Concerted Actions Under Russian Antimonopoly Law: Compliance and Liability

 

December 9, 2024

BRACE Law Firm ©

 

Antimonopoly legislation aims to maintain healthy market competition, which is achieved through the effective interaction of commercial turnover participants (the "participant", "subject", or "economic entity"). This area of regulatory oversight ensures favorable conditions for the functioning of the market for goods, works, or services, within which participants can compete with each other (the "market", "commodity market", or "relevant market").

The behavior of entities in such a market is subject to rules and restrictions that suppress dominance, discrimination, and inequality between participants while maintaining a balance of their interests and the freedom of economic activity. For this specific purpose, Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition (the "Law on Protection of Competition") establishes models of behavior for economic entities that are regarded as a violation of antimonopoly legislation and for which liability is established. One such violation is concerted actions of economic entities (the "concerted actions").

Concerted actions can be called one of the most problematic phenomena of anticompetitive law. This legal construction is subject to sharp criticism from specialists and legal scholars. Literature has repeatedly noted that the concept of "concerted actions" is not conceptually disclosed in the law, the term itself does not correspond to the content, and the regulatory oversight is insufficiently logical and needs improvement. [1] Indeed, economic entities are held liable for concerted actions much less frequently than for other antimonopoly violations. This is because such actions bear similarities to an anticompetitive agreement (the "agreement", "anticompetitive agreement", or "cartel"), and distinguishing between these models of unlawful behavior is quite difficult. Furthermore, it is not always easy to prove the destructive influence of concerted actions on the state of competition.

This article will consider various aspects of concerted actions:

• Signs and characteristic features of concerted actions;
• How concerted actions can affect the commodity market and restrict competition;
• How to distinguish concerted actions from anticompetitive agreements and other violations;
• The liability provided for unlawful concerted actions.

What Constitutes Concerted Actions in Antimonopoly Law?

The law establishes three main criteria for concerted actions, which are listed in Article 8 of the Law on Protection of Competition. To hold an entity liable, a combination of all three criteria is required simultaneously; the presence of only one or two of them will be insufficient. [2]

First, the personal benefit of each participant. As a rule, such an interest is economic in nature: entities strive to improve their position in the commodity market. For example, to increase sales volumes, attract additional customers, eliminate competitors, or change or conversely maintain certain prices for products. In the law, this criterion is designated as the "correspondence of the result to interests", meaning the presence of an interest.

Second, the fact of a public statement by one entity that formed a certain model of concerted actions for other participants is required. Two fundamental points are important in this criterion:

• The public nature of the statement. That is, the initiator of the concerted actions, through their public act, forms a strategy of bad-faith behavior in the market, and other participants begin to adhere to this strategy, acting similarly. For example, one company posted information about price changes on a corporate website, placed an advertisement in the media about the termination of product manufacturing, or placed an advertisement in the public domain. Other participants in the scheme followed this example. Publicity is a fundamental criterion for the initiator's actions; the information must be addressed to an indefinite circle of persons. If the initiator addressed such information personally to a specific entity (for example, reporting a price change during business correspondence or during negotiations), such an act does not constitute concerted actions but is qualified as an agreement;
• Other participants followed the initiator's example, meaning they copied their actions. As a result, the commodity market experiences a destructive influence: "the possibility of repeatability of behavior is ensured even without any written agreement or 'information exchange', as it is a direct consequence of enterprises disclosing their actions. Any economic entity in the specified commodity market, being the first to raise prices, does not risk a possible loss of consumers, since, according to established practice, it is aware in advance that other economic entities that also pursue goals of extracting additional profit will follow suit and raise prices". [3]

Third, concerted actions are caused specifically by the actions of the initiator and other entities rather than by objective circumstances in the commodity market. Participants in the scheme borrow the behavior model from each other without any objective or compelling reasons. If, however, the cause of the actions was a situation in the market that equally affects all its participants, such behavior is not a violation (Clause 29 of the Plenum of the Supreme Court of the Russian Federation dated March 4, 2021, No. 2, On Certain Issues Arising in Connection with the Application of Antimonopoly Legislation by Courts (the "Plenum No. 2")). Objective circumstances include (Part 1, Clause 3, Article 8 of the Law on Protection of Competition):

• Changes in regulated tariffs;
• Changes in prices for materials or raw materials used in product manufacturing;
• Changes in prices for a specific product in world commodity markets;
• A significant change in demand for a product over a period of more than one year, or if such a period is less than a year, a change in demand during the term of existence of the relevant market.

