Pepeliaev Group’s Antimonopoly Club Meets to Discuss Antitrust Offences in the Digital Sector
On 20 November, a new meeting of the Antimonopoly Club was held under the auspices of 'Competition and Law' journal, at which participants discussed antimonopoly offences in the digital sector.
As economic processes go digital, the ways of committing antimonopoly offences are also transformed. High technologies, including special robots, price algorithms and other software, are used increasingly often to perform anticompetitive agreements and illegally coordinate business practices. Yet, these are not the only tools that offenders use.
According to Elena Sokolovskaya, moderator of the meeting, partner at Pepeliaev Group and chief expert of 'Competition and Law' journal, the limitation of competition by administrators of electronic trading facilities (ETFs), hacker attacks (such as DDoS-attacks) on bidding participants and an ETF server may also be regarded as a limitation of competition. Has the nature of offences changed in the digital era, how does the antitrust authority determine the degree of their public danger and what methods does it use to identify anticompetitive conduct?
Andrey Tenishev, Head of the Anti-Cartel Department at the Russian Federal Antimonopoly Service underlined that so far antitrust offences remain essentially the same; changes have only occurred in the ways of committing such offences and in the traces they leave in the real world. “In the past a bid participant entering into collusion had to set the requisite tools manually, while today this is done with special software. Yet, in future we should think seriously that in the modern, rapidly changing world the cartel definition cannot remain a dogma and it is pretty possible that tomorrow a cartel formed to artificially shape consumer demand or illegally exchange big data will be as dangerous for the economy as price collusion and will have to be prohibited per se”, he said.
According to Mr Tenishev it is now too early to say that digital antitrust offences are a higher public danger than non-digital ones: “We are examining this phenomenon. Yet, we cannot deny that these offences are easy to commit, given their computerised form. Some of them are becoming possible only if committed 'digitally'”.
“So far the FAS of Russia does not intend to amend the Russian Code of Administrative Offences to classify the use of a digital program for committing an antimonopoly offence as an aggravating circumstance on the ground that such an offence presents a higher danger for the public. Before adopting a regulation we need to examine this trend carefully. So far the practice is not sufficient. The existing fines are established with account being taken of the higher danger of such actions. The cartel using digital tools achieved success and received a high income, consequently, the turnover-based fine will be much higher," explained Mr Tenishev, adding that: "As for software that is initially detrimental to competition, a ban on this tool that represents a public danger needs to be established in antimonopoly legislation and sanctions must be imposed for the use of such software”.
Anton Teslenko, Deputy Head of the Anti-Cartel Department at the Russian Federal Antimonopoly Service, presented a detailed overview of the general operating principles of the “Big Digital Cat”, software conducting an automated search of cartel agreements and compiling evidence against cartels. Among the principal tasks for the regulator, he listed an expansion of the list of information used for analysing data and forming the body of evidence and available databases.
Fatima Konieva, Head of Digital Investigations of the FAS’s Anti-Cartel Department, spoke about international experience of using screening software to identify digital cartels. “At present such software is used in Russia, South Korea, Brazil and the United Kingdom. The first one was launched in South Korea. On the whole, notwithstanding the geographical location of these countries, such software modules consolidate the general approaches to searching for suspicious behaviour on the market and the universal operating principles. And this is reasonable, given that the legal nature of cartels is the same everywhere across the globe”.
Mr Tenishev added that, unlike our colleagues from other countries, we set the goal for the “Big Digital Cat” not only to perform the screening, but also to collect, record and analyse evidence. We understand that there is an individual behind each software programme, and the traditional methods of collecting proof will remain unchanged. Research is required to determine in what situations proof has to be collected by an individual and when this must be done with software. We need to think seriously about establishing such an area of research as antitrust criminology”, he concluded.
The participants continued to discuss the rules of antitrust regulations of online trade. Olga Protchenko, a senior associate at Pepeliaev Group, noted that with the development of online trade, the terms of distribution agreements inevitably change: manufacturers attempt to influence online re-sale prices and monitor such prices using algorithms, to establish conditions regarding price parity, and a prohibition on sales and advertisements in the Internet, on the use of third-party platforms and price comparison websites, and on the use of geoblocking and geodiscrimination practices. According to Olga, a legal assessment of these practices is complicated by the fact that so far this area lacks special regulation, clarifications of the FAS, and practice of courts and administrative bodies.
Alexey Yakovlev, Deputy Head of the Department for Expert Assessment of the Results of Informatisation Events under the Expert Surveys Department of the Federal State Budgetary Institution “Centre for Expert Survey and Coordination of Informatisation”, Associate Professor of the Department of Law, Intellectual Property and Forensic Analysis of the Moscow State Technical University named after N.E. Bauman, made a presentation on the prospects of the criminal law assessment of actions involving the use of auction robots. According to Mr Yakovlev, current legislation allows for developers of malicious software, auction robots and algorithms to be held liable under criminal law if the product they make is aimed at committing offences.
Betal Bizhoev, Project Director and CEO of the Online University of CJSC Sberbank-AST, spoke about the work of Sberbank-AST’s automated trading system. According to the speaker, at present the business processes of customers and suppliers are converted into electronic format. As a result, ETFs are transformed into DTFs (digital trading facilities).
As economic processes go digital, the ways of committing antimonopoly offences are also transformed. High technologies, including special robots, price algorithms and other software, are used increasingly often to perform anticompetitive agreements and illegally coordinate business practices. Yet, these are not the only tools that offenders use.
