Digest 81

November 29, 2017 Subsribe

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An unusual format was adopted for the Eurasian Anti-Cartel Forum, held in Moscow on November 24. The attending lawyers and public officials took part in a series of moot sessions simulating the investigation of a cartel agreement, culminating in a court ruling. Read more about the highlights of the Eurasian Anti-Cartel Forum ►

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Lawyers and Officials Take On Cartels

An unusual format was adopted for the Eurasian Anti-Cartel Forum, held in Moscow on November 24. The attending lawyers and public officials took part in a series of moot sessions simulating the investigation of a cartel agreement, culminating in a court ruling.

Organizers: LF Academy educational project and NPP Promotion of Competition in the CIS. Support for the forum comes from the Federal Antimonopoly Service of Russia and St. Petersburg International Legal Forum.

Partners: ALRUD, ART DE LEX, Baker McKenzie, Dentons, Antimonopoly Law Office and Astashkevich&Partners.

Andrey Tenishev

Head of the Anti-Cartel Department, FAS Russia

I believe that cartel conspiracies are a particularly dangerous form of economic crime. With the aid of events such as the Eurasian Anti-Cartel Forum, we seek to bring this message home to the business community and law enforcement agencies. There are two crimes that merit stringent punishment for entrepreneurs: tax evasion and cartel schemes.

“For example, some companies will conspire to take turns winning government contract tenders under Federal Law No. 44-FZ. The government will save nothing in this case as there is no competition. This is bid rigging. Why is it bad for the state and the eceonomy? Let’s say, a government contract provides for a 30% downpayment for wholesale supplies, the balance payable upon full contract delivery. The party to a rigging arrangement will deliver a thousand PCs to the government at retail price and receive full payment right away, while some other company, acting in goof faith, will sell a thousand PCs through the retail chains over the space of a year, and it also has to spend on marketing, advertising and warehousing. The unit price of a PC is the same in either case, but the latter company is at a disadvantage and more exposed to risks.

“FAS Russia brought 416 cases under Article 11 of the Compaetition Protection Act in 2016, and 231 more caases in the first six months of 2017. There have been few criminal cases, however: only 7 so far in 2017, brought under Article 178 of the RF Criminal Code (“Infringement of Competition”). We have seen five criminal cases arising from antitrust offenses. We expect the number of criminal cases to increase in the next few years.

Vassily Rudomino

Chairman of the Board Committee of the Non-Commercial Partnership “Competition Support Association in the CIS Countries”, Senior partner at ALRUD Law Firm

The views on how to investigate a cartel conspiracy have changed a lot in recent years. The Federal Antimonopoly Service is focused on fighting cartels as a most heinous form of economic crime. FAS has directed its attention to international cartels in recent years, which harm the Russian economy and consumers no less than domestic cartels do.

“For now, what we need is to build up our cache of hands-on expertise and share it. The Eurasian Anti-Cartel Forum helps us gain awareness of the challenges that confront the anti-cartel effort today. At this forum, we analyzed the evolution of anti-cartel enforcement practice and discussed the pending legislative initiatives in the field.  

“In the end, this work will be conducive towards promoting fair competition and reduucing the incidence of cartel price-rigging in Russia’s economy.

“We all know that ignorantia legis non excusat. Those companies that find themselves involved in a cartel arrangement through imprudence will be well advised to hire some good consultants, who will skillfully negotiate a deal for the company under the release programme, which really only works when the violator cooperates with the regulator. With the realease programme, penalties stand to be much reduced for the company and for its officers involved in the cartel scheme. Doing business the cartel way was the done thing in Soviet time, but no one will take Soviet precedents seriously today, 26 years on. All players must realize full well that punishment for cartel price-rigging will be ineluctable and very tough.

Mukhamed Khamukov

Deputy Head of the Anti-Cartel Department, FAS Russia

Here are some signs of a cartel arrangement in government contract bidding: the initial maximum price goes down very little, if at all, and there is clear record of the bidders taking turns winning supply contracts. Sometimes the same company will keep winning, while the other participating bidders will not offer any better prices. 

“We distinguish five major forms of cartel conspiracy in the commodity market: price-rigging, territorial division, customer division, boycotting, and production downsizing. Arising from this, there will be marks betraying a specific cartel arrangement. If we observe rival vendors offering identical prices for a long spell of time, we will get suspicious. We will investigate when we see that a vendor seems to cling to a particular group of customers while not selling to any others, while the customers themselves never shop around for other vendors. 

“FAS will follow a standard action sequence when it suspects a cartel scheme. First of all, it will more closely analyze the incoming data. Sometimes closer analysis will vindicate the existence of a cartel scheme, and sometimes it will prove the suspicion wrong. Second of all, we will request information in writing from the cartel suspect. We may also make a susprise visit. We will show up on the company’s premises unannounced, search the premises, check their computers, electronic media, and the records we find on the account managers’ desks. We process our findings and see whether they vindicate our suspicions. Where we have reasonable grounds to suspect a cartel scheme, we will bring antitrust action. Then a FAS body will review the case to see if the player’s actions constitute evidence of an offense.

Anton Subbot

Partner, Baker McKenzie

I predict that FAS and the law enforcement agencies will step up cooperation in anti-cartel investigations in the next few years. FAS has a smooth process in place to detect and investigate cartel schemes. But the point is to prosecute the individual conspiracy masterminds and hold them accountable. This practice is new to criminal law. As the law enforcement agencies hone their expertise in this, we are likely to see more crimninal cases go to court in the coming years. This is not a specifically Russian trend: legal practice is trending in the same direction worldwide.

I don’t think that closer cooperation between FAS and the Interior Ministry is a threat to good faith players. You cannot land in a cartel conspiracy by accident, unwittingly. How “unwitting” are the CEOs of rival companies when they agree to divide up the markletplace? I’m pretty sure that when a company is without fault, it will be able to make a convicing case to prove its innocence, whether during the administrative or criminal proceedings or in court.

Anastasia Shkarina

General Counsel Russia, Unilever

We draft annual activity plans for our employees as part of our antitrust compliance control effort, including training, presentations and individual interviews. We also do internal audits in the company.   The key safeguard against antitrust offenses is for the legal department to constantly raise employees’ awareness of the consequences of such an offense. We explain the provisions of antitrust law and cite real-life cases from other companies’ practice.

Our annual audit is a sequence of planned events – meetings, workshops and talks, taking place throughout the year. We will evaluate the outputs of our activities, identify potential risk areas, and plan our further action accordingly. This means that we will be administering pinpoint action in each of the risk areas over the course of the year. We teach our employees how to behave in the presence of antitrust enforcement officers: they are supposed to call their lawyer or line manager and, in the meantime, they are expected to cooperate with the officers and answer their questions in a tranquil manner. Our lawyers or external consultants frequently make surprise visits to our offices to test our employees’ reactions to unexpected situations. This method really works and it’s fun, too.


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