The list of objective circumstances capable of influencing the behavior of economic entities is open, as it is impossible to provide for all situations in the law.

The most common case is an entity raising prices for a product due to an increase in costs that affect its value. In this case, the entity has the opportunity to prove the lawfulness of its actions, meaning to disclose the procedure of its pricing and provide the antimonopoly authority with the necessary calculations. For example, a company raised gasoline prices due to an increase in purchase prices from suppliers. Since the sum of expenses for its acquisition and sale is factored into the selling price of gasoline, the price increase is an adequate reaction to the change in the market situation. [4]

In addition to the purchase cost of the product, its price may include transport and logistics costs; therefore, when freight rates increase (for example, if the product delivery is provided by JSC "RZD" via rail transport), the seller will also reasonably increase the selling price. In retail sales, the trade margin is taken into account, which includes commercial and administrative expenses, taxes and fees, shortages, losses from product damage, and profit. [5]

If, in such a situation, an organization cannot provide the antimonopoly authority with an economically justified calculation of the product price during the period in dispute, this increases the risk of being accused of committing concerted actions. For example, several gas stations simultaneously and uniformly raised retail gasoline prices but could not justify this by an increase in costs that would have served as the reason for such a pricing policy. The antimonopoly authority noted that the conditions of the entities' economic activities differ ("different purchase and delivery prices, different storage conditions, different oil product sale conditions, different employee remuneration terms, different expenses for maintaining and updating the material base, depreciation charges, etc."), yet the retail sale price was increased simultaneously to the same level. [6]

It is important to consider that a violation is the behavior of only those participants who are competitors in the same commodity market. If entities do not compete with each other, their actions do not constitute an offense. [7] For example, the interaction of a lessor and a lessee within the framework of lease relations does not in itself qualify as economic activity in the same market. [8]

The qualification of concerted actions often bears an evaluative character, as the formal criteria listed in Article 8 of the Law on Protection of Competition are sometimes insufficient. In law enforcement practice, additional characteristics have been formed to help reveal the specifics of this violation.

The Plenum of the Supreme Arbitration Court of the Russian Federation (the "SAC RF") indicated in 2008 that concerted actions are distinguished by uniformity and synchronicity without any objective reasons (Clause 2 of the Plenum of the SAC RF dated June 30, 2008, No. 30, On Certain Issues Arising in Connection with the Application of Antimonopoly Legislation by Arbitration Courts (the "Plenum No. 30")). Despite the fact that this clause of Plenum No. 30 lost its force in 2021, the criteria of "uniformity" and "synchronicity" are still used in judicial practice when qualifying this violation.

In 2009, the Presidium of the SAC RF issued a decree providing a detailed description of concerted actions. [9]

• This is the predictable individual behavior of market participants who are formally independent of each other;
• The actions of entities are coordinated and directed, meaning entities consciously make their behavior dependent on the behavior of other market participants;
• Concerted actions represent a group behavior model, while signs of imposing such a behavior model on other participants with whom it is impossible to openly agree are present.

Despite their coordinated nature, concerted actions should be distinguished from the coordination of economic activity (the "coordination", Clause 14, Article 4 of the Law on Protection of Competition). The main differences between these violations are as follows:

• In coordination, the behavior model of entities in the market is coordinated by a third party (the coordinator), while the coordinator itself does not carry out activities in this commodity market. In concerted actions, the initiator, along with the other participants, always acts as an entity of the same commodity market;
• Coordination is expressed in the active actions of the coordinator, purposefully addressed to specific entities whose behavior they coordinate (in this sense, coordination bears a similarity to an agreement). The coordinator's actions are not always public. Unlike a coordinator, the initiator of concerted actions always acts publicly.

