Competition Case Studies for Senior Russian Competition Officials Cartel Investigation & Abuse of Dominance
Competition Case Studies for Senior Russian Competition Officials Cartel Investigation & Abuse of Dominance
Seminar
27-30 September 2005
Rostov, Russian Federation
Seminar carried out with funding by the European Union
This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union nor of the OECD nor of its member countries.
Contents
I. CASE STUDIES 7
ASTRAKHAN DIRECTORATE OF THE FAS - 9
Case No. 24-K-03-04 of 17.09.2004 on Violation of the Antimonopoly Legislation (Art. 5 (1) of the RSFSR Law on Competition) - 9
ASTRAKHAN DIRECTORATE OF THE FAS - 11
Case No. 09-K-03-05 of 18.04.2005 of Violation of the Antimonopoly Legislation (Art. 5 (1) of the RSFSR Law on Competition) - 11
BELGOROD DIRECTORATE OF THE FAS - 13
Case concerning MUE Ritualbytservis - 13
BRYANSK DIRECTORATE OF THE FAS - 21
On Violation of Art.5 of the RSFSR Law «On Competition…» by Refusal to Allow a Customer to Select a Tariff for Settlements for the Received (Consumed) Electric Energy - 21
DAGHESTAN DIRECTORATE OF THE FAS - 24
Description of the Case of Violation of Art. 5 and 6 of the RF Law «On Competition…» by OJSC Gazprom, LLC Mezhregiongaz, LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz - 24
IRKUTSK DIRECTORATE OF THE FAS - 27
Case of Violation of the Antimonopoly Legislation by a Group of Entities (LLC YUKOS M Trading House, OJSC Angara Polymer Plant) - 27
IRKUTSK DIRECTORATE OF THE FAS - 31
Information Brief on the Violation of the Antimonopoly Legislation by OJSC UILK - 31
KARACHAEVO-CHERKESSIA DIRECTORATE OF THE FAS - 35
Problems of Access of Public Energy Companies to the Federal Electric Energy Wholesale Market - 35
KRASNODAR DIRECTORATE OF THE FAS - 38
Case concerning «Kuban-GSM» - 38
KRASNODAR DIRECTORATE OF THE FAS - 42
Case concerning the «Post of Russia» - 42
KURSK REGIONAL DIRECTORATE OF THE FAS - 45
Case of violation of Article 6 of the Russian Federation Law «On Competition…» by ZAO «LVZ Kursky» and OOO «KurIASEB», OOO «TD Vneshtorgservice», OOO «TC Sodruzhestvo», OOO «Limas» - 45
LIPETSK REGIONAL DIRECTORATE OF THE FAS - 47
Description of Case Initiated and Considered According to Article 6 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» - 47
MOSCOW REGIONAL DIRECTORATE OF THE FAS - 50
Description of Case ¹ 07-28/2004 involving OAO «Mosenergo» - 50
NORTH OSETIAN REGIONAL DIRECTORATE OF THE FAS - 53
Case Involving «Alaniaregiongas» and Zildincky Brick Factory - 53
ST. PETERSBURG DIRECTORATE OF THE FAS - 55
Description of a Case of Possible Abuse of a Dominant Position on the Market of Services of Localisation, Collection and Utilisation of Petrochemicals - 55
SAMARA DIRECTORATE OF THE FAS - 58
Case Description: JSC Samara City Electric Networks and JSC SaMMer - 58
SARATOV DIRECTORATE OF THE FAS - 61
Description of Case No. 20-52 - 61
STAVROPOL DIRECTORATE OF FAS - 66
Case ¹ 28 Considered in Connection with the Fact of Violation of Article 6 of the RSFSR Law «On Competition…» - 66
STAVROPOL DIRECTORATE OF FAS - 72
Case ¹ 41 Investigated in Connection with the Fact of Violation of Clause 1, Article 5 of the RSFSR Law «On Competition…» - 72
TAMBOV DIRECTORATE OF THE FAS - 76
Description of Case No. 10 of 20.05.2003 (Dominance Abuse) - 76
ULYANOVSK DIRECTORATE OF THE FAS - 79
Description of the Case of Violation of Art. 18 of the Law «On Competition and Restriction of Monopolistic Activity on Product Markets» by Economic Entities Engaged in Retail Sale of Oil Products - 79
VOLGOGRAD DIRECTORATE OF THE FAS - 82
Problems of Detecting Monopolistically High Prices on the Example of Analysis of the Volgograd Market of Socially Significant Bread Brands - 82
VOLOGDA DIRECTORATE OF THE FAS - 90
Description of the Case on Concerted Actions on the Product Market of Technical Maintenance of Cash Registers - 90
VORONEZH DIRECTORATE OF THE FAS - 94
Voronezh Department of the Russian FAS vs. JSC AC Polet (Art. 5 of the Law on Competition) - 94
LEGAL DEPARTMENT OF THE FAS - 98
Description of a Case of Violation of the Antimonopoly Legislation by OJSC CentrTelecom - 98
DEPARTMENT FOR TRANSPORT AND COMMUNICATIONS MONITORING AND CONTROL OF FAS - 103
Consideration of Case No. 1-05/1 05 of Violation of the Antimonopoly Legislation in the Form of Dominance Abuse by OJSC RZhD - 103
DIRECTORATE OF CONTROL AND SUPERVISION IN FUEL AND ENERGY COMPLEX - 108
Abuse of Dominant Position on the Coal Processing Market - 108
UNIDENTIFIED - 110
Possible Dominance Abuse on the Sales Market of Liquefied Hydrocarbon Gases - 110
UNIDENTIFIED - 112
Report on the Case of Violation of the Antimonopoly Legislation by OJSC United Trade Company on the Product Market of Caustic Soda - 112
II. BACKGROUND NOTES - 115
III. PARTICIPANTS - 118
IV. AGENDA - 126
I. Case Studies
Astrakhan Directorate of the FAS
Case No. 24-K-03-04 of 17.09.2004 on Violation of the Antimonopoly Legislation (Art. 5 (1) of the RSFSR Law on Competition)
The Astrakhan Department of the Russian FAS has received a complaint from OJSC Metallist against the actions of LLC PF Streletskoe - Terminal.
OJSC Metallist owns a railway branch adjacent to the railway tracks owned by LLC PF Streletskoe - Terminal. The transport of cargoes from common use railway tracks to the OJSC Metallist branch is possible only via the railway tracks owned by LLC PF Streletskoe - Terminal.
LLC PF Streletskoe - Terminal has dismantled part of the railway tracks (as a matter of fact, not only its own, but also part of the tracks owned by OJSC Metallist) and blocked the exit from the territory of OJSC Metallist, thus depriving this enterprise of a possible access to common use railway tracks, and hence, the possibility of normal business activity.
LLC PF Streletskoe - Terminal has explained its actions with the following reasons, backing them with documents:
· an act on unsuitability of the railway tracks owned by OJSC Metallist, drawn up by the chief of the Right Bank distance of the route - A.A. Nasrullaev, track foreman - N.I. Petrova, and chief of the Right Bank railway station I.O.Lisitsin;
· repeated derailment of cars and locomotives (dump cars) on the OJSC Metallist tracks;
· absence of agreements on the serving of cars and their transit via the LLC PF Streletskoe - Terminal tracks;
· absence of security guards on the OJSC Metallist territory, resulting in constant penetration of outsiders to the territory of the state border post and customs territory, situated on the LLC PF Streletskoe - Terminal territory;
· repair jobs at railway tracks adjacent to OJSC Metallist;
· demands of the border guard services to install safeguards in order to prevent the penetration of outsiders on the territory of the border post.
The Commission of the Astrakhan Department of the Russian FAS considered these explanations unconvincing for the following reasons:
· the Astrakhan department of the Russian Transport Inspection (letter No.1136/1-15 of 09.09.2004) and the Astrakhan railway track maintenance department (letter No.03/1511 of 08.09.2004) have notified the Astrakhan Department of the Russian FAS that they did not inspect the technical condition of the OJSC Metallist railway tracks. Therefore, the act on the disrepair of the OJSC Metallist railway tracks is void of legal force, as it has been drawn up by unauthorised persons;
· the instruction of the border guard service contains no requirements of prohibiting the passage of cargo cars (flat wagons) for OJSC Metallist vie the LLC PF Streletskoe - Terminal railway tracks;
· the safeguards installed by LLC PF Streletskoe - Terminal on railway tracks prevent only the passage of railway cars to the OJSC Metallist territory, but do not prevent the penetration of people to the LLC PF Streletskoe - Terminal territory'
· LLC PF Streletskoe - Terminal has failed to back the allegations of derailment of trains on the OJSC Metallist tracks with relevant documents;
· The argument presented by LLC PF Streletskoe - Terminal that the railway tracks dismantled at the border with OJSC Metallist is under repair was not been confirmed by inspection held by the Astrakhan Department of the Russian FAS.
Therefore, the actions of LLC PF Streletskoe - Terminal to block the OJSC Metallist railway tracks constitute a violation of Art. 10 of the RF CC, prohibiting title holders from using their property right for purposes of inflicting damage on other persons, and Art. 5 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» prohibiting dominant economic entities to take actions infringing lawful interests of other economic entities.
Guided by Art. 27 (1) of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» and item 2.12 of the Rules of Considering Cases of Violation of the Antimonopoly Legislation, the Commission decided to qualify the actions of LLC PF Streletskoe - Terminal, consisting in the blacking and dismantle of part of the railway tracks owned by OJSC Metallist and prevention of OJSC Metallist access to common usage railway tracks as a violation of Art. 5 (1) of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» and issued an instruction to LLC PF Streletskoe - Terminal demanding the following:
· to unblock the railway tracks bordering on the section owned by OJSC Metallist;
· to return the railway tracks bordering with OJSC Metallist to the state existing before the violation of the antimonopoly legislation.
LLC PF Streletskoe - Terminal has filed a claim to the Astrakhan regional arbitrazh court to invalidate the decision and instruction of the Territorial Department of 29.09.2004, No.24-K-03-04.
The Astrakhan regional arbitrazh court passed a decision of 18.01.2005 dismissing the LLC PF Streletskoe - Terminal claim to invalidate the decision and instruction of the Territorial Department of 29.09.2004, No.24-K-03-04.
In connection with non-fulfilment by LLC PF Streletskoe - Terminal of the instruction of the antimonopoly authority, on 22.04.2005 the Territorial Department initiated an administrative case against LLC PF Streletskoe - Terminal.
In the period of preparation of the case for consideration, LLC PF Streletskoe - Terminal has unblocked the railway tracks bordering on the section owned by OJSC Metallist and restored the railway tracks on the border with OJSC Metallist.
As LLC PF Streletskoe - Terminal has fulfilled the instructions, the consideration of the case of administrative offence was terminated, and the Company was given an oral reproof.
Astrakhan Directorate of the FAS
Case No. 09-K-03-05 of 18.04.2005 of Violation of the Antimonopoly Legislation (Art. 5 (1) of the RSFSR Law on Competition)
The Astrakhan Department of the Russian FAS received a complaint from the agricultural department of the Astrakhan regional administration against the actions of OJSC Astrakhanenergo (the successor to the rights and liabilities of which since 11.01.2005 is OJSC Astrakhan Energy Company) against the inclusion of requirements stipulated by item 3.4 in the draft additional agreement to energy supply contracts with agricultural companies of the Astrakhan region Akhtubinsk district - OJSC Stepnoe, SPK Novonikolaevsky, SPK Udachensky, SPK Pirogovsky, and SPK Kirovets.
This item of the draft agreement stipulates that in the event of increase or decrease of electric energy consumption established by the contract by more than 10% of the target, the deviation value shall be calculated on the basis of a 1.5 mark-up coefficient.
At the Commission session a representative of OJSC Astrakhan Energy Company expressed disagreement with the applicant's complaint for the following considerations:
The Decree of the USSR Council of Ministers No.929 of 30.07.1988 «On Adjustment of the System of Economic (Property) Sanctions Applicable to Enterprises, Associations, and Organisations» is still valid, and its item 10 (»B») stipulates: «Energy consumers shall pay to energy supplying organisations a ten-times value of electric energy and electric power capacity used above the volume stipulated by contract over a relevant period.»
The Astrakhan Department of the Russian FAS established that OJSC Astrakhan Energy Company is the only supplier of electric energy to agricultural enterprises of the Akhtubinsk district - OJSC Stepnoe, SPK Novonikolaevsky, SPK Udachensky, SPK Pirogovsky, and SPK Kirovets, which is confirmed by the letter of the Technological and Ecological Monitoring Department of the Federal Service for Ecological, Technological, and Nuclear Control for the Astrakhan Region, No.289-02/12 of 11.05.2005.
