Law “On the Fundamentals of State Regulation of Trade in the Russian Federation” was adopted

Federal Law No. 381-FZ “On the Fundamentals of State Regulation of Trade in the Russian Federation” was adopted on 28 December 2009. The Law enters into force on 1 February 2010.

The Federal Law regulates the relations arising between the state authorities and companies engaged in trade and the supply of products in the Russian Federation, as well as relations arising directly between trading companies and suppliers in connection with the supply of products.

The provisions of this law contain a number of important principally new terms and conditions, which will have a material impact on the regulation of operations and contractual relations between retailers (primarily retail chains) and product suppliers (including manufacturers).

Restrictions on the market share of a retailer

Federal Law No. 381-FZ imposes restrictions on the acquisition and lease of additional trading premises by a retail chain if a retailer accounts for over 25% of real food sales within the borders of a constituent entity of the Russian Federation, city district or municipal area. These restrictions enter into force fr om 1 February 2010 for retail chains that account for over 25% of the market share within the borders of a constituent entity of the Russian Federation and fr om 1 July 2010 for retail chains that account for such a share within the borders of a city district or municipal area, including Moscow and St. Petersburg. Please also note that a retail chain may not acquire or lease additional trading premises within the lim its established by the law on any grounds, including in connection with the commissioning of new shopping centres, participation in tenders held for the purpose of their acquisition, etc.

A transaction performed in violation of said lim itations shall become void.

Restriction on the size of bonuses payable by suppliers to retail chains to 10%

The law stipulates a restriction on the size of the remuneration payable by a supplier to a retailer, which may be granted for the wholesale purchase of foodstuffs. The size of this remuneration may not exceed 10% of the price of the supply agreement. Such bonuses may not be paid for the acquisition of socially important products. The inclusion of other types of bonuses in the price of the supply agreement for the execution of the terms of the contract by the retailer is also prohibited.

The right of the state to regulate prices in the event of significant price growth

In accordance with the law, if retail price growth for certain types of socially important basic consumer foodstuffs increase by 30% or more in a constituent entity of the Russian Federation during the preceding 30 calendar days, the Government of the Russian Federation is granted the right to establish the maximum permissible retail prices for such products, but for no more than 90 calendar days.

Restriction on the deadline for paying for supplied products

The law establishes the deadline for paying for products supplied for sale. The deadline depends on the shelf life of the products. Products with a shelf life of up to 10 days should be paid no later than 10 days after the acceptance of the products; products with a shelf life of 10-30 days should be paid no later than 30 days; while foodstuffs with a shelf life of over 30 days, as well as the alcohol products of Russian manufacturers, should be paid no later than 45 days.

For additional information, please contact:
In Moscow — Ilya Bolotnov, Head of Commercial/M&A Practice, at (495) 967-00-07 or e-mail: info@pgplaw.ru

In St. Petersburg — Andrey Pekhovsky, Head of Corporate Practice (St. Petersburg), at (812) 333-07-17 or e-mail: spb@pgplaw.ru