Subsequently, these theses of the Presidium of the SAC RF began to be actively used in antimonopoly and judicial practice, and coordination and parallelism became characteristic signs of concerted actions. Synchronicity of behavior is necessary because it ensures the participants in concerted actions an advantage over other market participants. If the coordination of participants' behavior is not proven, it is impossible to hold them liable. [10]

A sign of concerted actions is the ability of entities to monitor each other's behavior, meaning mutual awareness [11], as well as the ability to exert mutual influence on each other. At the same time, the entity must realize that its actions influence other participants, adversely affect the market, and violate competition. [12]

The strategy of concerted actions is expressed in the unspoken development of uniform "key parameters of economic behavior as a result of direct information exchange (or in the form of disseminating information for an indefinite circle of persons about pricing policy, the geographical direction of business development, priorities, and conditions for serving individual segments of the commodity market), established methods of responding to the intentions of a 'competitor' that do not require a special agreement". [13]

The unlawful nature of concerted actions lies in the fact that several entities implement a single market policy in their own interests and, essentially, manipulate other participants. At the same time, these persons are independent of each other, and there are no agreements between them. Participants in concerted actions tacitly refuse to compete with each other, thereby reducing competition in the market as a whole. As a result, the general order of turnover of goods, works, or services in the relevant market is determined not by the "spontaneous interaction of participants", but specifically by the strategy of such concerted actions. [14] Concertedness manifests in the uniform behavior of manipulators (for example, several sellers raising wholesale prices for the same product). However, this behavior is directed not toward each other but toward other market participants, such as competitors. [15]

How to Distinguish Concerted Actions from Anticompetitive Agreements?

Article 8 of the Law on Protection of Competition establishes a rule: concerted actions are not an agreement. This distinction is emphasized twice: the first part of the article indicates that actions are recognized as concerted in the absence of an agreement, and the second part states that behavior possessing the characteristics of an agreement does not apply to concerted actions.

Despite such a categorical legislative demarcation, distinguishing between agreements and concerted actions in practice can be quite difficult. Literature has repeatedly noted that these concepts are often identified with each other, they are easy to confuse, the boundaries between them are blurred, and therefore their distinction is problematic. [16] The difficulty lies in the fact that both agreements and concerted actions can be carried out without any written documents. If an agreement was formalized by a document or at least confirmed by correspondence, this significantly facilitates the qualification of the violation. However, an agreement can be expressed through an exchange of information that does not have a public character. If this led to a restriction of competition, such an exchange of information is qualified as an oral agreement, even if all material evidence (business correspondence, protocols, etc.) was destroyed (Clause 29, Plenum No. 2).

In this regard, in legal literature, concerted actions are sometimes identified with an oral agreement in the form of conclusive actions. [17] Some authors suggest regarding concerted actions as a variety of agreements. [18] Suggestions have even been made to completely abandon the construction of concerted actions as an independent type of violation. [19] There is also a more flexible position: concerted actions are interpreted as a broad concept that includes an agreement, since they are aimed not only at reaching a consensus but also at its subsequent implementation. [20]

An agreement is a consensus of participants in written or oral form (Clause 18, Article 4 of the Law on Protection of Competition). A special category is a "vertical" agreement, where one of the entities performs the function of a buyer and the other is the seller (Clause 19, Article 4 of the Law on Protection of Competition). Article 11 of the Law on Protection of Competition establishes a ban on agreements restricting competition (cartels). This is a consensus between competitors who sell or purchase goods in the same commodity market. Such agreements are illegal if they negatively affect the market and restrict its normal functioning. The destructive consequences of agreements are set out in Parts 1 and 2 of Article 11 of the Law on Protection of Competition:

• Establishing or maintaining prices, tariffs, discounts, allowances, or markups;
• Increasing, decreasing, or maintaining prices at auctions;
• Dividing the commodity market according to territorial principles, volume of sales or purchases of goods, assortment of sold goods, or the composition of sellers or buyers;
• Reducing or terminating the production of certain goods;
• Refusing to enter into contracts with certain sellers or buyers;
• Imposing on a counterparty unfavorable or unjustified contract terms (for example, unmotivated payment of funds or transfer of property, or imposing goods in which the counterparty is not interested);
• Unjustified establishment of different prices for the same product;
• Creating obstacles for other entities to access the commodity market or exit from it;
• Establishing conditions for membership or participation in professional and other associations.

The law provides more lenient conditions for "vertical" agreements; they are prohibited only in the following cases:

• If they lead to the establishment of a product resale price;
• If they prohibit the buyer from selling the goods of an entity that is a competitor of the seller (except for the sale of goods under a trademark or other means of individualization of the seller or manufacturer).

Agreements that lead to price manipulation in the retail and wholesale electricity markets are prohibited. This ban extends to electricity market entities, as well as to commercial infrastructure and technological infrastructure organizations, and network organizations (Part 3, Article 11 of the Law on Protection of Competition). A similar ban is also established regarding concerted actions.