According to the Federal Law «On State Regulation of Tariffs on Electric and Thermal Energy in the Russian Federation No, 41-FZ of 14.04.1995 (with amendments of 30.12.2004), the Basis of Electric and Thermal Energy Pricing in the Russian Federation approved by Decree of the RF Government No.109 of 26.12.2004, tariffs on electric energy supplied by power supplying organisations to consumers are subject to state regulation. According to the above regulations, state regulation of prices of electric energy shall be exercised by the executive authorities of the Russian Federation Subjects (the Astrakhan Regional Tariffs Service).
In keeping with Art. 62 of the Basis of Electric and Thermal Energy Pricing in the Russian Federation approved by Decree of the RF Government No.109 of 26.12.2004, the amount of payment for electric energy consumed above the amount stipulated by contract shall be calculated on the basis of tariffs on electric power (capacity) supplied by energy supplying organisations to consumers, approved by a regulating authority with the use of mark-up (mark-down) coefficients. The calculation and institution of such coefficients constitutes the competence of the Federal Service for Tariffs. So far, the regulator has not introduced any such coefficients.
Considering that the 1.5 mark-up coefficient included by OJSC Astrakhan Energy Company to item 3.4 of the draft additional agreement to an energy supply contract was not introduced by relevant regulatory authorities, it is unlawful and unjustified.
Therefore, the actions of OJSC Astrakhan Energy Company to include conditions stipulated by item 3.4 to the draft additional agreement to the energy supply agreement with agricultural companies of the Akhtubinsk district - OJSC Stepnoe, SPK Novonikolaevsky, SPK Udachensky, SPK Pirogovsky, and SPK Kirovets - constitute a violation of Art. 5 (1) of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» No.948-1 of 22.03.1991, prohibiting a dominant economic entity to violate the pricing procedures established by regulations and infringe the interest of other economic entities.
Proceeding from the above and guided by Art. 27 (1) of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» No.948-1 of 22.03.1991 and item 2.26 of the Rules of Considering Cases of Violation of the Antimonopoly Legislation, the Commission decided to qualify the actions of OJSC Astrakhan Energy Company consisting in inclusion in the draft additional agreement to the energy supply contract with agricultural enterprises of the Astrakhan region Akhtubinsk district - OJSC Stepnoe, SPK Novonikolaevsky, SPK Udachensky, SPK Pirogovsky, and SPK Kirovets - of requirements stipulated by item 3.4 , as infringing the interests of economic entities and violating Art. 25 (1) of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» No.948-1 of 22.03.1991, and issued an instruction to OJSC Astrakhan Energy Company to terminate the violation of the antimonopoly legislation, for which purposes:
· to strike from the draft additional agreement to the energy supply contract with agricultural enterprises of the Astrakhan region Akhtubinsk district - OJSC Stepnoe, SPK Novonikolaevsky, SPK Udachensky, SPK Pirogovsky, and SPK Kirovets - of item 3.4, stipulating the application of a 1.5 mark-up coefficient for exceeding energy consumption or under-consumption of electric energy within a 10-percent deviation of the actually consumed energy from the contractual consumption amount over the calculation period applicable to the area tariffs.
The instruction of the Astrakhan Department of the Russian FAS has been fulfilled.
Belgorod Directorate of the FAS
Case concerning MUE Ritualbytservis
1. Resume.
The main problem for competition on the product market of ritual services within the geographic borders of the city of Belgorod is the dominant position of one of the economic entities operating on the said product market - the municipal unitary enterprise (MUE) Ritualbytservis. This is connected both with the purposes of creation of the enterprise, and with provisions of Art. 9, 25, and 29 of the Law «On Burial,» and RF Presidential Edict «On Guarantees of Citizens' Rights to Provision of Burial Services of the Deceased» No. 1001 of 29.06.1996, according to which the state shall render a guaranteed list of ritual services, the duty of free provision of which is assigned to special funeral services created by the executive authorities of the Russian Federation Subjects or bodies of local self-government.
The most difficult aspect in examining the situation on the said product market is the establishment of the capacity of the market of the basis types of ritual services and the share of a concrete economic entity on this market. As ritual services are not fungible, the department has analysed only the market of burial ritual services. It was impossible to examine the other ritual services markets due to the lack of the necessary information: these types of services are accounted by economic entities only in value terms, and the Belgorod Regional Department for Statistics does not keep any statistics of them.
2. Fact and Legal Content.
The Belgorod Territorial Department of the Russian MAP received an application on 26 March 2004 from the Belgorod subsidiary of JSC Military-Memorial Company (hereinafter JSC VMK) located at the address: 308006, Belgorod, 52 B.Khmelnitskogo St.
According to the application, MUE Ritualbytservis (308010, Belgorod, 10, Portovaya St.) addressed an offer to JSC VMK on 10 March 2004 - two copies of contract No.9 on the rendering of services of deceased servicemen burial for 2004 - for its acceptance. It was stipulated that in the event of non-conclusion of the said contract MUE Ritualbytservis would not render JSC VMK the services of burial of the deceased servicemen.
JSC VMK noted in its application that MUE Ritualbytservis used its dominant position on the funeral services market to unjustifiably include in the contract the terms in which the company was not interested, specifically:
· providing temporary equipped grounds during the burial;
· digging a grave during the burial;
· singular tidying up of the grave after the burial;
· inspection of the site for purposes of installing a gravestone and arrangement of the grave of the deceased, control over the observance of technical requirements during the installation of gravestones;
· on additional agreement of the parties, the Customer shall render free assistance in the tidying up and improvement of the territory of the military section of the cemetery where JSC VMK makes the burial.
In addition, the Belgorod Department of the Russian FAS received an application from JSC VMK on 19.07.2004 concerning the fact that MUE Ritualbytservis refuses to accept orders from JSC VMK on the rendering of services of burial civilians, although the concluded contract does not envisage such restrictions.
Having accepted the application for consideration, the Department, guided by the Law on Competition, the Decree of the Russian Federation Government No.154 of 19.02.1996 «On the Register of Economic Entities Holding over 35% Share on a Certain Product Market» (hereinafter - the Register), orders of the Russian MAP of 20.12.1996 No.169 «The Procedures for Holding and Analysis and Appraisal of the Status of Competitive Environment on the Product Markets» and No.67 of 03.06.1994 «On Methodological Recommendations for Determining an Economic Entity's Dominance on Product Markets,» on the basis of materials provided by the Belgorod Regional Department for Statistics, JSC VMK, and MUE Ritualbytservis, has analysed the situation on the product market of ritual services within the geographic dimensions of the city of Belgorod.
The analysis of the market of ritual services connected with the burial of the deceased has demonstrated that the share of MUE Ritualbytservis on the territory of the city of Belgorod in providing this type of services in 2002 and 2003 was 88.9% and 83%, respectively. Therefore, this economic entity is dominant on this product market.
In accordance with Art. 8, 9, 12 of the Law «On Burial and the Funeral Business,» No. 8-FZ of 12.01.1996, MUE Ritualbytservis is the only economic entity within the geographic borders of Belgorod rendering the following types of ritual services:
· rendering a guaranteed list of ritual burial services;
· allocating a plot for burial or reburial;
· issuing documents needed for the burial.
By Decree of the Belgorod Department of the Russian FAS No.61 of 30.06.2004 MUE Ritualbytservis was included in the Register within the geographic borders of the city of Belgorod, holding over 65% of the product market of burial services (OKUN code 019505).
According to Art.9, 25 and 29 of the Law «On Burial and the Funeral Business,» No. 8-FZ of 12.01.1996 and RF Presidential Edict «On Guarantees of Citizens' Rights to Provision of Burial Services of the Deceased» No. 1001 of 29.06.1996, the state shall render a guaranteed list of ritual services, the duty of free provision of which is assigned to special funeral services created by the executive authorities of the Russian Federation Subjects or bodies of local self-government.
The Law «On Burial and the Funeral Business,» No. 8-FZ of 12.01.1996 does not envisage any restrictions on conducting activity connected with the burial of the deceased by other economic entities, except services stipulated in Art.9 and 12.
The list of ritual services rendered to the population by a specialised funeral service on the territory of the Belgorod region and their cost are determined by resolution of the Belgorod regional governor No. 215 of 24.12.2003 «On Prices and Tariffs on Ritual Products and Services,» with amendments introduced by resolution of the regional governor of 16.03.2004, No.72. The right to regulate prices of ritual services is granted to the Russian Federation Subjects in keeping with the RF Governmental Decree No. 239 of 07.03.1995 «On Measures for Improvement of State Regulation of Prices (Tariffs).»
On results of analysis of all the above circumstances, the Department issued a determination of 16.06.2004 to initiate case No.029-04-AZ against MUE Ritualbytservis based on the elements of a violation of Art. 5 of the Law n Competition.
The Commission has examined the case on 18.08.2004 and arrived at the following conclusions:
MUE Ritualbytservis includes in the contracts on the rendering of funeral services (contract No. 9 of 20.03.2004 with JSC VMK) an obligatory list of nine types of ritual services, out of which only four are obligatory as per Art. 9 of the Law «On Burial»: issuing documents needed for the burial, issuance of a burial passport, inspection and allocation of a plot for burial or additional burial, installation of a grave registration number. The other services, including the digging of a grave and burial can be performed by JSC VMK on its own.
MUE Ritualbytservis has not presented documents confirming its right of ownership and usage of the land plots allocated for the organisation of cemeteries or of obligatory rendering of ritual services stipulated in item 1.3 of contract No.9 of 20.03.2004 concluded between MUE Ritualbytservis and JSC VMK only by this particular economic entity.
The Commission qualified such actions of MUE Ritualbytservis as attempted imposition of contractual terms on JSC VMK, unprofitable to the latter and irrelevant to the subject of the contract. On results of consideration of the case, the Commission passed a decision to recognise the fact of violation of Art.5 of the Law on Competition by MUE Ritualbytservis and issued an instruction to terminate the violation of the antimonopoly legislation. For this purposes, MUE Ritualbytservis should within three days from the moment of receiving the instruction:
1. terminate the actions connected with a refusal in registering documents on fulfilment of jobs on the burial of civilians by the Belgorod subsidiary of JSC VMK;
2. strike from contract NO. 9 on the rendering of services of burial of the deceased concluded with the Belgorod subsidiary of JSC VMK on 7 June 2004 the following items:
· 1.3.4 Providing temporary equipped grounds during the burial.
· 1.3.5 Digging a grave and burial.
· 1.3.6 Singular tidying up of the grave after the burial.
· 1.3.9 Inspection of the site for purposes of installing a gravestone and arrangement of the grave of the deceased, control over the observance of technical requirements during the installation of gravestones.
· 1.6 On additional agreement of the parties, the Customer shall render free assistance in the tidying up and improvement of the territory of the military section of the cemetery where the Belgorod subsidiary of JSC VMK makes the burial.
The instruction of the Belgorod Department of the Russian FAS No. 7 on termination of violation of the antimonopoly legislation issued to MUE Ritualbytservis on case No. 029-04-AZ of 18.08.2004 was fulfilled in the stipulated period, of which the company notified in writing (letter No. 173 of 14.09.2004).
Simultaneously MUE Ritualbytservis filed a claim with the Belgorod regional arbitrazh court on 12.11.2004 to invalidate the decision and instruction of the Commission of the Belgorod Department of the Russian FAS of 18 August 2004 on case No. 029-04-AZ.
On 24.12.2004, MUE Ritualbytservis has also filed a claim with the Belgorod regional arbitrazh court to recognise as unlawful item 2 of Order No. 61 of the Belgorod Department of the Russian FAS of 30.06.2004 on inclusion of MUE Ritualbytservis in the Register within the geographic borders of the city of Belgorod with a share exceeding 65 percent on the product market of burial ritual services. As a result of consideration of the case by the Belgorod regional arbitrazh court, the claims filed by MUE Ritualbytservis have been dismissed. This decision was not contested by MUE Ritualbytservis and entered into legal force.
On 12.01.2005, in connection with the consideration of the case of appeal against the Order on inclusion in the Register, the Belgorod regional arbitrazh court suspended proceedings on the case of contesting the decision and instruction of the Belgorod Department of the Russian FAS. So far, this case has not been considered.
