Fourth Antimonopoly Package
In January 2016, the Fourth Antimonopoly Package came into effect, introducing amendments to Russian competition law (Federal Law No. 135-FZ “On Protection of Competition”). Additional proposed amendments to Russian competition law are currently in the second reading of the State Duma. This concerns in particular an additional adjustment of merger clearance requirements.
Apart from changes in the field of unfair competition, the Fourth Antimonopoly Package includes several important amendments to:
- merger control clearance,
- horizontal and vertical agreements,
- market dominance, and
- other modifications
Merger control clearance
The Fourth Antimonopoly Package introduces a new merger clearance requirement for the execution of joint venture agreements between competitors
- whose aggregated balance sheet value on a group-wide basis exceeds RUB 7 billion, or
- whose turnover on a group-wide basis exceeds RUB 10 billion.
Joint venture agreements potentially triggering filing comprise not only projects that envisage the formation of a jointly held legal entity, but also other collaborative projects between competitors.
In a non-public statement, the FAS clarified that amendments to previously concluded joint venture agreements also require clearance if the applicable thresholds are met.
Nevertheless, the voluntary submission of any joint venture agreements containing non-compete provisions should be carefully evaluated, even if the economic thresholds are not met.
The Fourth Antimonopoly Package also abolished the register of legal entities with a market share of more than 35% or with a dominant position on the market. This in fact eliminates one trigger for a potential merger control filing.
Horizontal and vertical agreements
With respect to cartel prohibitions, companies competing on the sales markets were previously regarded as competitors. Now also companies that are active on the same purchasing market can be regarded as competitors.
A previous exemption for agency agreements, excluding them from the general restrictions on vertical agreements, was repealed. Accordingly, going forward agency agreements will fall under the general restrictions of Russian competition law.
The Fourth Antimonopoly Package added a provision according to which the restrictions on horizontal and vertical agreements will not be applied to joint venture agreements that were approved by the FAS. This is a logical consequence of the additional merger control clearance requirement described above.
With respect to exemption from restrictions on vertical agreements for parties with up to 20% market share, competition law now specifies that the 20% market share is to be calculated for the market that is the subject matter of the agreement.
Abuse of dominant position
Companies with less than 35% of the market are no longer regarded as holding a dominant position now.
Companies holding a dominant position in a certain market and abusing that position can be forced by the FAS to adopt rules of non-discriminatory access. These rules must include a list of goods concerned, principles for determining the price for goods, standard agreements, contractual terms and conditions and other information.
The Fourth Antimonopoly Package also introduces many other changes, such as:
- Revision of the procedure for reviewing violations of antitrust rules;
- Update and clarification of administrative liability for violation of antitrust rules (tenders in particular);
- Federal Law No. 135-FZ “On Protection of Competition” will not apply to relations governed by unified competition rules on cross-border markets, which are governed by acts of the Eurasian Economic Commission;
- Establishment of conditions for second and third leniency applicants, decreasing the administrative fine to a minimal amount.
A draft law initiated by the State Duma envisages the exemption of small businesses from antitrust restrictions.
It stipulates that the criterion for merger clearances concerning target balance sheet value is to be increased from RUB 250 million to RUB 400 million. It also exempts businesses with up to RUB 400 million turnover from general restrictions on agreements restricting competition, while specific restrictions on horizontal agreements (cartels) and vertical agreements remain applicable. Such businesses cannot be regarded as holding dominant positions on the market (with some exceptions).
As this draft law has already passed the second reading in the Russian State Duma, the likelihood of it becoming law is fairly high.
Any Questions? Please contact: Stefan Wolfgang Weber or Arrem Kara
Practice Group: Antitrust & Competition