Amending Code of Administrative Offences to establish liability for a breach of the Law on Trade

Pepeliaev Group advises that, on 1 January 2011, Federal Law No. 411-FZ “On amending the Code of Administrative Offences of the Russian Federation” dated 28 December 2011actually came into force. The Law contains amendments to the Code of Administrative Offences (the “CoAO”) establishing a fine of up to 5 million roubles for a breach of the compulsory requirements of Federal Law No. 381-FZ “On the fundamentals of state regulation of trade in the Russian Federation” dated 28 December 2009 (the “Law on Trade”).

The amendments to the CoAO provide that legal entities can be fined up to RUB 5 million, while their officers can be fined up to RUB 50,000, for the following:

- creating discriminatory conditions prohibited by the Law on Trade, including preventing businesses fr om entering or exiting the market;

- breaching the pricing procedure established by regulations;

- pressing a contracting party into accepting terms prohibited by the Law on Trade;

- wholesale trade using a commission agreement or mixed agreement which contain elements of a commission agreement depending on the degree of fault on the part of the person initiating the conclusion of the contract;

- a failure by a trading network to provide information requested by a supplier of such trading network on the terms for selecting a party with whom to conclude a supply contract for foodstuffs and on the substantive terms of such contract by way of placing the relevant information on its Internet site or by supplying the information requested free of charge within 14 days of the relevant request being received;

- a failure on the part of a trading network to present to the supplier of such trading network information the supplier has requested on the trading network’s terms for selecting a party with whom to conclude a supply contract for foodstuffs and on the substantive terms of such contract and also on the quality and security of the foodstuffs to be supplied, by way of placing the relevant information on its Internet site or by supplying the information requested free of charge within a 14 days of the relevant request being received;

- including in a supply agreement a term whereby a fee is paid in excess of 10% of the price of the foodstuffs acquired, for the purchase by a trading network of a certain quantity or volume of foodstuffs or a term for the payment of such a fee (i.e. one based on volume) for the purchase by a trading network of specific types of foodstuffs of social significance included in the list set out in the Russian Government’s Resolution No. 530, dated 15 July 2010, “On approving the Rules establishing the limits of permissible retail prices for specific types of socially significant staple foodstuffs and in respect of which limits of permissible retail prices may be established, and a list of socially significant foodstuffs for the purchase of a specified quantity of which the payment of a fee to a trading business is not permitted”;

- including in a supply agreement for foodstuffs types of fees for a trading network other than a fee, as described above, for the purchase by a trading network of a specified quantity or volume of foodstuffs;

- stipulating, in a supply agreement for foodstuffs, deadlines for paying for such foodstuffs in excess of the deadlines established in the Law on Trade;

- establishing in a supply agreement for foodstuffs a prohibition on changing the persons on whom obligations fall in connection with such agreement by way of assigning a claim or a civil liability for a failure to comply with such prohibition by the parties to the agreement in question;

- including in an agreement to supply foodstuffs terms requiring a trading network to carry out specific actions in relation to foodstuffs to be delivered which relate to providing advertising services for the goods, marketing services or similar intended to promote the foodstuffs. What this refers to is actions that lead to increased sales of the foodstuffs (part 12, article 9 of the Law on Trade). Moreover, services involving advertising foodstuffs, marketing and similar may be carried out by a trading network on the basis of an agreement for such services supported by payment (part 11, article 9 of the Law on Trade). This does not give rise to liability under the CoAO.

- compelling another party, when concluding a supply agreement in respect of foodstuffs, to enter into a fee-based agreement for services to promote such goods. Moreover, actions that lead to increased sales (part 12, article 9 of the Law on Trade) give rise to liability under the CoAO. ‘Compelling’ another party is understood to refer to actions aimed at concluding a consideration-based agreement to supply foodstuffs on condition that another agreement is concluded at the same time – specifically, a fee-based agreement for services to promote the foodstuffs.

Persons fr om the same group of persons as trading networks and their suppliers, when engaged in trade, are also liable under the CoAO for a breach of the requirements. A ‘group of persons’ is established using the rules stipulated in article 9 of Federal Law No. 135-FZ “On the protection of competition” dated 26 July 2006.
It is the officers of the Federal Antimonopoly Service or of its regional offices who are authorised to draw up reports and examine cases on administrative offences (article 23.48, and part 1, article 28.3. of the CoAO). Thus the Federal Antimonopoly Service is actually has the authority to oversee compliance with all of the mandatory provisions of the Law on Trade and not just its antimonopoly requirements.

The addition of a new part 2.7. to article 19.5. of the CoAO can be regarded as advantageous for business. This can mean, in certain circumstances, a fine of RUB 50,000 or a disqualification for between 1 and 3 years for officers of executive authorities of the Russian Federation’s constituent areas, officers of local government bodies or the officers of authorities or organisations carrying out the functions of such bodies. Such penalties may be imposed wh ere the officer fails to carry out or improperly carries out (including not doing so on a timely basis) the antimonopoly authority’s directions to cancel or amend a certificate it has issued, to stop performing an act or omission wh ere such failure or improper action leads or may lead to a breach of legislation on the fundamentals of the state regulation of trade in the Russian Federation.

Pepeliaev Group’s lawyers have significant experience in advising and representing clients in respect of complying with state legislation on the fundamentals of regulating trading activity in Russia and in proceedings in cases concerning offences covered by the CoAO. They will provide the necessary assistance on any issues connected with mitigating or eliminating risks of liability under the CoAO being imposed for breaches of the Law on Trade as well as protection against unlawful actions connected with breaches of the Law on Trade on the part of executive or local government authorities and their officers. Our lawyers defend persons held liable under the CoAO in proceedings at all stages in cases concerning administrative offences.

For further details, please contact:

in Moscow – Elena Ovcharova, Head of the Administrative Defence of Business Group, at (495) 967-00-07 or by e-mail; Nataly Travkina, Senior Associate, at (495) 967-00-07 or by e-mail; Elena Lazareva, Senior Associate, at (495) 967-00-07 or by e-mail;

in St Petersburg - Sergey Spasennov, Partner, Head of St. Petersburg office, at (812) 333-07-17 or by e-mail