3. Competitive Analysis. General.
The analysis and appraisal of the status of the competitive environment on the product market of ritual services in the city of Belgorod have been fulfilled in accordance with «The Procedures for Holding and Analysis and Appraisal of the Status of Competitive Environment on the Product Markets» approved by Order of the Russian MAP No. 169 of 20.12.1996 (hereinafter - the Procedures).
In keeping with Art. 4 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» of 22.03.1991 No. 948-1 (in edition of 09.10.2002, No. 122-FZ):
«A product is the result of activity (including jobs, services) destined for sale, exchange, or another form of circulation.»
«A product market is the sphere of circulation of a product having no substitutes, or fungible products on the territory of the Russian Federation or its part, determined on the basis of economic possibility of the purchaser to acquire the product on the relevant territory and back of such a possibility outside its borders.»
According to item 1.4 of the Procedures, to evaluate the status of the competitive environment on a certain product market, calculation and analytical jobs shall be conducted to determine:
· the product dimensions of the product market;
· the subjects of the product market (the quantity and composition of sellers and buyers);
· the geographic dimensions of the product market;
· the volume of the market product resource;
· the share of an economic entity on the market;
· quantitative characteristics of the product market structure;
· qualitative characteristics of the product market structure;
· the market potential of an economic entity.
The analysis and appraisal of the status of the competitive environment on the product market of ritual services in the city of Belgorod has been conducted for 2002 and 2003.
Considering the specific nature of the product market in question, the regulatory framework is presented below.
In accordance with Art. 25 of the Federal Law «On Burial and the Funeral Business,» No. 8-FZ of 12.01.1996 (in edition of 30.06.2003), the burial of a deceased and rendering funeral services shall be conducted by special funeral services created by the executive authorities of the Russian Federation Subjects or bodies of local self-government.
In keeping with Art. 29 of the above Law, the procedures for such activity are determined by the executive authorities of the Russian Federation Subjects or bodies of local self-government.
According to Art. 16 of the Federal Law «On General Principles of Organisation of Local Self-Government in the Russian Federation» of 06.10.2003 No. 131-FZ, the organisation of ritual services and maintenance of burial sites constitutes the issues of local significance of a municipality.
In accordance with Art. 10 of the Charter of the Belgorod City of the Belgorod Region of 26.06.1997, one of the issues referred to municipal jurisdiction is the organization of ritual services and maintenance of burial sites.
According to Art. 9 of the Federal Law «On Burial and the Funeral Business» and the RF Presidential Edict «On Guarantees of Citizens' Rights to Provision of Burial Services of the Deceased» No. 1001 of 29.06.1996, the state guarantees free provision of the following list of funeral services:
· issuing documents needed for the burial;
· provision and delivery of a casket and other items needed for the burial;
· transportation of the body (remains) of the deceased to the cemetery (crematorium);
· burial (cremation with subsequent handing over of the mortuary urn).
These burial services are provided by a specialised funeral service, which may be supplied by the executive authorities of the Russian Federation Subjects or bodies of local self-government with recoverable circulation funds in the amount necessary for rendering such services during one month at the expense of budgets of the Russian Federation Subjects and local budgets.
Art. 10 of the above Law envisages the payment of a social burial allowance in the amount equal to the cost of the services provided according to the guaranteed list of funeral services stipulated in Art. 9 (1) of this Federal Law, but not in excess of 1,000 roubles.
Citizens who have received a guaranteed list of funeral services are not eligible to a social funeral allowance.
The payment of the cost of services granted above the list of funeral services is made at the expense of the person assuming the responsibility to organise the burial of the deceased.
Specialised funeral services are legally responsible for the arrangement and maintenance of the burial grounds, and providing a guaranteed list of funeral services.
In accordance with the RF Governmental Decree No. 239 of 07.03.1995 «On Measures for Improvement of State Regulation of Prices (Tariffs)» (in edition of 02.04.2002), the tariffs on ritual services is subject to state regulation.
The institution of tariffs on ritual services is referred to the competence of executive authorities of the Russian Federation Subjects.
Product Dimensions of the Product Market
In accordance with item 2.1 of the Regulations, the identification of a product starts with identifying its classification group, applying effective classifiers of produce, services, types of activity, … GOST (state standards) of relevant types of products.»
According to the Russian National Classifier of Types of Economic Activity (OKVED), approved by Decree of the RF Gosstandart (the State Committee for Standards) of 06.08.1993, servicing of organising funerals, burial, and cremation (9313000) are referred to public utility services (9300000) and include a considerable spectrum of services.
Proceeding from the variety of services included in the category of «ritual services,» as well as the fact that these services are not fungible, the following product markets of ritual services in the city of Belgorod have been analysed:
1. Burial services (OKUN code 019505).
2. Manufacture of tombstones (OKUN code 019512-019516).
3. Rendering a guaranteed list of burial ritual services.
Identifying the Sellers and Buyers
In keeping with item 3.1 of the Regulations, all sellers operating on the analysed product market should be identified.
The information basis for the analysis of the product market of ritual services in the Belgorod city consisted of materials provided by:
· the Belgorod Regional Committee for State Statistics;
· the Belgorod municipal administration;
· economic entities operating on the said market.
According to the information received, 14 economic entities operate on the product market of ritual services in the city of Belgorod:
1. MUE Ritualbytservis (308010, Belgorod, 94, Portovaya St.);
2. the Belgorod subsidiary of JSC Military-Memorial Company, JSC VMK (308006, Belgorod, 52, B.Khmelnitskogo St.);
3. LLC Kristall Granit (308019, Belgorod, 7v, Krasnoarmeiskaya St.);
4. LLC Glasis (308600, Belgorod, 56v, Popova St.);
5. LLC Granit (308600, Belgorod, 36a, Narodnaya St.);
6. Private enterprise Zhigalova (308001, Belgorod, 21, Litvinova St., Apt.59);
7. Private enterprise Yegorova (308600, Belgorod, 56g, Popova St.);
8. Private enterprise Makagonova (308001, Belgorod, 133, Zheleznodorozhnaya St.);
9. Mramor (308024, Belgorod, 56a, Gorkogo St.);
10. Private enterprise Dudina (308010, Belgorod, 13, Urozhainaya St.);
11. Private enterprise Rozgina (308010, Belgorod, 1, 3rd Portovy per.);
12. LLC Ritual-Service (308010, Belgorod, 77, Chelyuskintsev St.);
13. LLC Recital (308013, Belgorod, 14, Mikhailovskoe Shosse);
14. Private entrepreneur Kulin (308, Belgorod, 22, Chekhova St.).
In addition, three economic entities operate on the product market of burial ritual services (OKUN code 019505):
1. MUE Ritualbytservis (308010, Belgorod, 94, Portovaya St.);
2. the Belgorod subsidiary of JSC Military-Memorial Company, JSC VMK (308006, Belgorod, 52, B.Khmelnitskogo St.);
3. Private entrepreneur Kulin (308, Belgorod, 22, Chekhova St.).
Some 25 economic entities operate on the product market of the ritual services of tombstones manufacture (OKUN code 019512-019516). The qualitative and quantitative parameters of this market have not been determined.
Rendering guaranteed burial ritual services.
In the city of Belgorod, the guaranteed list of ritual services of burial is provided only by MUE Ritualbytservis.
The population of the city of Belgorod is considered as the consumers of the said services.
Geographic Dimensions of the Product Market
According to item 4.4 of the Regulations, the following factors are to be taken into consideration for determining the geographic dimensions of a product market:
a possibility of shifting of the demand between territories presumably constituting one territorial market.
Proceeding from the requirements of item 4.4 of the Regulations, the geographic dimensions of the product market of ritual services have been identified within the geographic borders of the city of Belgorod.
Determining the Volume of the Market Product Resources and the Economic Entities' Share on the Market
In keeping with item 5.1 of the Regulations, the quantitative characteristic of the volume of the market product resources is the total product sales volume within the geographic dimensions of the market by an identified group of buyers in value terms or in kind.
The calculation of the share of buyers on this product market is conducted on the basis of the actual market structure (without considering potential competitors), as this analysis was conducted on the basis of materials of the application files with the Department by the Belgorod subsidiary of JSC VMK for purposes of detecting the elements of dominance abuse on the market by MUE Ritualbytservis.
The share of MUE Ritualbytservis on the product market of burial ritual services in 2002 and 2003 was 88.9% and 83%, respectively, which is much higher than the 65% margin.
According to Art. 4 of the Law on Competition, such a position of an economic entity is defined as dominant.
In keeping with effective law, MUE Ritualbytservis is the only economic entity providing certain types of ritual services on the following product markets:
· Rendering a guaranteed list of burial ritual services;
· Allocating a land plot for burial or reburial;
· Issuing documents needed for the burial.
Quantitative Parameters of the Product Market Structure
In keeping with item 6.1 of the Regulations, quantitative characteristics of a product market structure include:
· the number of sellers operating on this product market;
· shares occupied by the sellers on this product market;
· market concentration indices.
The concentration rate of the analysed market was not determined, as it is usually determined for 3, 4 and more major market participants. As already stated above, three economic entities operate on the burial ritual services market, and the share of one of them - MUE Ritualbytservis - in 2002 and 2003 was 88.9% and 83%, respectively.
Conclusions
The analysis of the market of some types of ritual services conducted in accordance with the methodology of evaluating the status of the competitive environment on product markets approved by the Order of the Russian MAP of 20.12.1996 No.169 «On Approval of the Procedures for Holding and Analysis and Appraisal of the Status of Competitive Environment on the Product Markets» has shown:
1. In keeping with effective law, MUE Ritualbytservis is the only economic entity providing certain types of ritual services on the following product markets:
· Rendering a guaranteed list of burial ritual services;
· Allocating a land plot for burial or reburial;
· Issuing documents needed for the burial.
2. MUE Ritualbytservis occupies a dominant position on the product market of burial ritual services with a share on this market exceeding 65%.
Under such circumstances, it is possible to assume that MUE Ritualbytservis has abused its dominance on the analysed product market, which was manifested in imposing on a counterparty of unprofitable contractual terms and terms irrelevant to the subject of the contract.
The effect of the supposed dominance abuse by MUE Ritualbytservis consists in the gaining of additional profit and elimination of competitors from the market in question.
Bryansk Directorate of the FAS
V.S. Rogachev
On Violation of Art.5 of the RSFSR Law «On Competition…» by Refusal to Allow a Customer to Select a Tariff for Settlements for the Received (Consumed) Electric Energy
Resume: The Bryansk Territorial Department of the Russian Federation Ministry for Antimonopoly Policy and Support of Entrepreneurship has considered case No. 13 of the violation of the antimonopoly legislation by a natural monopoly in the electric energy sphere. A decision on the case has been adopted on 16.05.2003, and an instruction issued to OJSC Bryanskenergo.
OJSC Bryanskenergo is an entity operating in the sphere of natural monopolies rendering electric energy supply services within the geographic borders of the Bryansk region.
The case was considered on the application of OJSC Klintsovsky Autocrane Plant, which OJSC Bryanskenergo has denied an opportunity to choose a tariff for payment for the consumed electric power, a possibility of choosing which was envisaged by the Russian Federation Governmental Decree No.226 of 02.04.2002 «On Electric and Thermal Energy Pricing,» valid at that moment.
According to item 24 of the said Decree, regulated tariffs (prices) of electric and thermal energy supplied to consumers (except the population) are established simultaneously in three options, and the consumer can choose one of these three options for conducting settlements for the consumed electricity, giving prior notice of its choice to the energy supplying organisation.
OJSC Bryanskenergo and OJSC Klintsovsky Autocrane Plant have concluded an electric energy supply contract No. 12 of 10.02.2002, according to which the subscriber was to pay for the consumed electric power according to a two-rate tariff.
In keeping with item 24 of Governmental Decree No. 226 of 02.04.2002, OJSC Klintsovsky Autocrane Plant in its letter of 29.12.2002 has notified OJSC Bryanskenergo represented by its subsidiary Energosbyt to the transfer to a single-rate tariff.
OJSC Bryanskenergo replied to this notification that the transfer to settlements on the basis of a single-rate tariff may be permitted only during the approval of new tariffs by the Bryansk Regional Energy Commission (REC) and after the signing of a new energy supply contract with the energy supplier.
REC Regulation No. 3/1-E of 05.02.2003 has introduced new tariffs, in connection with which OJSC Klintsovsky Autocrane Plant sent its draft contract to OJSC Bryanskenergo on 17.02.2003.
