Kazakhstan: Recent Significant Amendments To Antimonopoly Legislation In Kazakhstan

In the beginning of June, the Law of the Republic of Kazakhstan "On Amendments to Certain Legislative Acts of the Republic of Kazakhstan on improvement of the entrepreneurial activity"1 (the Law) entered into force.

The most crucial and significant amendments introduced by the Law to the competition protection legislation, in  particular, to the provisions of the Entrepreneurial Code of the Republic of Kazakhstan2 (the Code) are presented below.

  1. Competition protection requirements while organizing and conducting procurement of goods and bidding (tender)

    Although the competence of the antimonopoly body included preventing market participants from anticompetitive agreements, the antimonopoly body did not actively advocate and investigate competition issues in the course of conducting tenders. A new provision on the protection of competition during the organization of procurement of goods and bidding has been added to the Code,  and new terms such as "procurement organizer" and "procurement and bidding operator" have been established. Pursuant to the Law, procurement organizer, procurement and bidding operator are prohibited  from coordinating the activity of procurement providers and bidding participants, if this action will or may lead to the prohibition, restriction or elimination of competition.

    Moreover, procurement organizers, except for procurement being performed electronically, and subsoil users providing information on the procurement conducted to the competent state bodies or authorized organizations in compliance with Kazakhstan legislation, are required to provide an annual procurement plan and information on the procurement conducted to the antimonopoly body in due time. Procurement and bidding operators, except for the procurement and bidding being performed electronically, shall also provide information on the bidding conducted to the antimonopoly body. Additionally, the antimonopoly body is entitled to demand access to the information system of electronic procurement and bidding from authorized bodies.

    The abovementioned amendments may lead to numerous investigations in the field of procurement, tenders and bidding, where, considering recent investigations, special attention will be paid most likely to anticompetitive agreements.

  2. Application of different prices or different terms by the market participants holding a dominant or a monopoly position

    The Law has introduced clarifications regarding the situation related to the application of different prices or different terms to equivalent (equally ranking) agreements. According to new specifying amendments, "market participants holding a dominant or a monopoly position may apply different prices to equivalent agreements with market participants or consumers, provided that it is due to different costs for the production, sale and delivery of goods, due to non-discriminatory application of the discount system that takes into account volumes of sales, payment terms and duration of the contract. "
  3. Monopolistically high and monopolistically low price of the goods

    The Law introduced a clarity regarding monopolistically high and monopolistically low price of the goods. Now the price of the goods (works, services), which was formed in the course of bidding on commodity exchanges and electronic trading platforms, is not regarded as monopolistically high (low), provided that such price is not set as a result of the execution of monopolistic activity. The version of the Code, which was effective prior to the adoption of the Law, did not contain such provision.

  4. Expansion of powers of antimonopoly body officials during the conducting of an investigation

    Particular attention should be devoted to the expansion of powers of antimonopoly body officials during the conducting of an investigation. Thus, for example, antimonopoly body officials have acquired a right to:

    • Inspect items, electronic and paper documents and other data storage devices  located on the premises and on the territory of the object of investigation, in accordance with the subject of investigation;
    • Make a copy of the documents, information from the database (information systems) and other electronic devices of the object of investigation in accordance with the subject of investigation;
    • Obtain audio, photo and video recording: actions (lack of actions) of the personnel of object of investigation and other persons located on the territory of the object of investigation; premises and territory of the object of investigation; property located in the premises or on the territory of the object of investigation; and
    • Sample goods/products for examination.
    Under the Law, all rights of antimonopoly body officials are carried out in the period from 9 a.m.- 6 p.m. local time and in accordance with the subject of investigation. However, in case it is necessary to suppress violations, realization of powers of officials can be carried out at night, during weekends or on holidays.
  5. Preliminary consideration of a draft agreement of market participants

    Market participants intending to reach an agreement had the right to address to the antimonopoly body an application to verify the compliance of the draft agreement with the antimonopoly legislation requirements. Leastwise this approach was presumed based on a broad interpretation of the relevant provision. The Law has introduced clarifications, according to which now the draft agreement can only be verified for compliance with an article relating to anticompetitive agreements questions.

  6. Corresponding changes to the Code of Administrative Violations (the Administrative Code)3

    The new version of the Administrative Code establishes an administrative liability for the coordination of procurement providers' activity and bidding participants by the procurement organizers, procurement and bidding operators (Art. 163-1 of the Administrative Code), which corresponds to the requirements for the protection of competition in the organization and conduct of procurement of goods and bidding (Article 169-1 of the Code).

    The amendments have also related to the liability of market participants holding a dominant or a monopoly position. Thus, the abuse of the dominant or monopoly position through the establishment, maintenance of monopolistically high (low) or monopsonically low prices has been allocated as a separate administrative offence, which provides for a fine with the confiscation of monopoly income. Other cases of abuse of the dominant or monopoly position provide for a fine only as a liability.

Footnotes

1. The Law of the Republic of Kazakhstan No. 156-VI "On Amendments to Certain Legislative Acts of the Republic of Kazakhstan on improvement of the entrepreneurial activity" dated May 24, 2018.

2. The Entrepreneurial Code of the Republic of Kazakhstan No. 375-V dated October 29, 2015.

3. The Code of Administrative Offences of the Republic of Kazakhstan dated July 5, 2014.

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