Russian Competition Proceedings

The Federal Antimonopoly Service

The Federal Antimonopoly Service (Federalnaya Antimonopolnaya Sluzhba, FAS) is the central authority responsible for competition enforcement in Russia. The FAS operates directly under the Government of the Russian Federation and exercises powers established by the Federal Law on Protection of Competition (No. 135-FZ of 26 July 2006), the Federal Law on Natural Monopolies (No. 147-FZ), and the Federal Law on Advertising (No. 38-FZ). The FAS has territorial bodies in each federal subject, exercising delegated enforcement powers at the regional level.

The FAS investigates violations of competition law, issues binding orders, imposes administrative penalties, approves mergers and acquisitions, and exercises control over state aid and anti-competitive actions by state bodies. The Service’s enforcement powers have expanded significantly since the adoption of the Third Antimonopoly Package in 2011, which amended the Competition Law to introduce turnover-based fines, enhanced procedural powers, and greater investigative capacity.

FAS Investigation Procedure

The FAS investigation procedure is governed by the Competition Law and the FAS Administrative Regulations. Investigations may be initiated: on the FAS’s own initiative based on its monitoring of market conditions; on the application of an interested person (any person whose rights are affected by an alleged violation); on the referral of a prosecutor or other state body; or on the basis of information from the media.

The investigation proceeds through several stages. The pre-investigation stage involves the preliminary assessment of the information received and the determination of whether there are reasonable grounds to initiate a case. If the FAS determines that there are sufficient grounds, it issues an order initiating the case and forms an investigative commission. The commission, composed of FAS officials, conducts the investigation by: requesting documents and information; conducting on-site inspections; appointing expert examinations; and hearing the explanations of the parties.

Part 9 Procedure

Article 37 of the Competition Law establishes the Part 9 procedure — a pre-trial mechanism for the resolution of competition disputes. Under this procedure, a person whose rights may be affected by an alleged violation may submit an application to the FAS, which conducts a preliminary investigation and may issue a warning (predosterezhenie) to the alleged violator. The warning sets out the FAS’s preliminary findings and provides the alleged violator with an opportunity to remedy the violation voluntarily within a specified period.

The Part 9 procedure is designed to resolve competition disputes without formal proceedings. If the alleged violator complies with the warning — by ceasing the anti-competitive conduct, restoring the applicant’s rights, and paying compensation — the case is closed without a finding of violation. The procedure has been extensively used in abuse of dominance and unfair competition cases. In cartel cases, the Part 9 procedure is not available, reflecting the per se prohibition of cartel agreements.

Antimonopoly Compliance

Russian competition law encourages the implementation of antimonopoly compliance (antimonopolny komplaens) systems by business entities. The Competition Law provides that the implementation of an effective compliance system may be considered as a mitigating factor in the imposition of administrative penalties. The FAS has issued methodological recommendations on the structure and content of antimonopoly compliance systems.

An effective compliance system typically includes: the appointment of a person responsible for competition compliance; the adoption of internal policies and procedures for competition law compliance; the training of employees on competition law requirements; the regular monitoring and auditing of compliance; and mechanisms for reporting potential violations. The FAS may request information on the applicant’s compliance system when considering leniency applications or determining the appropriate penalty.

Administrative Liability — Turnover Fines

Administrative liability for competition violations is established by Articles 14.9, 14.31, 14.31.1, 14.31.2, 14.32, and 14.33 of the Code of Administrative Offences (KoAP). The most significant innovation of the 2011 amendments was the introduction of turnover fines (oborotnye shtrafy), calculated as a percentage of the violator’s revenue from the market in which the violation occurred.

Article 14.32 KoAP establishes liability for anti-competitive agreements (cartels). The fine is calculated as 1% to 15% of the violator’s revenue from the goods or services that were the subject of the violation, but not less than 100,000 RUB and not more than 4% of the violator’s total annual revenue. Article 14.31 KoAP establishes liability for abuse of dominance, with fines ranging from 1% to 15% of the violator’s revenue from the relevant market.

The turnover fine system replaced the fixed-amount fines of the earlier legislation and brought Russian penalties closer to European Union practice. The FAS calculates the fine based on the duration of the violation, the severity of the conduct, the violator’s market position, and the presence of aggravating or mitigating factors. Repeat violations and violations involving state bodies carry enhanced penalties.

Leniency Programme

The Competition Law establishes a leniency programme (programma smyagcheniya) for cartel participants who cooperate with the FAS investigation. Article 11 provides that the first participant in an anti-competitive agreement to voluntarily report the agreement to the FAS and to provide sufficient evidence may be exempted from administrative liability entirely. The exemption requires that: the applicant was not the organiser of the cartel; the applicant ceases its participation in the cartel; and the FAS did not already possess sufficient evidence to establish the violation.

Subsequent cooperators may receive a reduction of the fine, depending on the timing and value of their cooperation. The leniency programme has been an important tool for cartel detection, though its effectiveness has varied. The FAS reports a significant number of cartel cases initiated on the basis of leniency applications, particularly in the construction, pharmaceuticals, and food sectors.

Criminal Liability for Cartels

Article 178 of the Criminal Code of the Russian Federation establishes criminal liability for cartels (kartelnye sgovory) — anti-competitive agreements that restrict competition and cause large-scale damage or generate large-scale income. The article applies to agreements between competing business entities (horizontal cartels) and, under certain conditions, to vertical agreements.

The criminal threshold is set at damage exceeding 10,000,000 RUB or illegal income exceeding 5,000,000 RUB. Penalties for individuals include: fines of up to 300,000 RUB or the convicted person’s income for up to two years; compulsory community service for up to 480 hours; imprisonment for up to three years; and disqualification from holding certain positions for up to three years. Aggravated offences — those committed by an organised group, causing particularly large damage (exceeding 30,000,000 RUB), or involving violence — carry enhanced penalties of up to six years’ imprisonment.

The criminal provisions are applied relatively rarely compared to administrative liability. The high threshold for criminal liability and the complexity of proving the criminal intent of participants have limited the number of criminal cartel cases. However, the threat of criminal prosecution has been an important deterrent and has encouraged participation in the leniency programme.

Appeal of FAS Decisions

Decisions and orders of the FAS may be appealed to the courts. The Arbitration Procedure Code (APK RF) governs the judicial review of FAS decisions in cases involving economic activity. The appeal must be filed within three months of the issuance of the contested decision. The court reviews the FAS decision for compliance with substantive and procedural requirements, applying the standard of review established by the Competition Law.

The FAS has a relatively high success rate in defending its decisions in court. The courts apply the substantive provisions of the Competition Law in accordance with FAS guidance, including FAS clarifications on the definition of the relevant market, the analysis of market conditions, and the establishment of dominance. However, the courts have annulled FAS decisions where the Service failed to properly define the relevant market, to establish the causal link between the conduct and the alleged anti-competitive effect, or to comply with procedural requirements.