OJSC Bryanskenergo left this proposal on conclusion of a contract envisaging settlements on the basis of a single-rate tariff unanswered, and presented payment orders to OJSC Klintsovsky Autocrane Plant based on the two-rate tariff, as it assumed that before a new contract is concluded the parties were to conduct settlements on the basis of the energy supply contract No. 12 of 10.02.2002.
In an attempt to justify its actions OJSC Bryanskenergo referred to Art. 310 of the Russian Federation Civil Code, reflecting the principle of interminability and invariability of contract in the form of inadmissibility of unilateral alteration of its terms: a unilateral refusal from fulfilling obligations and unilateral alteration of its terms are admitted only in cases stipulated by law and contract.
To substantiate its position, OJSC Bryanskenergo was also referring to other provisions of the civil law, including Art. 450 (1), alleging that in the case under consideration the existing contract could not be altered unilaterally, as Art. 450 (1) stipulates that a contract may be unilaterally altered or terminated, if it is envisaged by the Russian Federation Civil Code, other laws, or the contract. A governmental decree is not a law and for this reason it cannot be used in the implementation of a contract.
At the same time, in keeping with Art. 426 (4) of the RF Civil Code, in cases stipulated by law the Russian Federation Government may issue binding instructions to all parties during the conclusion and implementation of public contracts. Art. 544 (2) says that the order of conducting settlements for energy shall be determined by law, other legal acts or agreements between the parties. Art. 454 (3) also says that in cases envisaged by this Code or another law the details of the purchase and sale of certain types of products shall be determined by laws and other legal acts.
Art. 424 (2) says that the alteration of a price after the conclusion of a contract shall be admitted on terms stipulated by the contract, the law or in the legally prescribed manner.
Art. 539 (3) stipulates that laws and other legal acts on energy supply shall be applied to relations not regulated by this Code.
Therefore, Art. 424, 426, 454 stipulate that the application of the Government Decree requires the existence of Laws, and two articles (Art. 539 and 544) make direct reference to other legal acts.
The fundamental law enabling the application of the Government Decree is the Law of 14.04.1995 No. 41-FZ «On State Regulation of Electric Energy Tariffs in the Russian Federation,» Art. 5 of which stipulates that the Russian Federation Government shall establish the fundamentals of electric and thermal energy pricing on the territory of the Russian Federation, and Art. 15 says that the order of state regulation and application of tariffs shall be established by the Russian Federation Government.
Having considered the presented materials, including the contract concluded between OJSC Bryanskenergo and OJSC Klintsovsky Autocrane Plant, the correspondence between them, the REC Regulation on the introduction of new tariffs, and other materials, the Bryansk Territorial Department has arrived at the conclusion that OJSC Bryanskenergo has violated Art. 5 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» by imposing unprofitable contractual terms and unjustified demand of transfer of finances in the amount of RUR 324,576.
Having disagreed with the issued decision and instruction on the case, OJSC Bryanskenergo applied to the Bryansk regional arbitrazh court with a claim to invalidate the decision of 16.05.2003 and instruction No. 1 of 15.05.2002 on grounds that they do not comply with the Rules of Considering Cases of Violation of the Antimonopoly Legislation, have been issued with exceeding office and violate the principle of freedom of contract, stipulated by Art.421 of the Russian Federation Civil Code, as well as Art. 310 and 450 of the CC.
The Bryansk regional arbitrazh court in its first instance has recognised as inconsistent the reasoning of the applicant concerning the non-compliance if the appealed non-regulatory acts with requirements of the Rules of Considering Cases of Violation of the Antimonopoly Legislation. It has been established that the decision and instruction comply with items 2.12 and 2.16 of the Rules. The applicant's allegation that control over the sphere of activity in the electric energy supply sector does not constitute the competence of the antimonopoly authority, as well as the argument on the supposed violation of Art. 421 of the Civil Code have been waived, as Art. 5 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» envisages an exception from the principle of freedom of contract with respect of a dominant entity on the product market abusing its dominance.
The decision and instruction have been recognised justified and legal.
The court of appeals of the Bryansk regional arbitrazh court has also appraised the applicant's reasoning in the first instance court and the contract, including item 5.4 of the contract mentioned by the Bryansk Territorial department in its review.
The contract stipulates that the contractual price is formed by the tariffs introduced by other acts of the Russian Federation, According to item 5.4 of the Contract, a change of tariffs in the period of the Contract's validity does not require its re-registration, they become binding as of the date of introduction of new tariffs both for the energy supplying organisation and for the subscriber, and the energy supplying organisation should have taken into consideration the subscriber's right to the choice of a tariff.
Having disagreed with the decision and instruction of the Bryansk regional arbitrazh court in the first and appeals instances, OJSC Bryanskenergo has filed a cassation to the Federal Arbitrazh Court of the Central District to verify the lawfulness and soundness of the legal decisions.
The applicant also claimed that item 5.4 envisages the possibility of changing the price of a tariff, but not the choice of its option. This comment was not taken into account by the cassation court, as in accordance with Art. 1 of the Federal Law «On State Regulation of Electric Energy Tariffs in the Russian Federation,» electric and thermal energy tariffs constitute a system of price rates according to which settlements for electric energy are conducted.
The application of Art. 421 of the RF Civil Code in the case under consideration has also been assessed, as a result of which it has been stated that in keeping with Art. 421 (part 4) of the RF Civil Code, contractual terms shall be determined at the discretion of the parties, except cases when the content of a relevant term is prescribed by law of other legal acts.
Allegations that the Bryansk Territorial Department was not authorised to control the activity of OJSC Bryanskenergo was recognised inconsistent.
Therefore, in the course of a year, from May 2003 to May 2004, the Bryansk Territorial Department had to defend in three court instances the subscriber's right to choose a tariff for payment for the consumed electricity, envisaged by a Government Decree.
Daghestan Directorate of the FAS
Description of the Case of Violation of Art. 5 and 6 of the RF Law «On Competition…» by OJSC Gazprom, LLC Mezhregiongaz, LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz
1. Main problem for competition.
Competition, or the rivalry of economic entities in naturally monopolistic segments of the economy such as natural gas transportation is seriously complicated by technological and production specifics of the manufactured product (service). Access to the transportation infrastructure enables the company that owns or uses it to abuse its position on the relevant product market.
2. Fact and legal content.
On 20 May 2004, a group of entities (OJSC Gazprom, LLC Mezhregiongaz, LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz) has concertedly stopped the supply of natural gas to the Karabudakhkentsk district of the Republic of Daghestan. The reason for the natural gas disconnection consisted in constant non-payments for the consumed gas by the residents and enterprises of the Karabudakhkentsk district. However, along with persistent non-payers, the subsidiaries of OJSC Gazprom and LLC Mezhregiongaz - LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz - have shut off gas supplies also to bona fide payers who had made advance payments (debit balance) for gas. These economic entities mainly operate on the agricultural production, manufacture and sales markets. The abuse of market dominance on the gas supply market by a group of gas suppliers has inflicted damage on the interests on consumer organisations operating on other product markets.
The restriction of supplies of natural gas to bona fide consumers contradicts a whole number of laws and bylaws, as well as in-house corporate regulations of the Gazprom group. This includes Art. 5 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» No. 948-1 of 22.03.1991, Art.523 and 546 of the RF Civil Code, Art. 26 of the Federal Law «On Gas Supply in the RF,» etc.
The antimonopoly authority - the Daghestan Department of the Russian FAS - has initiated case No. 46/51 based on the applications of legal and physical persons situated on the territory of the Karabudakhkentsk district of the Republic of Daghestan, on the elements of a violation of Art. 5 and 6 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets» No. 948-1 of 22.03.1991.
3. Procedures.
Case No. 46/51 was initiated and investigated by the antimonopoly authority in compliance with the then effective Rules of Considering Cases of Violation of the Antimonopoly Legislation, approved by Order of the RF State Committee for Antimonopoly Policy No. 91 of 25.07.1996 (in edition of 25.11.2003). The investigation and evidence gathering was conducted by requesting the necessary documents and information from OJSC Gazprom, LLC Mezhregiongaz, LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz, receiving consultations and recommendations of the Russian FAS, and using the information databases available at the Department. The investigation revealed that the actions of the Gazprom group in restricting gas supplies to the Karabudakhkentsk district were concerted. The materials of the case make it evident that OJSC Gazprom, LLC Mezhregiongaz, LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz comprise one group of entities - 100% of the authorised capital of LLC Mezhregiongaz and LLC Kaspiygazprom belong to OJSC Gazprom; 51% of the authorised capital LLC Deghestanregiongaz belongs to LLC Mezhregiongaz; 100% of the authorised capital of JSC Daghestanregiongaz belongs to OJSC Regiongazholding, 54% of the authorised capital of which belongs to LLC Mezhregiongaz. This is confirmed by the fact that during the disconnection of gas, the regional subsidiaries of OJSC Gazprom were acting in pursuance of binding telegraph instructions of the mother companies - OJSC Gazprom and LLC Mezhregiongaz. These facts detected in the course of the investigation were pooled into one proceeding on the case initiated by the Daghestan Department of the Russian FAS firstly against LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz, and later against OJSC Gazprom and LLC Mezhregiongaz.
Upon the results of consideration of case No. 46/51, the antimonopoly authority issued an instruction to the Gazprom group to immediately resume gas supplies to bona fide payers who have no arrears for gas.
OJSC Gazprom and LLC Mezhregiongaz appealed against the instruction with the Moscow city arbitrazh court, whose decision of 03.02.2005 confirmed the lawfulness of actions of the Daghestan Department of the Russian FAS on initiating a case and issuance of instructions to the OJSC Gazprom group to terminate the violation of the antimonopoly legislation.
Having disagreed with the decision of the Moscow city arbitration court on this case, OJSC Gazprom and LLC Mezhregiongaz appealed against it with the court of appeals. The appeals instance of Moscow city arbitration court No. 9 issued a ruling leaving in force the decision of the Moscow city arbitration court of 03.02.2005 on case No. A40-39584/04-121-347 without changes, and dismissing the appeal filed by OJSC Gazprom and LLC Mezhregiongaz.
Analysis of the product market.
In accordance with the definition of the product market made in Art. 4 of the RF Law on Competition, the geographic dimensions of the product markets of transport, supply, and sale of natural gas were determined on the basis of the buyers' (consumers') economic possibility to purchase the product on a relevant territory (the Karabudakhkentsk district of the Republic of Daghestan) and lack of such a possibility outside its borders.
The shares of economic entities LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz on the market of transportation, supply, and sale of natural gas within the geographic borders of the Karabudakhkentsk district exceeded 65%.
Order of the Russian GAK of 21.01.1998 No. 16 has included the OJSC Gazprom group, including LLC Mezhregiongaz, in the Register of Economic Entities Holding over 35% Share on a Certain Product Market as a dominant entity on the service market of natural gas sale (within the geographic borders of the RF).
Orders of the Territorial Department of the Russian MAP for the Republic of Daghestan of 30.03.2001 No. 17, of 30.08.2004 No. 31, and 24.06.1996 No. 8 have, respectively, included LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz in the regional section of the Register as economic entities occupying a dominant position on the service market of natural gas sales (within the geographic borders of the Republic of Daghestan).
The said economic entities carried out concerted actions in violation of requirements of effective law, including the antimonopoly legislation, by terminating gas supply to all consumers in the Karabudakhkentsk district of the Republic of Daghestan, including those fulfilling obligations on payment for and collection of natural gas supplied by JSC Daghestanregiongaz in good faith.
Considering the above and guided by Art. 27 (1) of the Law «On Competition and Restriction of Monopolistic Activity on Product Markets» and item 2.12 of the Rules of Considering Cases of Violation of the Antimonopoly Legislation, the Commission passed a decision:
1. To recognise the actions of the group of entities consisting of OJSC Gazprom, LLC Mezhregiongaz, LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz as violations of Art. 5 and 6 of the RF Law in Competition, manifested in concerted actions of economic entities comprising one group of entities of OJSC Gazprom, which result (can result) in restriction of competition and infringement of the interests of economic entities, and elimination of other economic entities from the gas supplies market.
2. To issue an instruction to OJSC Gazprom, LLC Mezhregiongaz, LLC Kaspiygazprom, LLC Deghestanregiongaz, and JSC Daghestanregiongaz on case No. 46/51 to terminate the violation of Art. 5 and 6 of the RF Law on Competition.
