On June 26, Alexey Ivanov, Director of the BRICS Competition Law and Policy Centre, spoke at the session themed "New Challenges and Modern Solutions in Antimonopoly Regulation", which was held as part of the 12th St. Petersburg International Legal Forum. The meeting was moderated by Andrey Tsyganov, Deputy Head of the Federal Antimonopoly Service (FAS of Russia).
Opening the session, Andrey Tsyganov invited the participants to discuss the challenges faced by competition authorities amidst economic transformations and the growing influence of technology, as well as to assess the effectiveness of the existing antimonopoly response measures. Giving the floor to Alexey Ivanov, Director of the BRICS Competition Centre, he noted the Centre's contribution to the development of the "Fifth Antimonopoly Package" and to the development of cooperation between antitrust regulators from different countries.
"I hope that the Centre will continue its work on the "sixth antimonopoly package" as well. In addition, the Centre is our expert partner and assistant not only for the FAS, but also for the competition authorities of all BRICS countries, as well as the CIS and EAEU countries."
emphasized the Deputy Head of the FAS.
Alexey Ivanov himself mentioned the importance of strengthening cooperation in his speech. There is currently no global competition regulation regime, while global value chains that permeate almost all sectors of the economy, from digital to pharmaceuticals and food, require coordinated actions of antimonopoly authorities. In these conditions, the issue of further institutionalization of the BRICS regulators' partnership is overdue.
As for the Russian market, sanctions pressure, the exit of foreign players and the destruction of supply chains and familiar business models over the past two years have led to high monopolization of many sectors of the economy, Ivanov said. Antimonopoly regulation can become an anti-crisis tool to combat structural distortions in the economy. To realize this task, the BRICS Center Director suggested a number of measures. The first important step is to give the FAS an independent status and remove the service from the government. This will eliminate the inevitable conflict of interest between the antimonopoly authority and industry agencies and give FAS the opportunity to independently prioritize cases, paying more attention to structurally important phenomena.
"For example, we missed the growth of the market power of marketplaces. We could have started investigations in this sector earlier. Such socially significant problems, the solution of which is a priority for the development of the economy, require freedom of choice for the antimonopoly regulator."
Another important measure that can be envisaged in the "sixth antimonopoly package" is the activation of private lawsuits in antimonopoly law. This requires a procedurally effective model for stimulating such claims so that damaged entrepreneurs and consumers could apply to court en masse and receive compensation for damages. For example, in the United States, a so-called class action has been created for this purpose, and plaintiffs have the opportunity to recover triple damages. Class actions are one of the most effective methods of speeding up the process of protecting the rights of injured parties, Ivanov is convinced.
For antimonopoly law to work in full force, it is necessary to abandon fixation on formal criteria of market share and boundaries. This formalized approach, which does not correspond to the realities of the new economy, caused regulators to miss the moment of market monopolization. This problem could have been prevented by more effective control of mergers and acquisitions and various cartelization instruments.
In this regard, it is time to recall the application of Part 5 of Article 11 of the Law "On Competition", which actually prohibits the coordination of economic activities, as well as the fact that the foundations of the constitutional system (Article 34 of the Constitution of the Russian Federation) enshrines the prohibition of monopolization of the economy.
"If we are serious about antimonopoly law as it is articulated in Article 34 of the Constitution of the Russian Federation, then let us apply it. I believe that the Law "On Protection of Competition" can be an effective anti-crisis tool for sustainable - as Article 75.1 of the Constitution calls for - development of the Russian economy."
Ivanov concluded.
Competition law should be interpreted through the lens of the Constitution, agreed Hardin Ratshisusu, Deputy Commissioner of the Competition Commission of South Africa. He described a groundbreaking 2021 decision of the South African Constitutional Court, in which a merger of two hospitals was blocked on the grounds that it could impede the realization of the constitutional right of citizens to access health services. He also noted that the South African regulator's partnership with the FAS helps to provide a fresh perspective on antitrust issues from the perspective of developing countries.
Ahmed Khatab, Judge, Deputy Head, Egyptian Competition Authority (ECA), spoke about the main areas of the agency's work and noted the importance of international cooperation in investigating cross-border cartels and cases involving abuse by global digital companies.
Sergey Puzyrevsky, Secretary of State – Deputy Head of the FAS of Russia, mentioned the difficulties in regulating digital platforms, which often do not have traditional signs of dominance in the commodity market, but can influence the behavior of other economic entities. For example, it is impossible to identify the market power of digital platforms by the traditional method of assessing market shares. "The Fifth Antimonopoly Package" just takes into account new factors in the formation of market power and is aimed at curbing abuses by marketplaces and aggregators. The effectiveness of regulation is also enhanced by turnover fines for violations, emphasized the Deputy Head of the FAS:
"Only antimonopoly regulation, backed by sanctions commensurate with the profit earned by a monopolist or an entity with market power, ensures balance in the economy."