Thus, the negative result to which anticompetitive agreements can lead is practically identical to the consequences entailed by illegal concerted actions. Therefore, it is futile to attempt to distinguish between these violations by the nature of their impact on the market situation.

The difference between an anticompetitive agreement and concerted actions lies in the nature of the interaction between the violating participants:

• An agreement always assumes the mutual consensus of participants, meaning the joint adoption of a decision. In concerted actions, each entity adopts a decision independently but at the same time focuses on the behavior of other persons (and primarily on the initiator who acted publicly). That is, one participant follows the example of another, and a chain reaction occurs that can ultimately affect the market. However, there are no mutual consensuses between the participants;
• Participants in an agreement always interact directly with each other in written or oral form. The presence of a written contract is not mandatory (although agreements can be formalized in contractual form). Correspondence, negotiations, or other mutual information exchanges may take place. That is, to qualify the violation, it is necessary to prove the presence of contacts between the participants of the agreement. In contrast, concerted actions do not assume any contacts or purposeful information exchange between participants. Regarding the public notification, which is a mandatory element of concerted action, it is addressed not to specific entities but is always intended for an indefinite circle of persons;
• The exchange of information between participants in an agreement may have a non-public character (as usually occurs). In contrast, concerted actions must involve at least one fact of public action by one of the entities, which serves as a signal for the others.

The strategy of participants in concerted actions outwardly appears autonomous, but their actions are similar to each other and are carried out within the same period of time. Unlike a cartel, the concertedness of such actions has a "hidden (latent) character". Judicial practice notes that if there are no clear signs of an agreement in the actions, specifically this circumstance will be the key criterion for qualifying the behavior as concerted actions. [21]

It is also necessary to distinguish concerted actions of economic entities (market participants) from concerted actions involving representatives of state authorities. This behavior is also recognized as unlawful, but it is regulated by a special article of the law (Article 16 of the Law on Protection of Competition), and a different measure of administrative liability is established for it; therefore, it is an independent variety of antimonopoly offense. In such actions, at least one of the participants is:

• A state authority (federal, regional, or municipal);
• An authority or organization that performs the functions of state authorities;
• A state extra-budgetary fund;
• The Central Bank of the Russian Federation.

Concerted actions "with state participation" are qualified under Article 16 of the Law on Protection of Competition even when a commercial organization is among the participants. The general normative criteria for concerted actions established in Article 8 of the Law on Protection of Competition (the presence of interest among the entities, a public statement by one of the participants, and the absence of objective prerequisites for behavior in the market) do not apply to concerted actions involving state representatives. This is because state authorities are not, in principle, economic entities; therefore, they cannot act as players in the commodity market and do not have the opportunity to consciously repeat the behavior model of other market participants. [22]

Negative Consequences of Concerted Actions Restricting Competition

If concerted actions do not lead to a restriction of competition, they are not a violation. Plenum No. 2 noted: "the interaction of economic entities for mutual benefit in itself, including that assuming the combination of their efforts, mutual coordination, and joint implementation of actions (inaction) in the commodity market... the participation of economic entities in solving common problems of market functioning within the activities of professional associations, is not prohibited by antimonopoly legislation". Such behavior is unlawful only if it led to a restriction of rivalry in the commodity market (Clause 20, Plenum No. 2). For the elements of the offense, it is necessary for the negative consequences listed in Article 11.1 of the Law on Protection of Competition to occur:

• Establishing or maintaining prices, tariffs, discounts, allowances, or markups at a certain level;
• Increasing, decreasing, or maintaining prices at auctions;
• Dividing the commodity market according to territorial principles, as well as by the volumes or assortment of realized goods, volumes of acquired goods, or the composition of sellers or buyers;
• Reducing or terminating the production of certain goods;
• Refusing to enter into contracts with certain sellers or buyers (except for cases when such a refusal is provided for by federal laws);
• Manipulating prices in the retail and wholesale electricity markets (this ban is directed at electricity market participants, as well as commercial infrastructure and technological infrastructure organizations, and network organizations).

The list of negative results of anticompetitive influence is open: the law prohibits any concerted actions between competing entities if they involve a restriction of competition or otherwise destructively affect the commodity market (Part 3, Article 11.1 of the Law on Protection of Competition). Such actions include:

• Imposing on a counterparty unfavorable or unjustified contract terms. For example, an unjustified demand for the transfer of funds or property, imposing goods under the threat of refusal to enter into a contract, or other bad-faith demands;
• Unmotivated establishment by one entity of different prices or tariffs for the same product;
• Creating obstacles for other entities to access the commodity market or exit from it.