Irkutsk Directorate of the FAS
Case of Violation of the Antimonopoly Legislation by a Group of Entities (LLC YUKOS M Trading House, OJSC Angara Polymer Plant)
The Irkutsk Territorial Department of the Russian MAP received an application from OJSC Sayanskkhimplast (the Applicant) against the actions of a group of legal entities including YUKOS M Trading House and OJSC Angara Polymer Plant (OJSC AZP), manifested in imposing unprofitable contractual terms, namely, setting a monopolistically high price on gaseous ethylene GOST 25070-87.
The Territorial Department conducted an antimonopoly investigation (by interviewing experts, economic entities, territorial departments on whose territory ethylene manufacturers are located) and arrived at the following conclusions.
A) The existing technology of ethylene production is strongly dependent on the terms of supply of raw material for petrochemical processing, the process of further processing into ethylene, the technology of ethylene supply to the Applicant. In other words, it is tied to a fixed infrastructure of pipelines, excluding physical connection to the transportation and processing process of other economic entities, except OJSC ANHK, OJSC AZP, and OJSC Sayanskkhimplast.
B) Ethylene is sold to the end consumer by YUKOS M Trading House (wholesaler); OJSC ANHK (virgin gasoline manufacturer), OJSC AZP (ethylene manufacturer), and YUKOS M Trading House (seller) belong to one major oil company (OJSC YUKOS Oil Company).
C) The Russian market does not have free ethylene resources and no technological possibility of supplying gaseous ethylene to the Applicant by other ethylene manufacturers (the ethylene pipeline system existing in Russia firmly binds the manufacturer with the consumer).
· Overall expenses connected with the Applicant's switch over to liquefied ethylene consumption are not less than USD 15-200 million (infrastructural and other expenses, including, in expert opinion, the construction of an ethylene liquefying device at the enterprise manufacturing gaseous ethylene; expenses on the rent (or purchase) of special means of delivery (thermos tanks) with a temperature minus 101 degrees C; expenses on construction at the Applicant's enterprise of a special reservoir for liquefied gas acceptance and storage; ethylene regasification (restoration) costs from liquid to gas for further processing by the Applicant (into polyvinylidene chloride);
· The prices of liquefied and gaseous ethylene are incomparable (the quoted price of liquefied ethylene is 30-40% higher than that of gaseous ethylene).
Therefore:
· liquefied ethylene cannot be a substitute product of gaseous ethylene;
· only the manufacturer (OJSC AZP) can supply gaseous ethylene with the temperatures from minus 20 degrees to minus 30 degrees;
· the product can be supplied only by ethylene mainline owned by the Applicant (OJSC Sayanskkhimplast).
Consequently, only gaseous ethylene with the temperatures from minus 20 degrees to minus 30 degrees can be regarded as the product dimensions of the product market. The geographic dimension of the product market is the block of entrance to the ethylene mainline on the border of the manufacturer's (OJSC AZP) production territory.
Being the only possible seller of ethylene, in the absence of competitors on the ethylene sales market due to the technological pattern of the product supply to the buyer and high market entry barriers for new sellers and manufacturers of gaseous ethylene, YUKOS M Trading House occupies a dominant position (with 100% share) and has an opportunity to dictate the price of the product, including in it a profit considerably higher than would have been possible in comparable conditions.
To prove the fact of a monopolistically high price the seller's pricing policy was analysed in accordance with the cost-based pricing methodology and proceeding from the situation on the initial and end product markets.
Proceeding from direct expenses connected with the processing technology and sufficient profit rate, the price of 1 tonne of ethylene for the end consumer should be formed by the cost of the initial raw material (virgin gasoline), the cost of its processing, and the cost of the necessary chemical agents and catalysts, minus the value of by-products produced as a result of processing. Expenses applicable to ethylene should be proportionate to the overall ethylene return. Calculations revealed that the actual profitability of sales of YUKOS M Trading House was 43%, i.e. exceeded the average profit rate in the industry by 23%.
Proceeding from pricing with account of changes of the situation on the product markets of the initial resource (virgin gasoline) or the end product (polyvinylidene chloride), the comparison of the dynamics of prices on the said markets in 2001 and 2002 has shown that the pace of price increase of the produce (ethylene) of YUKOS M Trading House, occupying a dominant position, in no way depends on the changes (fluctuations) of prices on the markets of initial and end products:
· the pace of ethylene price increase is always ahead of the pace of growth of prices of petrochemical produce;
· during the period in question, prices on the ethylene market were persistently growing, whereas the prices on the markets of gasoline declined, and prices on the market of polyvinylidene chloride were changing both ways.
Conclusion:
1. The seller's (YUKOS M Trading House) pricing method was established, which does not reflect the objective situation on the product markets of both the initial raw material and ready produce (polyvinylidene chloride).
2. The amount of profit (profitability) in the ex-price has been determined as 43% per 1 tonne of gaseous ethylene, exceeding the industrial average by 23%.
3. The amount of profit used in the calculations is not a consequence of objective changes of the market situation, but a manifestation of dominance abuse by the seller on the market of gaseous ethylene sales, containing the elements of a violation of Art. 5 of the RF Law on Competition in the form of:
· setting and maintaining and monopolistically high price, manifested in a considerable excess of profit rate (43%) over the profit rate formed on competitive markets (20%);
· imposing unprofitable conditions by arbitrary pricing, not connected with the evaluation of the market offer or demand situation.
The main criteria for proving the fact of monopolistically high pricing included:
· provisions of Art. 4 of the Law on Competition, enabling to establish the fact of monopolistically high pricing on the basis of two independent aspects: proving the possibility of compensating for unjustified expenses; proving the possibility of gaining a considerably higher profit. The wording used in the Law (»or») makes it possible to use only one of the conditions included in the definition. The Irkutsk Territorial Department of the Russian MAP used the second part of the definition: … can receive a much higher profit than possible in comparable conditions. As a matter of fact, neither the Law nor any other regulations restrict the actions of the antimonopoly authority in the choice of comparability criteria;
· the initial raw material movement chain, its processing into a semi-finished product (polyvinylidene chloride) and further processing into the end product (polyvinylidene chloride) by OJSC Sayanskkhimplast is tied to a fixed infrastructure of pipelines, excluding physical connection to the transportation and processing process of other economic entities, except OJSC ANHK, OJSC AZP, and OJSC Sayanskkhimplast; therefore, the calculation of fair price of 1 tonne of ethylene for the end consumer (OJSC Sayanskkhimplast) can only be based on actual expenses (made by OJSC ANHK, OJSC AZP);
· as the seller on the market is a wholesale intermediary, the average petrochemical industry indices were taken as the basis for comparison (including the profit rate).
Instruction No. 61 of 26.08.2003 was issued on results of consideration of the case to terminate the violation of the antimonopoly legislation by streamlining the price with the level of actual expenses and the profit rate equal to the industrial average, based on the current figures published by Goskomstat.
The instruction was contested in court of the first and second instances. In both cases the court left the decision of the Territorial Department in force, confirming its lawfulness and reasonableness.
The court hearings held in April - May 2004 agreed with the conclusions of the Department that:
· the method of cost calculation used by the Department does not contradict the law, as there are no regulations introducing obligatory requirements for such calculations, and also that in the course of the antimonopoly investigation the Applicant failed to present the evidence refuting the cost and profit calculation method used for the adoption of the decision;
· the analysis of the Russian ethylene market (conducted by the KORTES centre for oil and petrochemical market research) presented to the court by the offenders has no direct connection to the circumstances considered during the issuance of the decision;
· the Department has lawfully used as a comparable factor the amount of industrial average profit rate in the petrochemical industry received from a public source;
· as the conclusion on more than double excess of the profit rate is substantiated by calculations of the Irkutsk Territorial Department of the Russian MAP, the qualification of YUKOS M Trading House actions as dominance abuse in the form of setting monopolistically high prices and a violation of Art. 5 (1) of the RF Law on Competition is absolutely grounded.
· The decision and instruction do not propose a specific price to be set by YUKOS M Trading House, including the profitability rate, and the instruction contains a requirement to streamline the ethylene prices with the actual expenses taking into account the average industrial profit rate, which is fact an instruction to introduce a fair price and, as a consequence, change contractual terms.
As a result of consideration of the case the Department has detected the following problems:
· a total lack or a lack of sufficiently up-to-date information sources on comparable terms of competition (price, profit, profitability, etc.). Statistic sources publish the said information practically with 1 - 2 years delay;
· the enterprise accounting policy prevents the identification of economic characteristics for particular types of produce;
· the legal definition of a monopolistically high price contains a number of parameters requiring additional explanation (e.g. «a considerably higher profit»: firstly, what does «considerably» exactly mean? secondly, from the economic viewpoint, profit is expressed in concrete monetary terms, therefore for purposes of antimonopoly control it would be better, perhaps, to apply the term of «profit rate»);
· in the opinion of the Territorial Department, the setting of a monopolistically high price of ethylene by the seller was a consequence of inclusion in the product price of unjustified expenses, not related to objective outlays of ethylene manufacture and marketing, but causes by an artificial chain of re-sales within the Oil Company through the formation of quasi-wholesale markets, closed by «exclusive» contracts. The termination of such practice is possible by direct ban on intermediary (exclusive) agreements on the markets of product resources, not requiring agency.
Irkutsk Directorate of the FAS
Information Brief on the Violation of the Antimonopoly Legislation by OJSC UILK
On 11 September 2002, the Irkutsk Territorial Department of the Russian MAP received an application from the General Director of LLC Trailing complaining against unlawful actions of OJSC Ust-Ilimsk Timber Industrial Complex Production Association (OJSC PO UI LPK), manifested in imposing contractual terms of using timber transportation trunk roads.
OJSC PO UI LPK and LLC Trailing have concluded a contract on the use of OJSC PO UI LPK timber transportation trunk roads No. 306/1322 of 16.08.2002, item 1.1 of which stipulates that the Complex (OJSC PO UI LPK) obligates to fulfil the current repair and maintenance jobs of the Kapayevskaya trunk road, and the client (LLC Trailing) assumed part of the expenses of the Complex on the road current repair and maintenance. Item 1.3 of the above contract regulates the settlement procedures between OJSC PO UI LPK and LLC Trailing - the amount expenses assumed by the client equals RUR 8.91 per one tonne (VAT not included) on 20 km of road. In keeping with the contract, the client shall transfer an advance non-cash payment of 85% of the monthly fare to the Complex's settlement account 5 days prior to the transportation month, as a result of which LLC Trailing loses part of its operating assets. The said contract with the term of validity from 01.08.2002 to 30.09.2002 was signed by an LLC Trailing branch due to business necessity, as the presentation of claims might have produced a genuine threat of banning the use of the Kapayevskaya trunk road. After the expiration of this contract no new contract on the use of the trunk roads has been concluded between OJSC PO UI LPK and LLC Trailing.
On 20.09.2002 the LLC Trailing branch company sent a letter to the OJSC PO UI LPK General Director, stating LLC Trailing refusal from extending contract No. 306/1322 of 16.08.2002 on the existing terms and offering the conclusion of a new contract regulating the issue of compensating the costs of Kapayevskaya trunk road maintenance and operation jointly with the other users of the road with establishing a reasonable (justified) amount of payment for the services, presenting calculations, and making payment after the actual provision of services. In its reply letter, OJSC PO UI LPK informed that contract No. 306/1322 of 16.08.2002 on the use of OJSC PO UI LPK timber transportation trunk roads expires on 30.09.2002, and starting 01.10.2002 the passage of LLC Trailing vehicles by the OJSC PO UI LPK roads is prohibited, without the conclusion of a new contract. The letter contained a clause stating that in the event of conclusion of a new contract the terms of payment will be much tighter, both from the point of view of increase of the cost of the services, and by introducing 100% advance payment for the road usage.
The Commission of the Irkutsk Territorial Department of the Russian MAP has established on the basis of analysis of the product and geographic dimensions of the market that OJSC PO UI LPK, the owner of the Kapayevskaya trunk road with a length of 98.6 km occupies a dominant position on the local market of the service «passage by the Kapayevskaya trunk road on the 20-kilimetre section from the Zheronsk coal deposit,» being the only seller on this market (the share of the Complex is 100%, which exceeds the 65% margin, which, according to Art. 4 of the Russian Federation Law «On Competition and Restriction of Monopolistic Activity on Product Markets,» enables to draw a conclusion on unconditional dominant position of OJSC PO UI LPK on the market of the service «passage by the Kapayevskaya trunk road on the 20-kilimetre section from the Zheronsk coal deposit»).