All over the world, marketplaces try to hide information about their activities and partners, said Irina Filatova, Member of the Committee State Duma of the Federal Assembly of the Russian Federation on Competition Committee. However, China requires companies to disclose such information upon request under the threat of heavy fines or suspension of interaction with counterparties. Nigeria practices consumer surveys and multi-level fines for marketplace owners. Committee members participate in finalizing the Draft Law on Marketplaces sent to the State Duma.
"At least, it will be necessary to oblige marketplaces to provide stricter entry control for sellers on this market. And it is necessary to introduce joint responsibility for the sale of goods on these platforms. Unfortunately, our marketplaces have taken an outsider's position: minimum responsibility and duties,"
Irina noted.
Many Russian government officials have a very lenient attitude towards monopolies, which hinders efforts to protect competition. It is necessary to work to change the situation, said Sergey Lisovsky, Deputy Chairman of the State Duma Committee of the Federal Assembly of the Russian Federation for the Protection of Competition. In his speech he touched upon the problem of increasing monopolization in the food sector. In particular, over the last three years there has been a noticeable monopolization of the grain export market.
"Grain transportation - rail and water transport, - port transshipment, trading. All four components of exports are currently being monopolized,"
Lisovsky said. At the same time, the Ministry of Industry and Trade sees nothing wrong in the fact that the country's five largest exporters own more than 60% of export quotas, he complained.
Olga Korolkova, Deputy Director, Department for Antitrust Regulation, Eurasian Economic Commission (EEC), spoke about the challenges faced by the EEC. In turn, Svetlana Guz, Managing Partner, LEGAL to BUSINESS, pointed out the problem of "professional complainers" who initiate numerous inspections against businesses and use complaints as a way to delay bidding and bankruptcy procedures. According to FAS statistics, about 45 thousand complaints were filed in 2023 and only 42.5% of them were recognized as justified.
"In order to reduce the number of such appeals from unfair competitors and reduce the burden on FAS, it seems reasonable to introduce some kind of fee for filing complaints,"
Svetlana suggested.
The meeting was also attended by representatives of the two companies that FAS recognized as dominant in the Russian e-commerce market in January 2024. Alexey Dukhanin, Executive Director, Wildberries, noted FAS's deep expertise in regulating digital platforms and pointed out that since 2020, there has not been a single practice that Wildberries has not eliminated upon the antimonopoly authority's notice or recommendation. He called for a consistent and cautious approach to the regulation of marketplaces:
"There are more than 1 million entrepreneurs on the Wildberries marketplace, more than 42,000 order pickup points. These are often large teams, families of entrepreneurs and employees. Therefore, regulation on our site alone will affect at least tens of millions of citizens."
Sergey Belyakov, Managing Director, Ozon, acknowledged that companies need to think about the interests of the industry and learn to restrain their aggressive practices of profit maximization. He also supported Alexey Ivanov's proposal to separate FAS from the government. Regulator independence is an important condition for quality control, and the rapid monopolization of the economy and concentration around a few leading companies is caused, among other things, by the fact that these companies are supported by industry ministries, Belyakov stressed.
"This leads to such imbalances in the economy, for which we all end up paying,"
he added.
In the picture, from right to left, are: Alexey Ivanov, Olga Korolkova, Akhmed Khatab, Andrey Tsyganov, Svetlana Guz, Irina Filatova, Sergey Puzyrevsky, Dmitry Vorona, Alexey Dukhanin, Sergey Lisovsky, Hardin Ratshisusu.
At the end of the session, Andrey Tsyganov promised that the comments made by the speakers would be taken into account in the work of the FAS, and suggested thinking about new challenges: regulation of artificial intelligence, concentration of computing power, development of digital algorithms, competition in the b2b sector and much more. "This is the future, and it has already come," emphasized the Deputy Head of the FAS.
The XII St. Petersburg International Legal Forum was held from June 26 to 28, 2024. The Forum is a major platform for dialogue among members of the legal, business, political and law-enforcement communities. It addresses a wide range of issues focusing on how law can better serve the interests of people and businesses. It also addresses improvements to law-enforcement practices, the promotion of legislative initiatives to strengthen the legal culture, and socioeconomic-related regulation in today’s world.