According to Elena Sokolovskaya, moderator of the meeting, partner at Pepeliaev Group and chief expert of 'Competition and Law' journal, the limitation of competition by administrators of electronic trading facilities (ETFs), hacker attacks (such as DDoS-attacks) on bidding participants and an ETF server may also be regarded as a limitation of competition. Has the nature of offences changed in the digital era, how does the antitrust authority determine the degree of their public danger and what methods does it use to identify anticompetitive conduct?
Andrey Tenishev, Head of the Anti-Cartel Department at the Russian Federal Antimonopoly Service underlined that so far antitrust offences remain essentially the same; changes have only occurred in the ways of committing such offences and in the traces they leave in the real world. “In the past a bid participant entering into collusion had to set the requisite tools manually, while today this is done with special software. Yet, in future we should think seriously that in the modern, rapidly changing world the cartel definition cannot remain a dogma and it is pretty possible that tomorrow a cartel formed to artificially shape consumer demand or illegally exchange big data will be as dangerous for the economy as price collusion and will have to be prohibited per se”, he said.
According to Mr Tenishev it is now too early to say that digital antitrust offences are a higher public danger than non-digital ones: “We are examining this phenomenon. Yet, we cannot deny that these offences are easy to commit, given their computerised form. Some of them are becoming possible only if committed 'digitally'”.
“So far the FAS of Russia does not intend to amend the Russian Code of Administrative Offences to classify the use of a digital program for committing an antimonopoly offence as an aggravating circumstance on the ground that such an offence presents a higher danger for the public. Before adopting a regulation we need to examine this trend carefully. So far the practice is not sufficient. The existing fines are established with account being taken of the higher danger of such actions. The cartel using digital tools achieved success and received a high income, consequently, the turnover-based fine will be much higher," explained Mr Tenishev, adding that: "As for software that is initially detrimental to competition, a ban on this tool that represents a public danger needs to be established in antimonopoly legislation and sanctions must be imposed for the use of such software”.
Anton Teslenko, Deputy Head of the Anti-Cartel Department at the Russian Federal Antimonopoly Service, presented a detailed overview of the general operating principles of the “Big Digital Cat”, software conducting an automated search of cartel agreements and compiling evidence against cartels. Among the principal tasks for the regulator, he listed an expansion of the list of information used for analysing data and forming the body of evidence and available databases.
In terms of identifying digital offences, it remains a matter of concern whether it is possible to use the information falling under the legal requirements for the secrecy of communication. “A line has to be drawn between “sensitive” information protected by the state, such as private correspondence between individuals, and other information that does not belong to this category, such as business correspondence between entities and even less so an automatic correspondence between robots”, added Mr Teslenko.
Fatima Konieva, Head of Digital Investigations of the FAS’s Anti-Cartel Department, spoke about international experience of using screening software to identify digital cartels. “At present such software is used in Russia, South Korea, Brazil and the United Kingdom. The first one was launched in South Korea. On the whole, notwithstanding the geographical location of these countries, such software modules consolidate the general approaches to searching for suspicious behaviour on the market and the universal operating principles. And this is reasonable, given that the legal nature of cartels is the same everywhere across the globe”.
Mr Tenishev added that, unlike our colleagues from other countries, we set the goal for the “Big Digital Cat” not only to perform the screening, but also to collect, record and analyse evidence. We understand that there is an individual behind each software programme, and the traditional methods of collecting proof will remain unchanged. Research is required to determine in what situations proof has to be collected by an individual and when this must be done with software. We need to think seriously about establishing such an area of research as antitrust criminology”, he concluded.
The participants continued to discuss the rules of antitrust regulations of online trade. Olga Protchenko, a senior associate at Pepeliaev Group, noted that with the development of online trade, the terms of distribution agreements inevitably change: manufacturers attempt to influence online re-sale prices and monitor such prices using algorithms, to establish conditions regarding price parity, and a prohibition on sales and advertisements in the Internet, on the use of third-party platforms and price comparison websites, and on the use of geoblocking and geodiscrimination practices. According to Olga, a legal assessment of these practices is complicated by the fact that so far this area lacks special regulation, clarifications of the FAS, and practice of courts and administrative bodies.
Alexey Yakovlev, Deputy Head of the Department for Expert Assessment of the Results of Informatisation Events under the Expert Surveys Department of the Federal State Budgetary Institution “Centre for Expert Survey and Coordination of Informatisation”, Associate Professor of the Department of Law, Intellectual Property and Forensic Analysis of the Moscow State Technical University named after N.E. Bauman, made a presentation on the prospects of the criminal law assessment of actions involving the use of auction robots. According to Mr Yakovlev, current legislation allows for developers of malicious software, auction robots and algorithms to be held liable under criminal law if the product they make is aimed at committing offences.
Betal Bizhoev, Project Director and CEO of the Online University of CJSC Sberbank-AST, spoke about the work of Sberbank-AST’s automated trading system. According to the speaker, at present the business processes of customers and suppliers are converted into electronic format. As a result, ETFs are transformed into DTFs (digital trading facilities).
Also taking part in the meeting of the Antimonopoly Club were members of the Association of Antitrust Experts: Andrei Rego, Ekaterina Gorshkova, Sergei Voychenko and Dmitry Abramov.