Explaining to the Commission the reasons for non-conclusion of a new contract with LLC Trailing upon the expiration of contract No. 306/1322 of 16.08.2002 on the use of the OJSC PO UI LPK timber transportation trunk roads and revoking the offer of 04.10.2002 previously sent by OJSC PO UI LPK to the LLC Trailing branch company (according to letter No. 110-06/4652 of 08.10.2002), a OJSC PO UI LPK representative referred to the conclusion of Deputy General Director for industrial safety of the Complex, stating that LLC Trailing uses the Kapayevskaya trunk road for the transportation of a dangerous cargo (mineral coal) with violations of safety requirements, creating an accident hazard. However, the Commission waived this conclusion, as in keeping with the Federal Law «On the Safety of Road Traffic» No. 196-FZ of 15.11.1995 (in edition of the Federal Law No. 41-FZ of 02.03.1999), such conclusion may be issued by specially authorized federal agencies.
A representative of LLC Trailing said that LLC Trailing is willing to conclude a contract with OJSC PO UI LPK on the use of the Kapayevskaya trunk road in the volumes of cargo transportation formerly agreed with OJSC PO UI LPK according to the offer sent to the LLC Trailing branch company, on terms of partial compensation of capital repair and maintenance expenses on the section of the Kapayevskaya trunk road used by the LLC Trailing branch. The representative of OJSC PO UI LPK, in turn, explained that this contract with the LLC Trailing branch can be concluded only on condition of inclusion of a 100% advance payment term. The OJSC PO UI LPK representatives motivated this requirement that the demand of advance payment is the usual business practice in the region. OJSC PO UI LPK also expressed disagreement with the opinion of LLC Trailing concerning the determination of the price of the service of using the Kapayevskaya trunk road section by the LLC Trailing branch, as the tariff on the usage of roads is formed by the Complex with account taken of expenses on the maintenance and operation of all roads in its ownership, and considering the entire volume of the transported cargoes. However, the calculations of tariff formation on the usage of OJSC PO UI LPK roads constitute commercial secret, as these data concern the interests of the Complex's counterparties, which are not in contractual relations with LLC Trailing.
The Commission of the Irkutsk Territorial Department of the Russian MAP has examined the documents presented by OJSC PO UI LPK and dismissed the reasoning of OJSC PO UI LPK representatives concerning the inclusion in the contract of the advanced payment condition. Besides OJSC PO UI LPK and the LLC Trailing branch, 21 other enterprises (legal entities and entrepreneurs operating without the formation of a legal person) use the Kapayevskaya trunk road. OJSC PO UI LPK uses a standard form of contract on the use of timber transportation trunk roads, envisaging 100-percent advance payment five days prior to the transportation month. In the opinion of OJSC PO UI LPK, charging 100-percent advance payments from its counterparties is the usual local business tradition, as such practice has existed for a long period of time and is connected with the fact that the parties know in the advance the supposed volume of cargo transportation, and the composition of the cargo transportation companies is traditional. However, as per Art. 5 of the RF CC, a rule of behaviour not prescribed by the legislation, but widely used in some sphere of entrepreneurial activity, is recognized as normal business practice, regardless of whether it is fixed by any document. The requirement of advance payment before the beginning of the transportation month set by OJSC PO UI LPK infringes the interests of counterparties, as advance payment results in withdrawal of a counterparty's operating assets, and constitutes in fact the use of a counterparty's assets received for a not yet provided service. The infringement of a counterparty's interests cannot be normal business practice, as in keeping with Art. 10 (3) of the RF CC, the exercising of civil rights shall be based on reasonable action and good faith of participants in civil relations. Art. 10 (1) of the RF CC does not admit the use of civil rights for purposes of competition restriction, as well as dominance abuse on the market. Therefore, the argument of OJSC PO UI LPK that a demand of advance payment for the usage of the Kapayevskaya trunk road is a local business tradition was qualified by the Commission as groundless.
In accordance with item 1.1 of contract No. 306/1322, the subject of the contract for OJSC PO UI LPK consists in fulfilment of road maintenance and current repair jobs of the Complex, including the Kapayevskaya trunk road. The subject of the contract suggests the participation of the LLC Trailing branch company in expenses on the maintenance and current repair of the 20 km section of the Kapayevskaya trunk road. Item 1.3 of contract No. 306/1322 stipulates that the amount of expenses assumed by the Client (the LLC Trailing branch) constitutes RUR 8.91 per one tonne (VAT not included) at a 20 km distance. Concrete jobs and expenses should be regulated by the balance of expenses on the maintenance and operation of a concrete road, in our case, the Kapayevskaya trunk road. In other words, expenses are determined on the basis of particular volumes of maintenance and current repair jobs on a concrete road. The comparison of expenses on the maintenance and current repair of the 20 km section of the Kapayevskaya trunk road , which should in fact constitute the subject of the contract between OJSC PO UI LPK and the LLC Trailing branch, with the presented calculations based on the volumes of the transported cargoes shows that the calculations for the actually rendered services are substituted with other calculations, not connected with the compensation of damage inflicted on the trunk roads by motor transport during cargo transportation. Expenses on the maintenance and current repair of the 20 km section of the Kapayevskaya trunk road are much lower than the costs calculated on the basis of the volumes of cargo transportation, which infringes the interests of the LLC Trailing branch by imposing unprofitable contractual terms irrelevant to the subject of the contract.
Having examined the documents presented by OJSC PO UI LPK, specifically, the tables of distribution of actual expenses on the maintenance and repair of timber transportation trunk roads by the transportation volumes, the Commission learned that OJSC PO UI LPK keeps records of actual expenses on the maintenance of each road in the OJSC PO UI LPK property, including the Kapayevskaya trunk road. Therefore, OJSC PO UI LPK has an opportunity to calculate the expenses on the maintenance of the section of the Kapayevskaya trunk road used by the LLC Trailing branch company.
Consequently, the Complex, owning the only trunk road enabling the Applicant to transport the extracted coal, used the opportunity to impose unprofitable contractual terms on its counterparty, both in the time of validity of the contract, and the price of the service. Therefore, during the conclusion of the contract the interests of the LLC Trailing branch were infringed.
The Commission came to the conclusion that the actions of OJSC PO UI LPK contain the elements of a dominance abuse, as OJSC PO UI LPK is an entity occupying a dominant position on the market, which, in keeping with Art. 5 of the RF Law «On Competition and Restriction of Monopolistic Activity on Product Markets,» is prohibited to take actions which result or can result in infringement of the interests of other economic entities, in this case, the infringement of the interests of the LLC Trailing branch company.
On results of consideration of the case on 16.10.2002, the Commission adopted decision No.59 and issued instruction No. 60 to terminate the violations of the antimonopoly legislation.
Essence of the decision: to recognize OJSC PO UI LPK as having violated Art. 5 of the RF Law «On Competition and Restriction of Monopolistic Activity on Product Markets» by including in a contract of terms unprofitable for the counterparty, namely, a demand of advance payment and transportation fee calculated on the basis of the entire volume of cargo transportation by all roads of the Complex, i.e. irrelevant to the subject of the contract and including in the cost of the service of using the Kapayevskaya trunk road the outlays on the maintenance and repair of all roads of the Complex.
Essence of the instruction: OJSC PO UI LPK shall terminate the violation of the antimonopoly legislation by concluding a contract with the LLC Trailing branch to the rendering of the service of passage by the Kapayevskaya trunk road to the cargo transportation volumes formerly agreed with OJSC PO UI LPK and determining the cost of the service on the basis of compensation of costs connected with the operation of the section of the trunk road used by the LLC Trailing branch company, in accordance with normal business practice and regulations of the Russian Federation for establishing the methods of payment for the rendered service.
The decision and instruction were appealed against. The courts at three instances supported the position of the antimonopoly authority and recognized its decision and instruction lawful and reasonable.
Karachaevo-Cherkessia Directorate of the FAS
Problems of Access of Public Energy Companies to the Federal Electric Energy Wholesale Market
1. The Russian Federation legislative authorities have adopted regulations on reforming the electric energy sector, in accordance with which competitive conditions shall be formed in the sphere of electric energy manufacture and sale. The implementation of this task becomes problematic due to strong opposition on the part of administrations of natural monopolies and a lack of approved regulations for allotment of economic entities to the competitive sector.
2. Electric power supply of the public sector and municipal enterprises in the capital city of the Karachaevo-Cherkessian Republic, the city of Cherkessk, is carried out by OJSC Cherkessk City Electric Networks. This company was formed by privatisation of a municipal unitary enterprise and currently has the status of a re-seller of electric energy. Electric energy is supplied to it by RAO UES subsidiary, OJSC Karachaevo-Cherkesskenergo.
On decision of the Russian Federation Federal Energy Commission of 4 December 2002 No. 89-e/b OJSC Cherkessk City Electric Networks was included in the List of commercial organisations - participants of the federal wholesale market of electric energy as of 1 January 2003. In accordance with the established order of entry to the federal wholesale market of electric energy, on 20 January 2003 OJSC Cherkessk City Electric Networks submitted a draft contract to OJSC Karachaevo-Cherkesskenergo on the rendering of electric energy and capacity transmission services over the OJSC Karachaevo-Cherkesskenergo networks. OJSC Karachaevo-Cherkesskenergo for unmotivated reasons declined it and up till now has not concluded the contract.
On the application of OJSC Cherkessk City Electric Networks, the Karachaevo-Cherkesskenergo Territorial Department of the RF MAP (presently the FAS Department for the Karachaevo-Cherkessian Republic) has initiated a case against OJSC Karachaevo-Cherkesskenergo on the elements of a violation of Art. 5 of the RF Law «On Competition and Restriction of Monopolistic Activity on Product Markets» and issued an instruction to terminate the violation of the antimonopoly legislation, manifested in non-conclusion of a contract.
3. The Antimonopoly Department has examined the materials presented by OJSC Cherkessk City Electric Networks (Gorelektroset), specifically, the draft contract on the rendering of electric energy transmission services on the OJSC Karachaevo-Cherkesskenergo networks, and materials of the correspondence. In dealing with the merits of the case the parties were suggested to be guided in all matters by effective law, the Civil Code, RF Governmental Decrees, the Rules of Electric Device Installation, decisions of the Regional Energy Commission, etc. OJSC Gorelektroset obligated timely and complete payment of the regional subscribers' fee for electric energy transmission established for it in keeping with effective law. At the same time, OJSC Gorelektroset has notified the counterparty of its readiness and acceptance of equipment for commercial account of the purchased electric energy.
OJSC Karachaevo-Cherkesskenergo left the request of this organisation unanswered. Upon the expiration of two months, OJSC Gorelektroset applied to the Antimonopoly Department. The instruction of the Antimonopoly Department obliging OJSC Karachaevo-Cherkesskenergo to conclude a contract has not been fulfilled within the prescribed period.
Starting from the moment of appealing against the instruction of the Antimonopoly Department and until obtaining a decision of the last legal instance, OJSC Karachaevo-Cherkesskenergo directed maximum of its effort to extend the time of consideration of the case by each instance. An administrative case was initiated against the offender and a penalty imposed. OJSC Karachaevo-Cherkesskenergo appealed in one of its court claims against the instruction of the Department and the administrative penalty. The court at first instance considered both claims of the applicant during one session. It has become clear during preliminary hearings that the applicant is trying to convince the court of the need to cancel all decisions of the Antimonopoly Department on procedural pretexts (untimely receipt of the instruction, etc.). In order to settle the main task of concluding a contract with the supplier of electric energy, the Department revoked its administrative penalty. The first instance court left in force the decision and instruction of the Department on the considered case. After that, OJSC Karachaevo-Cherkesskenergo was filing petitions and appeals to court on the last day of the appeals, as a result of which the court in the last instance considered the case practically after the expiration of one year (a decision was also passed in favour of the Antimonopoly Department). After all this, arguments were made that since the contract was offered for the period of 2003 and this year has expired, a new contract should be offered, in which court hearings will also be initiated.
4. The principal motive for refusal from concluding a contract by OJSC Karachaevo-Cherkesskenergo at the moment of the court hearings was the unprofitability of transferring of one of the main electric energy consumers to the regime of self-supply of electric energy and the corresponding reduction in profits. In addition, the regulatory authorities have not introduced the tariffs on transmission of electric energy over the OJSC Karachaevo-Cherkesskenergo networks. OJSC Karachaevo-Cherkesskenergo is an economic entity occupying a dominant position on the republican market of electricity supply and is included in the Register of Monopolistic Enterprises. 100% of electric energy consumer in the Karachaevo-Cherkessian Republic is supplied by OJSC Karachaevo-Cherkesskenergo. OJSC Gorelektroset with the status of reseller of electric energy supplies electricity to over 65% of consumers in the republican capital.
