are related by means of control (one party controls the other or both/all parties are controlled by the same legal entity or individual).
  4. Antimonopoly clearance of the Federal Antimonopoly Service (the "FAS") for transactions resulting in an acquisition of control over foreign target companies or of assets located in Russia which belong to foreign target companies may be required, if the foreign target supplied goods to the Russian market in an amount exceeding 1 billion roubles (currently approx. €24,750,000 / US$35,900,000) during the calendar year preceding the date of the transaction.
  5. The FAS will maintain a register of entities and individuals which have been held liable for administrative violations.
  6. The FAS will be entitled to send official warnings to entities which have publicly declared their intent to act in a certain manner if such behavior may lead to a violation of antimonopoly legislation.

The Third Antimonopoly Package also includes a broad range of amendments which further detail the procedures for identifying a monopolistically high price, concerted actions and one group of persons, as well as appealing against a tender/auction procedure or an agreement entered into as a result thereof, and applying for transaction clearances.

All of the proposed amendments attempt to cover the gaps in Russian antimonopoly legislation which are increasingly revealed as practical application of competition law evolves.

The market has been demanding answers to many antimonopoly questions for some time but, as of yet, the FAS has not provided any answers. However, the business and legal communities have yet to see what the State Duma will make of the current draft of the Third Antimonopoly Package by the time of its adoption, expected in autumn 2011.

Other Recent FAS Developments

According to official representatives of the FAS, the Federal Law No. 57-FZ on Foreign Investments into Entities of Strategic Significance for the Defense and Security of the [Russian] State (the "Strategic Law"), which has caused concern for many foreign investors in connection with M&A transactions and internal restructurings, has been shown to be "quite liberal". Out of over 170 applications for strategic transaction clearance, only two have resulted in a prohibition.

Amendments to the Strategic Law are expected to be adopted shortly (the draft amendments are already being considered by the State Duma). Among other noteworthy points, the amendments will remove banks (credit institutions) from the list of strategic entities. Thus, once adopted, acquisitions of banks will no longer require time-consuming strategic clearance involving the Government Commission.

Current regulation of state orders and government contacts, primarily governed by Federal Law No. 94-FZ on the Placement of Orders for the Supply of goods, Works, Services for State and Municipal Needs and Federal Law No. 135-FZ On the Protection of Competition, is expected to undergo significant amendment. The Third Antimonopoly Package addresses a number of issues in this area (mentioned above) and, in addition, a number of proposed amendments to the Law No. 94-FZ have been submitted to the State Duma for consideration. Further, following a lengthy and in-depth discussion on June 21, 2011 regarding state contracts, their legislative regulation and the authority of the FAS in this area, further legislative proposals are expected. The amendments are aimed at transparency at all stages of tenders, effective budget spending, equal access for participants and protection of participants' rights, as well as the general development and protection of fair competition.

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