Proposed Amendments to the Russian Competition Law
Aidyn Bikebayev Senior Partner Sayat Zholshy & Partners
The first all-Russian Research and Practice Conference devoted to the pressing challenges of the Russian Competition Law in connection with the adoption of the Third Antitrust Package
Undoubtedly, the Russian Competition Law is used as a model in all post-Soviet states. Nevertheless, this area of law needs improvement. In my presentation I would like to focus on certain proposed amendments:
1. Differentiation between the legislative control over unfair competition and the classic antitrust regulation due to their different nature
The legislation concerning unfair competition recognizes the behaviour of a market participant unlawful by the fact of its business unfairness (doubtful ethics and moral turpitude). Hence, in such case we see not the protection of competition, per se, but rather the prevention and preclusion of impermissible business techniques. In opposition to this, the business activities deemed as monopolistic could be positive and meet the generally accepted moral and ethical criteria. The incorporation of such different tenets in one legislative act gives rise not only to theoretical problems but to application issues as well. For example, let’s consider the case when we have to qualify the offence in which one and the same action can be recognized both as unfair competition and as monopolistic activity. In such case the law provisions contradict. This situation is complicated by the fact that the penalty for unfair competition can be insignificant compared to the penalty for monopolistic activity.
2. The concept of objective legitimacy (necessity) shall be formalized in the law
Article 13 of the Competition Law provides the grounds for admissibility of actions on the part of market participants (the rule of reason). This rule was designed by EU legislators for evaluation of anti-competitive agreements and concerted practices, but not for evaluation of abusive behaviour.
In order to differentiate between abusive behaviour and justifiable business actions, the European Commission and the European Court of Justice widely use the concept of objective legitimacy (necessity) according to which a market participant is deemed as applying impermissible techniques in competitive activity (i.e. abusive behaviour) when his behaviour does not make any economic sense and does not improve his own efficiency, but rather restricts or stifles competition. Hence, when competition is restricted for good cause (e.g. granting a dominant position due to the lack of preference given to established customers), the effect does not form corpus delicti.
Article 13 of the Russian Competition Law prohibits abusive behaviour subject to the concept of objective legitimacy only in five instances. In all other instances of abusive behaviour the legislator has not provided for compulsory consideration of the concept of objective legitimacy. As a result, there is no clear distinction between harmful and socially dangerous behaviour, on one hand, and customer/market beneficial activity, on the other hand.
Apparently, the concept of objective legitimacy (necessity) should be applied to anti-competitive practices of public authorities.
3. The approach to legislative treatment of such definitions as “agreement”, “concerted practice” and “cartel” should be revised
The Russian Competition Law distinguishes between “agreement” and “concerted practice”. Such approach was borrowed from the EU Competition Law and considerably helps to prove collusions among business entities. Moreover, based on such distinction, the Russian legislator introduced a special treatment of cartels and determined that only agreements, but not concerted practices, can be recognized as cartels.
In our opinion, the aforementioned provisions give rise to the following problems:
1) assumed distinction between oral agreements and implicative actions (also being oral agreements) regardless of the civil law theory and practice;