OJSC Karachaevo-Cherkesskenergo profits gained as a result of violation of the antimonopoly legislation were to be collected in favour of the federal budget through court procedure on the claim of the antimonopoly authority, in keeping with Art. 23.1 of the RF Law «On Competition and Restriction of Monopolistic Activity on Product Markets.» The amount of profit gained by OJSC Karachaevo-Cherkesskenergo in 2003 as a result of violation of the antimonopoly legislation and unjustified retaining of OJSC Cherkessk City Electric Networks as its direct customer was calculated by the Antimonopoly Department in the absence of tariffs on energy transmission and any approved methodology, on the basis of its own method and exceeded RUR 30 million. However, the legal claim of the Antimonopoly Department on collecting the profit in favour of the federal budget has not been satisfied due to the absence of transmission tariffs. Moreover, the court accepted as the basis the OJSC Karachaevo-Cherkesskenergo calculations made on the basis of the electric energy transmission tariffs for 2004. According to these calculations, the supply of electric energy to OJSC Gorelektroset is unprofitable to OJSC Karachaevo-Cherkesskenergo.
The absurdity of this situation consists of the following. The supplier does not sign the contract and does not allow its consumer to enter the federal wholesale market of electric energy, at the same time trying to prove that electric power supply to this consumer inflicts losses. In any regular situation the supplier would inevitably refuse to sell to such a consumer. In our case, all patterns of electricity supply to potential subscribers of the federal wholesale market of electric energy are being artificially made unprofitable for the latter by the administration of the natural monopolist and the regulatory authorities.
This makes it dubious that the legal acts adopted in 2003 - 2004 to reform the energy supply system have laid effective grounds for shifting this industry towards a competitive economy.
5. The federal regulatory authorities have introduced tariffs on transmission of electric energy via the networks of subsidiaries in such volumes that it is more profitable for the public services enterprises to receive electricity from the traditional supplier rather than from the federal wholesale market of electric energy. In our case, the entry of OJSC Cherkessk City Electric Networks onto the federal wholesale market of electric energy could result in a considerable tariff decrease for the consumers. Favourable decisions were issued by all court instances. However, because of insignificant procedural conditions, not stipulated by legal acts and imposed by RAO UES and its subsidiaries, entry on the wholesale market becomes impossible.
The matter is not so much that the legal acts adopted do not fully reflect the problems of creating genuine competitive sectors. The situation is being steered by the administrations of natural monopolies, which are practically uninterested in the emergence of competitors in the sector of public energy supply. Shocking arithmetic surfaces in mutual relations with potential competitors, introduced by the regulatory authorities, disregarding economics, logic, and any sort of common sense. It is rather difficult to imagine that an independent participant of the wholesale market of electric energy would have to pay over RUR 50 million for the transmission of electricity by the JSC-Energo networks to the total value of RUR 100 million. No sort of magnificent project of electric energy sector reform can overcome such arithmetic. However, it exists in our reality, and it prevented the Antimonopoly Department from punishing the monopolist failing up till now to fulfil the decisions of the court instances in the least amount.
When the seminar was announced we received material on similar cases considered in 2005 by the other antimonopoly departments. We would like to warn our colleagues that in many cases, despite the favourable results of economic entities' entry on the federal wholesale market of electric energy, regulatory authorities can introduce such tariffs on electric energy transmission by the JSC-Energo networks that would bring to naught the entire benefit of public utility and other enterprises entry to the federal wholesale market of electric energy.
In our opinion, it is necessary to improve the legal acts on reforming the electric energy sector, introduce regulations determining the entire cycle of economic entities entry on the federal wholesale market of electric energy, adopt laws and regulations establishing justified tariffs on electric energy transmission by the JSC-Energo networks, and eliminate the requirement of coordinating economic entities' entry on the federal wholesale market of electric energy with RAO UES.
(candidate to participation in the seminar)
Babaev Kair Abutalibovich, PhD (economy),
Deputy Head of the FAS Department
For the Karachaevo-Cherkessian Republic
Krasnodar Directorate of the FAS
Case concerning «Kuban-GSM»
Resume: The main problem for competition was caused by the actions of «Kuban-GSM» that abused its dominant position to limit competition of the mobile communication services market, preventing fair competition between «Mobicom-Caucasus», the Krasnodar branch of «Vimpelcom-Region» and «Kuban-GSM» by limiting the aforesaid operators' access to mobile communications market.
The Directorate was contacted by the Krasnodar region administration in connection with complaints of «Vimpelcom-Region» (Krasnodar branch) and «Mobicom-Caucasus» about «Kuban-GSM» creating barriers for them as mobile communications operators.
The investigation of mobile communications market was conducted for the 9 months of 2002 - to determine the borders of the market (commodity and geographical), the volume of commodity resources and the share of each economic subject in the market.
In 2003 the following operators were active in the Krasnodar region mobile communications market, all licensed by the Ministry for Communication and Information of the Russian Federation to supply mobile radio and telephone communication services: «Mobicom-Caucasus», «Krasnodar mobile communications», «SMARTS», «Telecom Eurasia», «Kuban-GSM», «Vimpelcom-Region» (Krasnodar branch).
These operators of mobile communication services had different zones of coverage: «Mobicom-Caucasus» - territories of the Krasnodar region, Rostov region, Stavropol region, Adyg republic, Karachevo-Cherkessia, Kabardino-Balkaria, Chechen republic, republic of Dagestan, North Osetia; «Krasnodar mobile communications» - territories of the Krasnodar region and Adyg republic; «SMARTS» and «Telecom Eurasia» - territory of the Krasnodar region; «Kuban-GSM» - territory of the Krasnodar region, Adyg republic; with the Krasnodar branch of «Vimpelcom-Region» - territory of the Krasnodar region and Adyg republic.
Despite these differences among the operators' respective the zones of coverage, the geographical borders of the commodity market had been determined in accordance with article 4 of the Regulations for the analysis and estimation of the condition of competition on the commodity markets (taken the specificity of the mobile communications market) within the borders of Krasnodar region. Consumers would purchase the services (in accordance with prior agreement) and pay for those services at the places where they live (as physical persons) or function (as legal persons). This means that consumers in the Krasnodar region are not likely to go to Adyg republic, Stavropol region or Rostov region looking for mobile communication services, since this would mean additional (transportation) expenses and loss of time. This has been proved through interviewing the consumers selectively with the view to determine the commodity and geographical borders of the consumer market as of 09.01. 2004: all the interviewees stated their desire to purchase mobile services from local operators within the territory of Krasnodar region.
Conducting this investigation the Directorate determined the commodity and substitute commodity in question with relevant consideration of their functional equivalence and the consumers' opinion. The commodity was defined as mobile communication service - in accordance with the currently operative All-Russian Classifier of types of economic activities (64.20.11- activities in telephone communications, including mobile telecommunications) established by Gosstandart of the Russian Federation (06.11. 2001, ¹ 454-ñò) and backed by the relevant licenses issued by the Ministry of the Russian Federation for communication and information.
The substitute commodity was first defined as the services supplied by local telephone networks. But survey conducted among the population of the city of Krasnodar showed that these services are hardly interchangeable since they have different sets of consumer qualities. Both supply communications but these are mobile, in one case, and stationary, in the other. Transmission and reception of signals, voice information, graphic texts, pictures, sounds and messages of any kind would, in one case, be conducted through a radio system and in the other - by wire (article 2 of the Law of the Russian Federation «On Communications» adopted 07.07. 2003, ¹126-ÔÇ). Difference between in- and out-coming calls was taken into account as well, particularly the fact that local telephone communication can only be used in places where telephones are installed. Using a taxophone may be an option but in this case a consumer has no possibility to receive an in-coming call.
In accordance with the Regulations for the analysis and estimation of the condition of competition on the commodity markets, if the two commodities are not functionally equivalent, it follows that they do not belong to the same commodity market.
It was thus concluded that local telephone services and mobile communications services cannot be considered as substitutes for each other.
According to the information on key economic indices (forms ¹ 8,11) supplied to the Directorate by «Kuban-GSM», the volume of mobile communication services provided by «Kuban-GSM» in the region of its registration in 2002 was 2941365,0 thousand roubles and for the 9 months of 2003 it was 3338593,0 thousand roubles; whereas the volume of mobile communication services for the region on the whole for 2002 was 3449569,3 thousand roubles and for the 9 months of 2003 - 3910971,6 thousand roubles (data of the Krasnodar regional committee for state statistics). The share of «Kuban-GSM» in the Krasnodar regional mobile communications market thus constituted in 2002 85,27% and in the 9 months of 2003 - 85,36%.
This led to define the position of «Kuban-GSM» on the mobile communication market in the geographical borders of the Krasnodar region - as dominant.
The facts of dominance abuse on the part of «Kuban-GSM» were the following.
The commission of the Ministry for Antimonopoly Policy has analyzed the tariff plans of «Kuban-GSM», «Mobicom-Caucasus», Krasnodar affiliate of «Vimpelcom-Region». The operating tariffs of «Kuban-GSM» for out-coming local calls into the fixed communication operator network ranged from 2,40 roubles to 7,20 roubles per minute depending on the time of the day, while with other mobile communication operators in the Krasnodar region tariffs for out-coming calls were undifferentiated - at the rate of 7,20 roubles per minute.
Operators «Mobicom-Caucasus» and «Vimpelcom-region» (Krasnodar branch) have provided differentiated tariffs for out-coming calls from other mobile communication operators and into fixed communication networks: for «Mobicom-Caucasus» - from 1,50 to 7,00 roubles per minute; for Krasnodar branch of «Vimpelcom-Region» - from 0,80 to 4,70 roubles per minute.
The Directorate has analyzed tariffs for analogous services in the Stavropol, Volgograd and Rostov regions. With mobile communication operators in these regions tariffs were differentiated and there was no difference between the tariffs for out-coming calls - those into the networks of other mobile communication operators and those to the fixed communication networks.
It thus appears that a consumer has access to a conveniently differentiated tariff plan and can choose to call the network of another operator at the rate, e.g., of 1,5 - 7, 0 roubles per minute (»Mobicom-Caucasus) or 0,80 - 4, 70 roubles per minute (Krasnodar branch of «Vimpelcom-Region»). A subscriber to «Kuban-GSM» has no such choice and could only contact the networks of other mobile communication operators at the rate of 7, 20 roubles per minute.
An agreement was reached between «Kuban-GSM» and «Mobicom-Caucasus» to bundle channels between their commutation centres and thus to ensure the better coherence of the technological process, to raise the quality of communication, to broaden the range of licensed services offered, to more effectively exchange net resources and provide for inter-network conversational and signal traffic.
«Kuban-GSM» and Krasnodar branch of «Vimpelcom-Region» have reached a similar agreement.
As communication networks of «Kuban-GSM», «Vimpelcom-Region» (Krasnodar branch) and «Mobicom-Caucasus» get integrated, expenses of each of the operators for the organization of out-coming calls to the networks of other mobile communication operators do not exceed those going to fixed communication networks.
«Kuban-GSM», owner of the largest net on the territory of Krasnodar region can influence unilaterally the general conditions of providing services on the regional mobile communications market and thus limit the competitive potential of «Vimpelcom-Region» (Krasnodar branch) and «Mobicom-Caucasus». «Kuban-GSM» would fix the tariff for out-coming calls to other mobile communication networks at the rate of 7, 2 roubles which, under conditions of networks' mutual integration and with tariffs for out-coming calls to fixed networks remaining at the level of 2, 4 - 7, 2 roubles infringes upon the interests of «Mobicom-Caucasus» and «Vimpelcom-region» (Krasnodar branch). «Kuban-GSM» attracts since they can make calls within the network at lower cost, but compromises the services offered by «Mobicom-Caucasus» and «Vimpelcom-region», Krasnodar branch and thus infringes upon their interests.
«Kuban-GSM» abuses its dominating position, limiting competition on the market of mobile communication services violating point 1 article 5 of the law «On Competition»; it limits competition on the market of mobile communication services and does not provide for fair competition among «Kuban-GSM», «Mobicom-Caucasus» and «Vimpelcom-region» (Krasnodar branch) hindering the latter operators' access to the market.
