Russian Federation: Corporate Antitrust Compliance Systems – Changes Initiated By FAS Russia

On July 8, 2015, the Presidium of the Federal Antimonopoly Service of Russia (FAS Russia) provisionally approved  the idea of changes to the RF Law on Protection of Competition that would introduce the concept of a "system of internal prevention of violations of antimonopoly legislation of a business entity" (better known as an internal antitrust compliance system) and changes to the Code of Administrative Offenses that would mitigate administrative penalties for antitrust violations if the business has such an internal compliance system in place and adheres to its provisions.

Igor Artemiev, the head of FAS Russia, who spoke at the Presidium's meeting, noted that the Strategy for Developing Competition and Antimonopoly Legislation envisions the creation of a package of measures to introduce such systems into the business practices of market participants. In other words, as a start FAS Russia needs to create positive legal consequences for companies that on their own initiative are already using internal antitrust compliance systems in their business. The next step, according to Mr. Artemiev, will be the development of a standard minimum list of procedures, an integral component of which will be assessment of the adverse consequences of violations and systematic training of company officers in the rules of antitrust legislation.

The above-mentioned legislative amendments initiated by FAS Russia are aimed at early prevention of antitrust violations by business entities, their conduct of business in accordance with ethical principles, prevention of damage to their business reputation, and the possibility of leniency in administrative penalties for antitrust offenses when the prescribed measures are taken.

So, what are the proposed changes?

First, the changes would see a new term introduced into the Law on Protection of Competition (art. 4): the "system of internal prevention of violations of antimonopoly legislation", defined as "the set of legal, organizational, and other measures provided for in an internal regulation of a business entity aimed at ensuring its compliance with antimonopoly legislation and the prevention of violations thereof."

Second, the changes to the Law on Protection of Competition would give businesses a right (but not an oblgiation) to establish such an antitrust compliance system. A business entity would exercise that right through the adoption and approval, by its competent governing bodies, of an internal regulation establishing such a system. It is envisioned that, under the Law on Protection of Competition, such an internal regulation would include the following sections:

  1. requirements for assessment of risks of antitrust violations in the course of the company's business operations;
  2. measures to reduce such risks;
  3. measures to monitor the operation of the internal antitrust compliance system;
  4. the business entity's officers and/or unit(s) responsible for the proper functioning of the system;
  5. the procedure for familiarizing the business entity's employees with the internal regulation.

Pursuant to the proposed changes, the Law on Protection of Competition would grant businesses the right to inform FAS Russia both of the adoption of such an internal regulation and of any subsequent amendment of it.

Finally, antitrust authorities would be required, when initiating and considering cases of antitrust offenses, to take into consideration the existence and practical application of such an antitrust compliance system by a business entity by mitigating administrative penalties for the relevant antitrust offense. However, the business entity itself would bear the burden of proving that it adheres to the said internal regulation in its operations.

The changes would also amend note 4 to article 14.31 "Abuse of Dominant Position in a Market" of the RF Code of Administrative Offenses to provide that the administrative fine for that offense will be imposed in its minimum amount if the business entity implements an internal antitrust compliance system which is meeting the requirements of Russian antitrust laws.

We believe that the above changes proposed by FAS Russia will evoke mixed reactions in the Russian business community. While pursuing the publicly beneficial goal of protecting competition and preventing violations of antitrust legislation directly within businesses themselves, the changes nevertheless, in their present form, substantially enhance the ability of the antitrust authorities to monitor the operations of every business entity – a business essentially has no other choice than to submit its antitrust compliance system for preliminary review and obtain FAS Russia's approval of the system prior to its approval by the entity's governing bodies in the form of an internal regulation and its implementation in the entity's operations. Otherwise, if the business entity's actions are investigated by antitrust authorities and there is subsequently a dispute over whether antitrust laws were violated, there will also be a dispute between the entity and FAS Russia over whether the entity's internal antitrust compliance system meets the requirements of antitrust legislation or not, which will make it considerably more difficult for the business entity to defend its interests.

Finally, for a number of sectors (such as pharmaceuticals and medical product manufacturing) there will be the unanswered question of how the commercial policies already in place in many companies (on which recommendations for pharmaceutical companies were approved by FAS Russia on June 17, 2015) will relate to the operation of the antitrust compliance system.
Of course, it is still early to talk about the above proposed amendments to the Law on Protection of Competition and the RF Code of Administrative Offenses as impending legislative changes. Obviously, their wording will undergo certain revisions as they progress through the various stages of the legislative process, and when that process will start and end is unknown.

We will keep you informed of developments on this subject and update you on the status of the changes as they progress through the various stages of the legislative process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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