A draft law has been put before the State Duma which amends the Law on Protecting Competition

Pepeliaev Group advises that on 29 February 2024 a draft federal law was put before the State Dumahttps://sozd.duma.gov.ru/bill/565349-8
 which proposes removing from the Law on Protecting CompetitionFederal Law No. 135-FZ “On protecting competition” dated 26 July 2006.
 the provisions that make possible identifying that a self-employed individual holds a dominant position, clarifying the procedure for identifying a monopolistically low price of a product and changing the procedure for how state control is exercised over economic concentration.

This draft law (the “Draft Law”) has been developed for the purposes of improving antimonopoly regulation and clarifying in more detail certain rules of the Law on Protecting Competition.

Please find below our analysis of the main new developments.

1. The removal of the possibility to identify dominant position of self-employed individuals

Article 5 of the Law on Protecting Competition discloses the concept of a dominant position of a business entity in the market, and article 2.2 of this rule sets out the conditions for certain business entities that are individual entrepreneurs to be categorised as persons whose position may not be treated as dominant.

At the same time, according to this rule, an individual who is not registered as an individual entrepreneur but applies the special tax regime of “Tax on professional income” (a “self-employed individual”) may be classified as holding dominant position, which creates discriminatory conditions of antimonopoly control for self-employed individuals as compared with individual entrepreneurs.

The draft law proposes amending this provision of the Law on Protecting Competition to rule out the possibility of the position of a self-employed individual being classified as dominant.

2. Clarifying the procedure for identifying a monopolistically low price of a product

Please be reminded that article 7 of the Law on Protecting Competition provides that a monopolistically low price of a product means a price established by a business entity holding a dominant position, provided that this price is less than the sum of costs necessary to produce and sell such product and the profit, and less than the price which has formed in a competitive environment in a comparable commodities market, provided that such market exists in or outside Russia.

Article 7(2)(3) of the Law on Protecting Competition contains an exception: the price of a product is not classified as monopolistically low if the setting of it did not entail or could not have entailed a restriction of competition connected with the reduction of the number of business entities in the corresponding commodities market that are not in the same group of companies as the sellers or buyers of the product.

Under this exception, a market participant is unable to protect its interests until it is removed from the commodities market as a result of another business entity’s abuse of its dominant position, which contradicts the fundamental principle of the protection of competition, as well as preventing and counteracting the restriction of it[3].

The Draft Law proposes amending article 7(2)(3) of the Law on Protecting Competition in such a way that a price of a product will not be classified as monopolistically low if the setting of it did not entail or could not have entailed a restriction of competition in general, without detailing any consequences, such as the reduction of the number of business entities in the market.

3. Changing the procedure for state control over economic concentration

Please be reminded that articles 27 and 28 of the Law on Protecting Competition provide that prior consent of the antimonopoly authority is required for a range of transactions, except for those performed by parties within the same group on the grounds set out in article 9(1)(1) of the Law on Protecting Competition[4].

At the same time, article 31 of the Law on Protecting Competition, according to which certain transactions require only that the antimonopoly authority be notified after they have been carried out, enables parties within the same group to carry out transactions using the notification procedure on other grounds set out in article 9(1) of the Law on Protecting Competition.

Practice shows that when parties within the same group carry out transactions using the notification procedure on other grounds set out in article 9(1) of the Law on Protecting Competition while at the same time the antimonopoly authority is unable to promptly apply measures of state control over economic concentration, this can cause significant damage to competition in the form of market monopolisation.

In view of this, the Draft Law proposes to remove the provisions of article 31 from the Law on Protecting Competition.

In addition, the Draft Law provides that article 33This article establishes the procedure for how the antimonopoly authority should make a decision after having considered an application or should issue an order to a person that has submitted a notification.
 will include a provision aimed at simplifying the antimonopoly authority's working together with business entities when they apply for consents to transactions or perform other acts that are subject to state control. Having considered the application, the antimonopoly authority will be able to notify the applicant of its decision not only in writing, but also electronically, and specify the rationale behind the decision.

4. Expanding the scope of the antimonopoly authority's powers

Please be reminded that under article 10(3) of the Law on Protecting Competition, for the purpose of preventing the creation of discriminatory conditions, a regulatory legal act of the Russian Government can establish rules for non-discriminatory access to commodities markets and/or goods produced or sold by natural monopoly holders.

Resolution No. 2106 of the Russian Government dated 22 November 2022 approved the Rules for non-discriminatory access to infrastructure for the allocation of electric power grids (the “Rules”). However, legal uncertainty exists in practice concerning the form in which information should be disclosed as provided for by the Rules.

The Draft Law proposes entrenching in article 10 of the Law on Protecting Competition powers of the federal antimonopoly authority to approve the forms of the document containing mandatory requirements.

5. Eliminating inconsistencies between the rules of the budget and antimonopoly legislation

According to article 156(5) of the Russian Budget CodeRussian Budget Code No. 145-FZ dated 31 July 1998.
, the Federal Treasury may open, for no consideration, accounts with credit institutions that meet the criteria established by the Russian Government.

Article 18(1) of the Law on Protecting Competition establishes the general rule that federal executive bodies, executive bodies of constituent entities of Russia, local authorities and state non-budgetary funds may enter into agreements with financial organisations based only on the results of a public tender or a public auction.

Therefore, a clear inconsistency exists between these provisions of budgetary and antimonopoly legislation. In view of this, the Draft Law proposes amending the Law on Protecting Competition and supplementing article 18(1) with a clause that the general rule established in it applies unless Russian legislation provides otherwise.

What to think about and what to do

We recommend becoming familiarised with the Draft Law and following up on its progress, then, if it is adopted, taking it into account when conducting professional activity.

Help from your adviser

Pepeliaev Group's lawyers have considerable experience of providing legal support to clients with regard to antimonopoly regulation. They constantly monitor amendments in antimonopoly legislation and are ready to promptly advise on all legal aspects arising in connection with the new provisions being adopted.

Translated by the Translation Department of Pepeliaev Group.