The MAP Krasnodar Territorial Directorate Commission resolved that «Kuban-GSM» actions have been in violation of point 2 Article 5 of the Law on Competition. «Kuban-GSM» was directed to cease the violation of the anti-monopoly legislature and hindrance to other economic subjects' access to the market by removing the barrier erected in the form of undifferentiated tariff for out-coming calls for operators of mobile communication «Mobicom-Caucasus» and «Vimpelcom-Region» (Krasnodar branch).
This resolution and the directions of the MAP Commission were taken to the Arbitrazh Court of the Krasnodar region and by its decision the demands put forward by «Kuban-GSM» were satisfied whereas the resolution and the directions were judged invalid. An appeal was submitted by the Directorate and the appeal instance of the Arbitrazh Court of the Krasnodar region the first instance decision was repealed, the resolution and the directions were confirmed as in full accordance with federal legislature. This decision of the appeal instance was left without change by the Federal Arbitrazh Court of the North-Caucasus territory.
As a result of the measures taken at present in the Krasnodar region the cost of «Kuban-GSM» out-coming calls into other mobile communication operators' networks has been reduced and brought down to the level of out-coming local calls. Conditions have been created for fair competition among mobile communication operators.
Krasnodar Directorate of the FAS
Case concerning the «Post of Russia»
Resume: The main competition-related problem arose from the actions of the Federal State Unitary Enterprise (FSUE) «Post of Russia», constraining the competition in the market of subscription services to disseminate periodical print editions in the Krasnodar region. Regional publishers were offered no other choice but to make contracts with a single subscription agency (Interregional Subscription Agency - ISA) since the possibility of direct subscription contracts with FSUE «Post of Russia» was denied.
The Directorate of the Federal Antimonopoly Service (DFAS) for Krasnodar region was contacted by the regional agency «Komsomolskaya Pravda-Kuban», «Press-Kuban» and publishing house «Krestyanin» with complaints related to the actions of FSUE «Press of Russia» and the subscription for the first half of 2005, - namely, refusal to make direct subscription contracts and enforcing those through ISA. Krasnodar DFAS has started a case dealing with the violation by FSUE «Post of Russia» of clause 1 of article 5 of the Russian Federation Law «On competition and restriction of monopolistic activities at the commodity markets» (Law on Competition).
The Directorate in preparation to dealing with this case conducted an investigation of the market of print editions' subscription and dissemination services in the Krasnodar region.
The commodity was defined as the service of subscription for a periodical edition. Functionally this type of service includes a number of technological operations including acceptance of subscription for a specified number of editions and their delivery, if envisaged by contract. There is no substitute for this commodity.
Services of dissemination of print materials through retail are functionally close, but the technology in this case is different. Dissemination through subscription relies on the organization of sites where subscription is taken, means of transportation, centres of distribution, personnel for delivery to consumers. Dissemination through retail relies only upon the retail sales network plus, in some cases, centres for commodity distribution. When printed matter is disseminated by subscription the publishers can better plan circulation, buy paper and expendable materials well in advance of production when money is available, they can also deliver their products to consumers in the localities where retail network is unavailable. Dissemination through retail has no such advantages.
Therefore the service of dissemination of printed materials by subscription in accordance with point 2 Article 4 of the Law on Competition (On conducting investigation of the competitive environment at the commodity markets) is considered as a commodity in itself.
Geographic borders of the market in question are those of the Krasnodar region where the service needs be provided to consumers (subscribers).
The structure of the market for the dissemination of printed materials by subscription in the Krasnodar region is the following. This service is now being provided on the territory of the region by the affiliate of «Post of Russia» and «Rospechat» of the Krasnodar region.
The total volume of subscription for the second half of 2004 on the territory of Krasnodar region was 219 963,1 thousand roubles, with the share of the «Post of Russia» affiliate equalling 217 928,3 thousand roubles (which is 99,1%) and that of Krasnodar «Rospechat» - 034,8 thousand roubles.»
«Post of Russia» is thus enjoys dominant position on the commodity market for dissemination of print matter through subscription in the Krasnodar region and is subject to all the norms stated in the Law on Competition.
Facts of dominance abuse on the part of «Post of Russia» can be described in the following way.
As shown by the Commission, the «Post of Russia» affiliate has sent out letters to the regional agency «Komsomolskaya Pravda-Kuban», «Press-Kuban», publishing house «Krestyanin» and other regional publishing bodies stating that in accordance with the regulations issued by «Post of Russia,» subscription for the first half of 2005 would be carried out exclusively on the basis of direct contracts between publishing houses and the operator that puts out the Catalogue of Russian Press «Press of Russia», i.e. interregional subscription agency.
An agreement was designed, in accordance with which a publisher would trust ISA to make contracts with a third party in its own name and at the publisher's expense to disseminate subscribed editions on the territory of Krasnodar region in the first half of 2005. In accordance with this agreement ISA has an obligation to make a contract with FSUE «Post of Russia», i.e. in fact, the service would be provided by «Post of Russia».
The fact that the draft of the agreement with ISA for subscription in the first half of 2005 in the Krasnodar region was sent out to the publishers testifies to the fact that «Post of Russia» refuses to offer them direct subscription contracts.
There is one more proof to this fact. Publishing house «Krestyanin» has submitted documents showing that FSUE «Post of Russia» had been offered an agreement for subscription for 2005. At the time the resolution was taken by the Krasnodar FAS Directorate those drafts were still not accepted, no disagreements were stated or discussed, no alternatives were suggested by FSUE «Post of Russia» which proves amply its refusal to conclude any such agreement.
The refusal on the part of «Post of Russia» to extend a direct subscription contract for 2005 and pressure to forward an agreement with ISA violates the publishers' interests in the following ways.
A third party entering the relationship between publishers and «Post of Russia» entails additional expenses on the publishers' part. In accordance with the ISA agreement the order of subscription payments is changed - it is now to be submitted every half year following the subscription campaign instead of in monthly instalments. This is a strain on the publishers' circulating assets and entails financial losses. The agreement does not envisage any fines or sanctions for delayed transference of subscription money by ISA to publishers which may prevent them from meeting their subscribers' expectations. According to the same agreement ISA has the right to change catalogue prices. Their increase may be followed by the fall of subscription and decrease of the income from advertising, largely dependent on the circulation.
FSUE «Post of Russia» refuses the publishers a direct contract imposing upon them the mediation of a single subscription agency (ISA) and it is thus is abusing its domination. According to the agreement proposed to the publishers subscription sums must be transferred to ISA which would be thus getting additional assets even though both, FSUE «Post of Russia» and ISA, function as co-founders of the subscription catalogue of Russian press «Post of Russia».
The actions of FSUE «Post of Russia» were qualified by the Commission of the Krasnodar FAS Directorate as violating point 1 article 5 of the Law on Competition. FSUE «Post of Russia» was directed to cease the violation of the antimonopoly legislature and make contracts with publishers about dissemination of print editions on the territory of Krasnodar region through subscription.
This resolution and directions of the Krasnodar FAS Directorate were taken to the arbitrazh court of the Krasnodar region. The main arguments put forward by FSUE «Post of Russia» were the following: FSUE «Post of Russia» dominates on the Krasnodar regional market of subscription services for periodical print editions; the agreement on subscription services for periodical print editions cannot be qualified as public and therefore according to article 426 of the Russian Federation Civil Code is not obligatory for conclusion; dissemination of periodical editions through subscription is not a post service.
The Arbitrazh Court of Krasnodar region refused to satisfy the demands of FSUE «Press of Russia» and recognized the resolution and the directions of the Krasnodar FAS Directorate as lawful and justified. The appeal instance of the Arbitrazh Court of Krasnodar resolved to leave the first instance decision unchanged. The Federal Arbitrazh Court of the North-Caucasus territory annulled this decision of the Krasnodar Arbitrazh Court, the case has been sent to the first instance for new consideration.
Kursk Regional Directorate of the FAS
Case of violation of Article 6 of the Russian Federation Law «On Competition…» by ZAO «LVZ Kursky» and OOO «KurIASEB», OOO «TD Vneshtorgservice», OOO «TC Sodruzhestvo», OOO «Limas»
1. Vertical agreements concluded between business entities placed at different levels of production and sales of products involve the decline of market functioning efficiency reducing competitiveness of entities not participating in the agreement and limiting the unanimity of economic space of the Russian Federation.
2. An application regarding non-compliance with a number of provisions of distribution agreements concluded by ZAO «LVZ Kursky» (further, «Kursky») with business entities operating excise warehouses (OOO «KurIASEB», OOO «TD Vneshtorgservice», OOO «TC Sodruzhestvo», OOO «Limas» - further -business entities) with the norms of the acting Law was sent to the Kursk region FAS directorate form Police department #1 of the Interior Ministry Department of Kursk town.. The actions of the mentioned business entities were qualified by the Kursk region Directorate of the Federal Antimonopoly Service according to the Article 6 of the Law of the Russian Federation «On Competition and Restriction of Competition on Product Markets» as a conclusion of agreement by non competing business entities which may have as result a restriction of competition (limitation of access of several suppliers to the Kursk regional market of alcoholic beverages).
3. During the investigation of the case initiated according to indications of violation of the Article 6 of the Russian law «On Competition…» the regional directorate collected necessary information from the Interior Ministry Department of Kursk town, Tax Service Department of the Kursk region, Kursk Region Committee of State Statistics, ZAO «LVZ Kursky» and OOO «KurIASEB», OOO «TD Vneshtorgservice», OOO «TC Sodruzhestvo», OOO «Limas». The directorate's own database was also used.
4. In the course of investigation FAS directorate of the Kursk region analyzed the market for the production of vodka and other liquor production market as well as the market for the storage, distribution and production of alcoholic beverages by wholesale (excise) warehouses. The geographical boundaries of the studied markets were defined as the territory of Kursk region.
«Kursky» occupies a dominant position on the market for the production of vodka and other alcoholic beverages in the Kursk region. It has been included in the «register of business entities with a market share of more than 35%» by an administrative order of the Kursk region FAS directorate of 26.06.96 # 32. «Kursky's» share on the market of vodka and other strong alcoholic beverages was 45,3% in the period analyzed.
According to the analysis results, the share of OOO»TC Sodruzhstvo», OOO «Limas», OOO «TD Vneshtorgservice» and OOO «Kuriaseb» on the market of sales of vodka and other strong alcoholic beverages by wholesale organisations having a license to set up excise warehouses was 58,7%.
«Kursky» and the business entities licensed to set up excise warehouses have signed distribution contracts. These contracts limit the volume of alcoholic beverages of a quality and pricing equal to products by «Kursky» (i.e. competing with «Kursky's» products) which a distributor may distribute through its excise warehouse over defined time and territories. These contracts also contain a list of producers and prohibit the distributors to sell alcoholic beverages produced by any other producers not on the list.
The limits contained in the agreement can have the result of limitation (restriction) of access to the market of Kursk region by other producers, thus restricting competition. Moreover, the agreement by the parties of the distribution contract on the prices at which «Kursky's» alcoholic beverages may be sold to third parties, and also on the volumes of sales, can depress the intra-brand competition among distributors of «Kursky's» products.
5. The commission of the Kursk region FAS directorate concluded that a number of provisions of distribution contracts signed between ZAO «LVZ Kursky» and business entities contradict requirements of the Article 6 of the Law «On competition….». The parties of the contracts were given orders to alter the contracts' terms or to cancel them.
The orders have been fulfilled in due time.
Lipetsk Regional Directorate of the FAS
Description of Case Initiated and Considered According to Article 6 of the RSFSR Law «On Competition and Restriction of Monopolistic Activity on Product Markets»
Summary: The Monopolistic activity in the form of coordinated actions of business entities acting on a single product market, which causes the setting (upkeep) of prices of alcoholic beverages and restriction of access to the market for other business entities as purchasers or sellers.
Description of the case
The Lipetsk territorial directorate of FAS of Russia, in accordance with the claim of OAO «Lipetskaya konstruktsya,» in August 2003 initiated a case on the violation of clause 1 of Article 6 of the Russian Federation law «On competition….» by OOO «Lipetsk-Alko» and Federal State Unitary Enterprise (FSUE) «Rosspirtprom» represented by its branch «Lipetskspirtprom» (further - Branch) in the form of co-ordinated actions by business entities acting on a single product market, which causes the setting (upkeep) of prices of alcoholic beverages and restriction of access to the market of other business entities as purchasers or sellers of alcoholic beverages (excise warehouses).
FSUE «Rosspirtprom» was set up in accordance with the Act of the Government of the Russian Federation #390 of 06.05.2000, Decision of the Gover
