• Introduction
• Monopoly Activity According to the Russian Legislation
• Unfair Competition According to the Russian Legislation
• State Supervision in Relation to Economic Concentration
• Liability for Breach of Antimonopoly Legislation

The Federal Law No.153-FZ as of July 26, 2006 "On the Protection of Competition" (hereinafter referred to as the "Law on Protection of Competition") forms the basis of the antimonopoly legislation. The main concepts of competition legislation are determined in this Law, such as the group of persons, monopoly activity, conditions for economic concentration and other issues. The Federal Antimonopoly Service acts as the executive body for the protection of competition.

The Law on Protection of Competition gives the following meanings in relation to a monopoly activity: (i) an excessive use of an agreement by a commercial entity or a group of persons by virtue of their dominant position, or (ii) concerted actions that are prohibited by the antimonopoly laws, and (iii) other acts (omissions) forming a monopoly activity as provided for by the federal laws.

Dominant Position:

A Dominant Position is a position where one or a few commercial entities trading in a certain commodity market may generally affect the conditions of circulation of these commodities in respective market and/or expel other companies from such market, and/or impede other companies an access to such commodity market.

A commercial entity shall be deemed to have a dominant position (except for financial organizations) if:

• its market share of a certain commodity exceeds 50% (as a general rule);

• the market share of which, with regard to certain commodity, is less than 50% provided that the position of that commercial entity has been deemed dominant by an antimonopoly body taking into account the unvaried, or insignificantly varied market share of that entity as compared to respective market shares of the competitors of that entity, and considering an opportunity for other competitors to enter this commodity market, etc.

As a general rule, a commercial entity may not be deemed to have dominant position (except for financial organization), the market share for a specified commodity of which does not exceed 35%.

The conditions, under which a position of a financial organization may be deemed dominant, are subject to determination by the Government of the Russian Federation, the same conditions for the credit institutions are set forth by the Government of the Russian Federation in consultation with the Central Bank of the Russian Federation.

Excessive Use of Dominant Position:

The following acts or omissions by a commercial entity having the dominant position, the effects of which will or may comprise prevention, limitation, elimination of competition and/or the infringement of interests of other persons, including the below-mentioned, are prohibited:

• formation and support of monopolistically high or low price for a commodity;

• withdrawal of a commodity from trading if such withdrawal has led to a higher price for that commodity;

• imposition of disadvantageous conditions of an agreement to contracting parties;

• denial or avoidance from entering into agreement with certain buyers (customers) provided that the commodity, which otherwise could have been subject to that agreement, can be produced or is available for sale;

• formation of different prices (tariffs) for the same commodity;

• impeding other commercial entities to enter or exit a certain commodity market.

Agreements Prohibited by Antimonopoly Legislation:

The agreements between commercial entities, or the concerted actions by the commercial entities in commodity markets are prohibited provided that such agreements or concerted actions will or may entail the following:

• formation or support of prices (tariffs), discounts, premiums (extra charges), mark-ups;

• rising, declining or keeping the prices at a certain level during the bidding process;

• sharing the commodities markets with regard to geography (territorial division), volume of sales or purchases, product range of commodities, or in respect of the composition of sellers or buyers (customers);

• unsubstantiated, whether economically or technologically, denial to enter into agreements with certain sellers or buyers (customers);

• unsubstantiated, whether economically, technologically or otherwise, formation of different prices (tariffs) for the same commodity;

• contraction or termination of production of commodities, which are in demand, or the orders for which have been placed taking into account the profitability of their production;

• impeding other commercial entities to enter or exit a certain commodity market;

• setting the conditions for membership (participation) in professional or other associations provided that such conditions will or may prevent, limit or eliminate competition or set the unsubstantiated conditions for membership impeding the participation in payment or other systems, without participation in which the financial organizations will not be capable to provide necessary financial services.

The given prohibitions do not apply to "vertical" agreements. A "Vertical" Agreement is an agreement between non-competing commercial entities, one of which is acquiring a commodity or is a prospective buyer whilst the other is selling that commodity or is a prospective seller of the latter. The vertical agreements are definitely allowed provided that they are made in writing in the form of commercial concession and the financial organizations are not parties to these agreements, or in the event where a market share, in any of commodity markets, of each party to those agreements does not exceed 20%.