Thus, for an antimonopoly offense in the form of concerted actions, a combination of three elements is necessary:

• The fact itself of concerted actions, in which three criteria are simultaneously present (the interest of all participants, the public action of one of them, and the absence of objective reasons for such a behavior scheme in the market);
• The result, meaning the unfavorable influence on the state of competition in the relevant market;
• A causal link between the concerted actions and the negative result.

When are Concerted Actions Not a Violation of Antimonopoly Law?

In some cases, concerted actions are not considered a violation even if all the necessary criteria are present.

First, if the concerted actions are committed by insignificant players in the commodity market. These are entities whose total share in the commodity market does not exceed twenty percent, and at the same time, the share of each of them does not exceed 8% (Part 5, Article 11.1 of the Law on Protection of Competition). It is assumed that such persons are not influential enough to affect the state of the market and in any way worsen the competitive situation.

Second, if the actions were committed by entities within the same group of persons, when one of the entities controls the other or if all entities are controlled by one person (Part 5, Article 11.1 of the Law on Protection of Competition).

A group of persons is a collection of individuals or legal entities that are interconnected in such a way that one person has the ability to influence the behavior of another person in one way or another. The relationships that form a group of persons are listed in Article 9 of the Law on Protection of Competition:

• A business company and its participant (a legal entity or individual) owning more than half of the participation share in such a company;
• A legal entity and a person endowed with the powers of the sole executive organ of this legal entity;
• A business company and a person (individual or legal entity) who, on the basis of constituent documents or a contract, has the right to give this company instructions that are mandatory for execution;
• Legal entities in which the same individuals constitute more than fifty percent of the collective executive organ or management bodies;
• A business company and a person (individual or legal entity) upon whose proposal the sole executive organ of this company was appointed or elected;
• A business company and a person (individual or legal entity) upon whose proposal more than fifty percent of the collective executive organ or the composition of the management body of this company was elected;
• An individual and their close relatives (spouse, parents, children, brothers, sisters);
• Persons who, according to the above characteristics, are part of a group with the same person, as well as other persons who are part of a group with any of such persons according to the listed characteristics;
• A business company and other persons (individuals or legal entities) who, according to any of the above characteristics, are a group if these persons own more than half of all percentages of the total number of votes (voting shares or interests) in such a company.

The point is that antimonopoly legislation regards the actions of a group of persons as the behavior of a single market participant (Clause 7, Plenum No. 2). Concerted actions assume the participation of several formally independent entities; therefore, such behavior within a single group of persons should be equated with the actions of one entity, and the behavior of a single entity in this case does not constitute an offense. However, there are situations when a person formally belongs to a group while maintaining the ability to independently determine their behavior in the commodity market. For example, an owner holds a significant share in a company, and other participants have no legal or organizational tools to influence their behavior. Another example could be a situation where each close relative owns their own business in different market segments. In such cases, the "protective" regime of the group of persons does not apply. For this specific purpose, the law clarifies that not all members of a group of persons are exempt from the ban on concerted actions, but only those who are in a state of interdependence (one entity controls another or all entities are controlled by one person).

Control is the ability of a person (individual or legal entity) directly or indirectly (through one or several legal entities) to influence the decisions adopted by another legal entity (Part 8, Article 11 of the Law on Protection of Competition). Control can be expressed in the following actions:

• Disposal of more than fifty percent of voting shares or interests in the charter capital;
• Exercise of the powers of the executive organ of a legal entity.

That is, control is achieved either through majority participation in the organization's charter capital or through the position of its head (for example, the general director).

Third, the law stipulates special cases when concerted actions are recognized as permissible (Part 4, Article 11.1; Part 1, Article 13 of the Law on Protection of Competition):

• If such actions do not create the possibility for eliminating competition in the relevant market;
• If such actions do not impose restrictions that are contrary to the achievement of the goals of these actions;
• If such actions contribute to the improvement of production or sale of goods, stimulate technical or economic progress, or increase the competitiveness of Russian-made goods in the world commodity market;
• If, as a result, buyers receive benefits proportionate to those benefits received by the entity that committed the concerted actions.

It should be noted that concerted actions may be recognized as permissible even when they have adversely affected the state of competition (Clause 20, Plenum No. 2).

