Plenary Session “Antimonopoly Regulation Under Modern Conditions"

Plenary Session “Antimonopoly Regulation Under Modern Conditions
Photo: bricscompetition.org 10.11.2022 558

On November 9, the VII International Research and Practice Conference "Antimonopoly Policy: Science, Practice, Education" co-organized by the BRICS Competition Law and Policy Centre, FAS Russia and Skolkovo Foundation opened in Skolkovo.

The plenary session "Antitrust regulation under modern conditions" featured experts, academics and representatives of competition authorities from different countries discussing the challenges currently faced by competition authorities, as well as the effects of changing conditions of competition in commodity markets and the ways to improve the effectiveness of competition and economic stability. 

Part I 

Sergey Puzyrevsky, Stats-Secretary - Deputy Head of FAS Russia, moderated Part I of the session.

Maxim Shaskolsky, Head of FAS Russia, noted that recently a set of measures has been taken at the state level to ensure stable operation of domestic markets, prevent commodity shortages and support business. He mentioned the mechanisms of "responsible pricing", which FAS and retail chains have developed to prevent food price growth. As the result, 11 federal retail chains managed to reduce the average level of mark-ups from 22% to 7,5%. In addition, work was carried out to protect consumers from abuse in the digital markets. FAS Russia considered cases against major digital platforms: Apple, Google, Microsoft, Booking. At the same time it was possible to conclude a case against Yandex, significant for a large number of Russian companies, by a settlement agreement.

In February this year, the FAS together with the largest Russian companies signed the "Principles of interaction between participants of digital markets", which are designed to increase transparency and predictability of relations between digital platforms and consumers of their services. 

"At the suggestion of FAS Russia on the need for socially responsible behavior and compliance with the principles of responsible pricing, Yandex, Ozon Wildberries introduced various additional support measures for sellers and buyers on their platforms," 

stressed Maxim Shaskolsky.

The head of FAS also noted the importance of cooperation in the field of competition policy within the BRICS. He noted that this summer the 14th BRICS Summit was held and the Beijing Declaration was adopted. The declaration reflected, among other things, the objectives of deepening cooperation on competition issues among the BRICS countries, creating conditions for fair competition and international trade and economic cooperation. 

"We are pleased that we will be able to continue joint discussions on antimonopoly regulation issues within the BRICS Working Group for Research of Competition Issues in Socially Important Markets and WG on Cross-Border Cartels. I would like to mention an important role and participation in such discussions of the BRICS Competition Law and Policy Centre which aims at providing scientific and methodological assistance to competition authorities in conducting joint research on socially significant markets and promoting initiatives on international forums. We actively cooperate both in the BRICS format and separately with each of the BRICS countries,'' 

said the head of FAS. 

In times of permacrisis (declared by Collins Dictionary a word of the year) a simple solution seems to be abandonment of antitrust regulation. However, antitrust was born as a response to the uncertainties of a constantly changing economic reality, noted Alexey Ivanov, Director of the BRICS Competition Law and Policy Centre. In its time the Sherman Act in the United States in the late 19th early 20th century was a response to large-scale changes comparable with today's crisis.

From the landmark case of Standard Oil and the syndicates of the early 20th century Russian Empire, Alexey Ivanov bridged to the ideology of "Neo-Brandeisians" (its author was Louis Brandeis, a U.S. Supreme Court justice) that is being revived today. An important value impetus that Brandeis laid was that antitrust regulation works to structurally reshape the economy and promote diversity in it.

In March of this year, a three-year ban was imposed on routine antimonopoly inspections, particularly of IT businesses, which are now highly susceptible to monopolization, Alexey Ivanov noted. In the same way, America, going through the Great Depression, used the mechanisms of refusal from antimonopoly regulation. However, the monopolies freed from administrative control did not bring the expected economic effect. In 1937 President Roosevelt returned to active antitrust enforcement, essentially restoring the logic of Sherman-era, neo-brandeisians and antitrust regulation. 

Antitrust was used as an anticrisis solution both during the postwar reconstruction of Europe and in South Africa to deal with the effects of the apartheid regime. One of the fundamental objectives of South Africa's antitrust policy since the mid-1990s has been to reshape the economic space to include previously excluded or oppressed segments of the population in economic life. This is a big problem for all developing countries, including Russia.

"We have one of the lowest levels of involvement of people in entrepreneurial activity, a very high monopolization of the economy and people in their expectations and career trajectories are focused more on working in large conglomerates than on the realization of their own entrepreneurial potential,”

the expert stressed.

