Antimonopoly policy: time for a change?

Currently, considerable discussion surrounds the so-called ‘Roadmap’ that is being developed by the Russian Federal Antimonopoly Service (FAS). This document offers a programme of steps to develop competition between 2013 and 2018.  The Roadmap puts forward a range of measures aimed at making the FAS more independent in administrative, functional and financial terms. Moreover, this document being adopted entails functions in developing antimonopoly policy being transferred to the FAS. What danger is there in vesting additional powers in the FAS? Is it capable of making antimonopoly policy more effective or, quite the opposite, can this only add to the existing problems?

In the system of executive authorities in Russia, there has traditionally been a distinction between the ministries and federal services / agencies to whom various functions of government are allocated. Ministries, as a rule, work out state policy and develop sub-legislative regulations. Meanwhile, the services and agencies, for their part, handle the more technical layer of the work: they supervise compliance with legislation in the area in question and impose liability for violations of it. Such a division of functions is due to the the need to implement the constitutional principle of separation of powers, which law-making functions to be kept apart from executive, administrative and supervisory functions. 

Perhaps the only exception to that rule is the FAS, which has almost all the functions of government vested in it. Currently, the agency creates a regulatory framework through issuing subordinate legislation in the field of antimonopoly regulation, monitors compliance with the legal standards that have been laid down, and applies coercive state measures, including imposing administrative liability. In other words, it is often ‘judge, jury and executioner’. This difficulty is significant enough in itself, but it is exacerbated by two factors. 

Firstly, the innate structure of antimonopoly legislation is unique in the Russian legal system: in an overwhelming majority of cases, it is not an action itself that is prohibited, but the effect that such action may have as its result. This feature significantly increases the importance of subordinate regulations that flesh out the detail of the law: so as to understand which actions are prohibited, a company should not only familiarise itself with a legal provision, but must to study the instructions, clarifications and methodological guidance of the authorised state body, i.e. the regulatory acts of the FAS.

Moreover, liability for violating antimonopoly legislation is truly unprecedented. Turnover-based fines may be as high as 15% of an offending company’s annual turnover, while at the same time, such companies’ management teams may face criminal penalties. In addition, it is the FAS that has full responsibility for establishing the fact of a violation and imposing administrative liability for it.

In the situation that has evolved, vesting additional powers in the FAS, including powers to develop state policy, will lead to the authority being isolated once and for all, making it a ‘state within a state’.  

It should also be remembered that antimonopoly is an integral part of the state’s overall socio-economic policy. To attain the most effective result, antimonopoly regulation must be carried out consistently and be coordinated with the implementation of other state regulation in the socio-economic area: tax, customs, civil law, administrative, criminal and sector-based regulation. This objective cannot be resolved by the efforts of the FAS.

In this sense, it has to be recognised that the growing momentum down the path of giving the FAS more power is likely to be a mistake rather than an achievement.

Oksana Migitko specialises in antimonopoly regulation and commercial law and has extensive experience of advising Russian and foreign companies on vertical and horizontal agreements, on how to determine whether a company has a dominant position on a specific market and on what constitutes abuse of a dominant position and unfair competition. She has a proven track record of structuring and providing legal support for transactions, including M&A transactions. Oksana has participated on numerous occasions in projects relating to the performance of fully-fledged audits into the compliance by companies with antimonopoly legislation. She has also represented clients before the Russian Federal Antimonopoly Service and arbitration courts. Oksana has extensive experience of speaking at conferences and seminars on antimonopoly regulation and commercial law.

Before joining Pepeliaev Group, Oksana worked for the Moscow office of Deloitte and Touche as a leading consultant.