Administrative Liability for Committing Concerted Actions

Prior to holding a violator administratively liable, the antimonopoly authority initiates and considers a case regarding the violation of antimonopoly legislation according to the rules established by Chapter 9 of the Law on Protection of Competition. This is an independent procedure; it should not be confused with the administrative process. The antimonopoly authority investigates all facts and circumstances of the case, evaluates evidence, identifies participants, and adopts a decision on the presence or absence of a violation. The entity is issued a prescription to eliminate the violation, which it is obliged to execute in a timely manner; however, such a prescription is not an administrative penalty (Articles 49 and 50 of the Law on Protection of Competition). The speed and quality of executing the prescription are important, as they will subsequently affect the degree of punishment when holding the entity administratively liable.

The antimonopoly authority initiates and considers the administrative offense case according to the rules of the Code of Administrative Offenses of the Russian Federation (the "CAO RF").

For concerted actions, administrative liability is provided for in accordance with Part 6, Article 14.32 of the CAO RF. Officials are subject to a fine for concerted actions in the amount of 10,000 to 20,000 rubles. Fines for legal entities have a more complex structure:

• The fine is calculated as a proportion of the amount of the violator's expenses for acquiring goods, works, or services (the "amount of expenses") or the amount of its revenue from the realization of goods, works, or services (the "amount of revenue"). Specifically, the product in the market of which the concerted actions were committed is taken into account in the calculation;
• The procedure for calculating the fine depends on the percentage ratio of the amount of expenses or the amount of the violator's revenue to the total size of its revenue from the realization of all goods (the "total revenue");
• The minimum fine limit is 50,000 rubles in any case.

The fine range is from 1/100 to 1/300 of the violator's amount of revenue or amount of expenses if any of the following conditions exist:

• The amount of the violator's revenue or amount of expenses is less than 75% of its total revenue;
• Prices for the product in respect of which the concerted actions were committed are not regulated by tariffs.

If, however, the amount of the violator's revenue or amount of expenses exceeds 75% of its total revenue, or the concerted actions were committed in respect of a tariffed product, the fine is from 1/1,000 to 1/100 of the violator's amount of revenue.

Administrative liability for concerted actions has a number of specific features. Universal tools for mitigating punishment or exemption from it, which are common for the vast majority of offenses under the CAO RF, do not apply to concerted actions.

First, it is impossible to reduce the minimum fine limit based on Part 3.2, Article 4.1 of the CAO RF.

In some cases, the law provides the opportunity to reduce the fine amount and appoint it in an amount less than the minimum limit established by the relevant article (Part 3.2, Article 4.1 of the CAO RF). This occurs in exceptional situations and taking into account the nature and consequences of the violation, as well as the financial position of the violator. Participants in concerted actions sometimes attempt to use this norm to reduce the fine amount. However, this rule applies only to violations for which the minimum fine level under the CAO RF is set at 100,000 rubles or more. The minimum fine limit for concerted actions is 50,000 rubles; therefore, it is impossible to reduce the fine for concerted actions below the specified amount.

Second, concerted actions are not recognized as a minor offense, and therefore one cannot limit oneself to an oral warning.

Minor nature of the violation is a ground for exemption from liability; in this case, a mere oral warning is issued (Article 2.9 of the CAO RF). However, minor nature is an evaluative category. In each specific situation, it is applied individually and only on the condition that the violation does not contain a significant threat to public relations. [23] Financial difficulties of the violator are not a reason for exemption from liability based on minor nature. Even when a person voluntarily eliminated the negative consequences of the violation and compensated for the damage caused, these facts can be taken into account as mitigating circumstances, but they do not constitute minor nature.

Antimonopoly violations destabilize the state of competition in the market; therefore, they are not, in principle, recognized as minor. Concerted actions are no exception. A uniform judicial practice has been formed that regards such behavior as a significant threat to protected public relations. The threat is expressed in the entity's contemptuous attitude toward the fulfillment of its public-law duties, namely in the non-compliance with the norms of antimonopoly legislation. [24] FAS Russia notes that such actions possess a high degree of public danger even compared to other acts, for example, violations of labor legislation or violations against the order of administration. [25]

Third, even if the violation is committed for the first time, replacing the fine with a warning will not work.

As a general rule, when an administrative violation is committed for the first time and it is identified during state control or supervision, the punishment is replaced with a warning (Part 1, Article 4.1.1 of the CAO RF). However, this "benefit" does not extend to committing concerted actions (Part 2, Article 4.1.1 of the CAO RF); therefore, the violator will have to pay a fine even if they have never committed anything similar before.