The "vertical" agreements between the commercial entities are forbidden if:

• such agreements will or may lead to a certain fixed price of re-sale of a commodity;

• by virtue of such agreement, the seller requires the buyer not to allow an other commercial entity's commodity, which is in competition with that commodity, for sale. This prohibition does not apply if an agreement comprises the buyer's intention to sell commodities under a certain seller's or manufacturer's trademark or brand name.

• such relationship or concerted actions will or may limit the competition.

The Russian legislation provides for certain cases, which are deemed to be an unfair competition as stated below:

• dissemination of false, inaccurate or distorted information that may inflict a loss to a commercial entity;

• misrepresentation of facts in relation to the nature, manner or place of production, consumer properties, quality or quantity of goods or in relation to the manufacturer of the latter;

• wrongful comparison, by a commercial entity, of goods being manufactured or sold by that entity to the goods, which are manufactured or sold by other commercial entities;

• sales, interchange or other trading, for the purposes of which the results of intellectual activities or equal methods of identification of a legal entity, methods of identification of goods, work or services have been used unlawfully;

• unlawful acquisition, use or disclosure of information forming commercial, official or other secret that is protected by laws.

An Economic Concentration means transactions or other actions, the accomplishment of which affects the state of competition.

In a number of events, as provided for by the Law on Protection of Competition, the establishment or re-organization of commercial entities will be made in accordance with the preliminary consent of an antimonopoly body - the Federal Antimonopoly Service or the territorial bodies of the latter. Certain transactions with the shares (participatory interests), the property or rights relating to commercial organizationsare also subject to the consent of the antimonopoly body. There are a number of transactions, the preliminary consent of which is not required to be obtained but it will be necessary to notify the antimonopoly body concerning the accomplishment of such transactions. The need for a specific transaction to be subject to the preliminary consent by the Federal Antimonopoly Service of the Russian Federationwill depend upon the total amount of assets pertaining to a group of persons performing a transaction and/or the amount of revenue of such persons.

If the consent of the antimonopoly body has not been obtained for a transaction, although such consent had been necessary for the completion of the latter, such transaction may, further to a claim filed by the antimonopoly body, be determined void by the court.

The following liabilities may be imposed on a person that is in breach of the antimonopoly legislation:

Civil Liability – compensation for losses.

Administrative Liability:

• an excessive use of the dominant position in the commodity market may entail the imposition of an administrative penalty on the officers in the amount of up to RUR 50,000 or their disqualification for a term of up to three years; for the legal entities the penalty may represent the amount of up to the fifteen hundredth of the revenue received from the sales of goods (work, services) of a company being at fault, in the market of which the administrative offense had taken place;

• entering into an agreement, which is providing for the limitation of competition as well as executing the concerted actions, which are limiting the competition, the co-ordination of economic activities may entail the imposition of an administrative penalty on the officers in the amount of up to RUR 50,000 or their disqualification for a term of up to three years; for the legal entities the penalty may represent the amount of up to the fifteen hundredth of the revenue received from the sales of goods (work, services) of a company being at fault, in the market of which the administrative offense had taken place;

• the unfair competition, provided that such actions do not represent a criminal offense, may entail the imposition of an administrative penalty on the officers in the amount of up to RUR 20,000 or their disqualification for a term of up to three years; for the legal entities the penalty may represent the amount from RUR 100,000 to RUR 500,000 or up to the fifteen hundredth of the revenue received from the sales of goods (work, services) of a company being at fault, in the market of which the administrative offense had taken place;

Criminal Liability (imposed on individuals only): prevention, limitation or elimination of competition provided that such actions have inflicted a large-scale loss to individuals, organizations or the state, or have resulted in a large-scale profit received by an individual at fault will be punished in the form of imprisonment for a term of up to seven years with the disqualification in respect of certain official positions or in relation to certain activities for a term from one year to three years.