Alexey Ivanov pointed out that after the January crisis in Kazakhstan due to a sharp increase in the price of liquefied natural gas, the president declared demonopolization of the economy and the development of competition a national priority. The integral function of antimonopoly regulation - fighting current problems - has in a sense become emasculated, as seen in the abandonment of regulation in the most important sector of the digital economy, in the circulation of intellectual rights and in blocking the economic activity of small and medium businesses through the ban on parallel imports, Ivanov complained. 

"We treat parallel imports as an abstract phenomenon that has to do with the customs sphere, but in fact it is a way to strengthen entrepreneurial activity of small and medium businesses. This is something that will give people an opportunity to get out of poverty, as it was in the 1990s."

At the end of his speech, the speaker urged not to forget about the recently introduced in the Constitution of the Russian Federation Article 75 on sustainable economic growth of the country and the improvement of the well-being of citizens. 

"Ensuring sustainability is including the fight against distortions and imbalances in the economy. The antitrust is best suited for this, this is what it was created for," 

Ivanov concluded.

The issue of intellectual property in the context of antimonopoly legislation was touched upon by Igor Drozdov, Chairman of the Board of Skolkovo Foundation. In the context of prohibition of access to technologies and disconnection from the ability to use books, music and cloud programs, antimonopoly regulation may become a responsive factor, said Drozdov. According to him, despite the fact that there are elements of such regulation in the Civil Code, "there is a general thesis that intellectual property cannot be limited by the tools of antitrust regulation.” The problem is that there are still no proposed mechanisms to determine what is considered an abuse of intellectual rights. "This is a difficult task. It would be great if the antimonopoly service could formulate these approaches together with experts," said the speaker. 

Continuing the theme Bakhyt Sultanov, Member of the Board – Minister in charge of Competition and Antimonopoly Regulation of the EEC, noted that business is also experiencing difficult times (consequences of the pandemic, disruption of supply chains, etc.) and antitrust measures should not be punitive. Competition policy should be aimed at helping business to adapt to the new realities. The EEC promptly applies comprehensive measures to support entrepreneurship: import customs duty rates are reduced, tariff benefits are introduced for goods of critical imports, and customs procedures are effectively reduced in terms of time. The development of import-substituting integration projects within the framework of the Eurasian Economic Union is also under consideration. 

"Fundamental here should be the participation of antimonopoly authorities, which should not only prevent the creation of new monopoly structures, but also ensure non-discriminatory access of consumers to the markets of goods and services in our countries," 

noted Sultanov.

Igor Igoshin, First Deputy Chairman of the State Duma Committee for Protection of Competition, noted that he supports the consolidation of parallel imports as a permanent mechanism of antimonopoly regulation for the possible reduction of prices and encouragement of consumers. 

"However, it is important to watch that together with consumer protection we do not adjust the legislation in such a way that we destroy the supply itself and create a deficit," 

he stressed.

Alexey Bogdanov, Minister of Antimonopoly Regulation and Trade of the Republic of Belarus, spoke about the country's decree № 713 "On the system of price regulation," which controls the distribution of added value among all participants in the market. For the producers of about 350 commodity groups, which are included in the accounting policy of the Belarusian statistical agency, any price increase requires justification and proving by the relevant state authorities. The Belarusian competition agency is also working to improve legislation on public procurement, the use of reference pricing practices for medicines and the development of exchange trading.

Marat Omarov, Chairman of the Agency for Protection and Development of Competition of the Republic of Kazakhstan, presented the main directions of the Agency's work: new privatization mechanisms, equal access to state support measures and joint work with the Government to adopt various road maps. The head of the Agency emphasized that Kazakhstan's President Kassym-Jomart Tokayev has set a new task for the antimonopoly agency: phasing out price regulation on various commodity markets. In particular, a phased deregulation of drug prices is already proposed. 

Tadzio Schilling, CEO of the Association of European Businesses, announced the softening of the position on parallel imports. He noted that although the Association has long opposed the authorization of parallel imports in Russia, "the supply of the domestic market today is a clear priority of the government. 

Gustavo Augusto, Commissioner of the Administrative Council for Economic Defense of Brazil, spoke about working in the changing landscape of digital markets. He noted that a balance must be struck in regulating technology companies so as not to have a negative impact on the development of innovation. At the same time, their practices must be examined in detail and possible abuses must be identified. 

"The most common type of anti-competitive behavior is illegal preferential treatment for their products in their own ecosystem. For example, allocating top positions for them in search results on the platform."

Part II 

Alexey Ivanov moderated the second part of the event. He invited Tembinkosi Bonakele, ex-Commissioner of the Competition Commission of South Africa, to open the session, emphasizing the importance of the fruitful cooperation between the Commission and the BRICS Competition Centre in recent years.

