Originally published 1 December 2009
Keywords: Russia, criminal sanctions, antitrust violations, criminal penalties, enforcement
The Russian legislator amended Article 178 of the Criminal Code of the Russian Federation ("the New Law"). The New Law sets up criminal penalties for violations under Article 11 (cartels) and Article 10 (abuse of dominant position) of Russia's Law "On Protection of Competition" No 135-FZ ("the Law No 135-FZ"). The maximum criminal sanction for antitrust violations in Russia is now seven years imprisonment. Whilst criminal sanctions technically existed under the previous law, they were not enforced in practice due to the interpretation issues which meant enforcement was not possible.
Paragraph 1 of Article 178 provides that criminal sanctions should apply for the following antitrust violations satisfying the following conditions:
- decisions by independent corporations and concerted practices which have as their object or effect the prevention, restriction or distortion of competition (Article 11 of the Law No 135-FZ); and/or
- "repeated abuse" of a dominant position by a corporation (Article 10 of the Law No 135-FZ) in the form of the imposition of unfair prices, refusal to enter into contractual relationships with other trading parties thereby placing them at a competitive disadvantage or market foreclosure;
if as a result of the antitrust violations in question the accused person or persons (i) caused damages to individuals, organisations or the State exceeding RUR 1 million (€23,218), OR (ii) gained income in excess of RUR 5 million (€116,090).
"Repeated abuse" of a dominant position is deemed established when a person is successfully prosecuted for at least three offences within a consecutive period of three years. A successful prosecution means in each case a decision by the Federal Antimonopoly Service ("FAS") that there has been a violation of the Russian antitrust laws identified above and the accused corporation has exhausted any court challenges to that decision.
Sanctions for violations under paragraph 1 of Article 178 include:
- fines up to RUR 500 thousand (€11,609) or up to two-years salary or income of the accused person or persons, or
- imprisonment for up to three years with or without prohibition to hold certain positions or have certain activities for a period of up to one year.
Paragraph 2 of Article 178 sets up tougher penalties for antitrust violations under paragraph 1 of Article 178, namely, imprisonment for up to seven years and potentially in addition a fine of up to RUR 1 million (€23,218) or up to five-years salary or income of the guilty person. In addition, the penalty can include the prohibition of holding certain positions or undertaking certain activities for a period of up to three years. These tougher penalties may be imposed if the guilty person committed an abuse of a public office for personal gain, caused or threatened to cause damage to or destruction of property, caused damaged to individuals or organisations of the State exceeding RUR 3 million (€69,654) or if the unlawful action resulted in the guilty person obtaining a benefit as a result of the antitrust violation of at least RUR 25 million (€580,450). Finally, the tougher penalties identified above will also apply for antitrust violations if committed with violence or threat of violence.
Note 3 to Article 178 releases from criminal liability persons who assisted with investigating the crime, compensated damages caused and repaid income derived from the illegal activities into the federal budget.
The FAS cannot initiate criminal antitrust proceedings itself. Criminal proceedings for antitrust violations will be initiated by the respective law enforcement bodies - namely, a department of the Ministry of Internal Affairs that is specialised in antitrust violations. However, the law enforcement bodies will only be able to initiate a criminal case under Article 178 after the FAS has determined the related antitrust violation and adopted a ruling and after the accused person has exhausted challenges to that ruling in court.
The New Law does not have retrospective effect and will apply to antitrust violations committed as of 30 October 2009.
Learn more about our Antitrust & Competition practice.
Visit us at www.mayerbrown.com.
Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
Copyright 2009. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.