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Lessons of the Market Division Case

11.02.2021

The Eurasian Economic Commission (the “Commission”) is becoming ever more significant as a platform for antimonopoly authorities in the member states of the Eurasian Economic Union (“EAEU”) to engage with each other in the area of investigations, information exchange and the reviewing of cases that show signs of a breach of general competition rules for cross-border markets. Although the Commission’s administrative and judicial practice is not yet sufficiently extensive, it has already shaped the principal approaches to analysing such markets and helped to identify the areas where regulation requires further improvement and various tools need to be used for the closer collaboration of the Union’s controlling bodies.

The markets of medications and medical products are attracting particular scrutiny from the Commission. This is best illustrated by the case of CJSC Delrus and LLP Delrus RK, which was the first to make its way through the appeal process to the Court of the EAEU (the “EAEU Court”).

Delrus is one of the leading suppliers of medical equipment, medical technology, diagnostics and treatment methods to the Russian market. The Commission has detected signs of a breach of the general competition rules in the actions of the companies.

Let us remind you the facts of the case. Scuderia intended to acquire services from the Russian company Delrus involving the calibration of ultrasonic sensors for a FibroScan device. However, the client was denied the service with no explanation and received a proposal to instruct Delrus Kazakhstan, which charged a higher fee for the same engagement.

The Board of the Commission classified these actions as evidence of an uncompetitive agreement, which is prohibited by article 76(3)(3) of the Treaty on the Eurasian Economic Union (the “EAEU Treaty”) (signed in Astana on 29 May 2014), and imposed a fine.

Delrus and Delrus RK disagreed with the Commission’s position and filed a claim with the EAEU Court to overturn the Commission’s decision. The Court Panel dismissed their claims (the Judgment of the Panel of the EAEU Court dated 11 February 2020 on the case regarding overturning Decision No. 165 of the Board of the Commission “On a violation of the general competition rules on cross-border markets” dated 17 September 2019). Later, however, the Appeals Chamber of the EAEU Court quashed the judgment of the Court Panel in part and ruled that the decision of the Board of the Commission was at variance with the EAEU Treaty and international treaties of the union (see the Judgment of the Appeals Chamber of the EAEU Court on case No. SE-1-2/4-20-AP dated 6 November 2020).

Among the issues examined during the case process was the competence of the EAEU Court, powers of the Commission, determining the cross-border nature of the market and discovery of administrative barriers. Moreover, the case triggered discussions regarding such circumstances as companies belonging to the same group and having a common member, i.e. the individual who was their founder. Neither of the parties had made a proper legal assessment of these circumstances, including the fact that the above individual had actual indirect control over the claimants. The Appeals Chamber of the Court confirmed this in its judgement.

Section XVIII of the EAEU Treaty provides for an exception whereby provisions regarding anticompetitive agreements do not apply to business entities that constitute a group of entities if they are under a direct or indirect control of a single person. Had this fact been checked and analysed, it would have been impossible to instigate the case based on the signs of the imputed offence and, consequently, to establish it.

Thus, the positions of the Commission and the Panel of the EAEU Court with respect to classifying the agreement as anticompetitive per se were refuted at the appeal level. As a result, no violation of the general competition rules was established and the companies were not held liable for the offences they were accused of.

It is notable that after the judgements had been issued at both levels of the court, some judges of the EAEU Court published dissenting opinions. To this end, Judges K.L. Chaika and A.E. Tumanyan criticized the approaches of the Commission and the Court Panel to assessing the circumstances of determining the cross-border nature of the market in question. Meanwhile, Judge D.G. Kolos pointed out that the Commission, the Court Panel and the Appeals Chamber of the EAEU Court had failed to take account of a few material factors that were significant for examining the case, including for establishing the status of the parties to the agreement and for the ultimate classification of their actions. Most notably, the court failed to establish the competitive nature of the relationships with a sufficient degree of certainty owing to the fact that no legal assessment was made of the connection between Delrus and Delrus RK.

We are inclined to support the arguments of the above judges that the Commission and EAEU Court must study all the evidence to assess the circumstances in question properly and that the existing legal uncertainty must be eliminated with respect to the companies taking any steps to ensure competition in connection with the suspected offence.

On account of the legal procedure at the level of the EAEU the dissenting opinions came out after the judgments had been handed down by the Court Panel and Appeals Chamber, which made them less likely to affect the outcome of the case. We believe, however, that these opinions may play an important role in the subsequent formation of case law involving the above issues being examined at the supranational level.

Source: Competition and Law

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