The level of concentration of the global economy is increasing, leading to growing social inequality. According to a study conducted by the South African Competition Commission, most sectors of the economy are dominated by one or two or three large companies, said Tembinkosi Bonakele. The situation of digital monopolies is of particular concern. The speaker urged to consider the relationship between stock owners when analyzing the market: 

"If just three investors dominate the New York Stock Exchange, how does that affect the decision-making of those institutional investors? How should U.S. antitrust authorities have analyzed the Facebook*- WhatsApp acquisition deal? Or Elon Musk's recent purchase of Twitter? How to evaluate Twitter, which is now controlled by the same person who influences the development of the electric car market?"

Responding to Alexey Ivanov's question about how to limit the market power of players who acquire assets in sectors ranging from telecom and medicine to mechanical engineering, Tembinkosi Bonakele said that competitive agencies need to be bolder in making economic decisions and transforming markets. International cooperation through a variety of initiatives and organizations, from BRICS and the EU to the OECD and UNCTAD's working groups, can help.

Anatoly Semenov, Deputy Chairman of the Committee of Russian Union of Industrialists and Entrepreneurs on Intellectual Property and Creative Industries, returned to the topic of parallel imports, noting that most developed countries have a parallel import regime for 251 countries or 30 countries of the Eurozone. But since 2012, Russia has allowed parallel imports from only 4 countries of the EAEU (Kyrgyzstan, Armenia, Belarus and Kazakhstan). The expert criticized the current counter-sanctions measures to expand the regime of parallel imports, saying that they contributed to the formation of a "toxic and corrupt legal environment that undermines confidence in the government. In his opinion, it is necessary to abandon the policy of protection of foreign investments and support of localization of production in Russia with the help of non-tariff regulation measures. Also, the international principle of exhaustion of rights should be established in the country and the institution of the Presidential Commissioner for Intellectual Rights should be established.

Arul George Scaria, Associate Professor of National Law School of India University, also addressed the issue of intellectual property in the context of antitrust. He spoke about the recent case of the Competition Commission of India against Vifor, a Swiss pharmaceutical company that holds patents on a drug to treat iron deficiency patients. The complainant wished to remain confidential, but it was clear from the parties' arguments that Vifor had abused its dominant position through price discrimination by offering the drug to government purchasers at a lower price than to individual consumers. In addition, the company appears to have denied licenses to third parties trying to either produce or import the drug.

"Intellectual property protection is just a means to an end (more innovation and creativity) and not an end in itself," 

the expert reminded.

Denis Gavrilov, PhD in Law, Deputy Head of Competition Law Department at Moscow State Law University (MSAL), Attorney, focused on the specifics of Russian M&A transactions. The number of mergers and acquisitions increased significantly due to the transfer of business of transnational companies to Russian management or local competitors. 

"If last year we were evaluating horizontal mergers with all the many antitrust tools, now we are posing other questions: will the deal help save jobs and important technologies in the country, as well as continue to fulfill contracts with Russian consumers?" 

Gavrilov noted. These questions do not rule out consideration of customary factors in the analysis, but in today's circumstances it seems inappropriate to ban such deals, he believes. 

Jia Cai, Associate Professor at the School for Public Policy and Administration, University of Electronic Science and Technology of China, gave an overview of regulatory measures for digital platforms in China. This work is carried out by several agencies at once, with full cooperation yet to be established. On March 1, 2022, the Provisions on the Management of Algorithmic Recommendations in Internet Information Services came into force - the rules require operators to enter data on the algorithms used: the name, type, and scope. The Cyberspace Administration of China (CAC) has already published a list of 30 applications whose operators have provided information on the algorithms used, along with a brief description of their purpose. However, the algorithms are so complex that the agency needs to work with cybersecurity experts to analyze them, Jia Cai said. 

Viktor Topadze, Director of Legal Affairs of Avito, spoke about the regulation of digital platforms in Russia. He mentioned the high-profile case of Yandex, related to that company giving advantages to its own services. The resulting settlement agreement between the FAS, Yandex and online services, including Avito, is "an effective tool that made it possible to connect to new search engine output formats," Topadze said. The applicants in the case confirmed that Yandex had done everything to eliminate discrimination in its search results.

At the end of the session Aldash Aitzhanov, President of Competition Development and Protection Center, Kazakhstan, shared the experience of antimonopoly regulation in Kazakhstan. After the January riots in the country due to the sharp increase in the price of liquefied gas, the government and competition authorities focused on curbing price increases, working to de-monopolize the economy and counteracting the illegal concentration of economic resources. Head of state Kassym-Jomart Tokayev outlined these goals in his address, stating in March of this year that it was important to "ensure fair and open competition" and "permanently eradicate all artificial monopolies both in the economy and in politics.

*banned in Russia as “extremist”

parallel imports 

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