As we can see, standard administrative-procedural defense methods will not help mitigate or exclude punishment for committing concerted actions. On the other hand, the law provides a special mechanism allowing the violator to reduce the fine to the minimum level or be exempt from liability. This is the voluntary statement of the entity about the implementation of concerted actions (the "statement" or "violation statement"). Filing such a statement with the body considering the administrative case is included in the universal list of mitigating circumstances (Part 1, Clause 3, Article 4.2 of the CAO RF), but the procedure and methodology for its application regarding agreements and concerted actions are detailed in the law (Article 44.1 of the Law on Protection of Competition; Clauses 1, 2, 5 of the Notes to Article 14.32 of the CAO RF).

The entity must file such a statement with the antimonopoly authority before the announcement of the operative part of the decision on the administrative offense case. The statement can be filed by an entity or a group of persons.

The statement must necessarily contain the following information (Part 2, Article 44.1 of the Law on Protection of Competition):

• Information about the applicant itself and its location;
• Information about the product in respect of which the actions were committed;
• Information about the territory to which the concerted actions extend;
• The time of the implementation of concerted actions;
• Information about the persons who participated in the concerted actions;
• The content of the concerted actions (meaning what they consisted of);
• Supporting documents (evidence);
• The applicant's request for mitigation of punishment or exemption from liability.

The statement can be filed in paper form or as an electronic document signed with an UK(E)P. If the statement is drawn up on behalf of a group of persons, it is signed by all members of the group who participated in the concerted actions. However, if several participating entities that are not part of a group of persons simultaneously filed statements, the antimonopoly authority will not consider them (Clause 2 of the Notes to Article 14.32 of the CAO RF).

The antimonopoly authority is obliged to accept the statement, register it, and issue a receipt. A refusal to register and the return of the statement are possible if it does not contain the necessary information.

When considering the statement, the antimonopoly authority studies its content and the attached documents for the elements of the offense. If the fact of the violation is established, the applicant is either completely exempt from punishment or receives a minimum fine depending on the following factors (Clauses 1, 5 of the Notes to Article 14.32 of the CAO RF):

• If, prior to receiving the statement, the antimonopoly authority did not possess the information contained therein, the applicant is exempt from liability on the condition that they voluntarily ceased participating in the concerted actions (Part 1, Clause 2, Article 4.2 of the CAO RF);
• If the information is not new to the antimonopoly authority, a fine in the minimum amount of 50,000 rubles is imposed on the applicant on the condition that they recognized the fact of committing the offense. If, in this situation, several accomplices filed statements sequentially, the second and third applicants will also receive a minimum fine. These concessions do not apply to the organizer of the violation. Obviously, the entity that first publicly declared its action in the commodity market and served as an example for others can be considered the organizer of the concerted actions.

When passing the punishment for concerted actions, other mitigating circumstances are also taken into account (Clause 3 of the Notes to Article 14.32 of the CAO RF):

• The entity must not act as an organizer of such actions;
• The entity properly, timely, and voluntarily executed the prescription of the antimonopoly authority (Part 1, Clause 7, Article 4.2 of the CAO RF); [26]
• The entity provided assistance to the antimonopoly authority in establishing the circumstances of the case (Part 1, Clause 4, Article 4.2 of the CAO RF). It should be noted that providing information in response to a request from the antimonopoly authority does not constitute assistance. This is an obligation of the entity by law, for the non-fulfillment of which administrative liability is established. [27] However, if the entity responded to the request promptly and in detail, or provided additional information or explanations about the circumstances of the case, this can be taken into account as mitigating circumstances; [28]
• Prevention of negative consequences of the violation by the entity (Part 1, Clause 5, Article 4.2 of the CAO RF);
• Voluntary compensation for the damage caused or elimination of the harm inflicted (Part 1, Clause 6, Article 4.2 of the CAO RF).

Aggravating circumstances for committing concerted actions can exacerbate the punishment (Clause 4 of the Notes to Article 14.32 of the CAO RF):

• If the entity acted as the initiator of concerted actions;
• If the entity coerced other persons into concerted actions;
• If the entity did not execute the prescription of the antimonopoly authority to cease unlawful behavior (Part 1, Clause 1, Article 4.3 of the CAO RF);
• If the violation is committed repeatedly during the period while the "unexpired" term of administrative punishment for a similar violation has not elapsed. Such a term is considered the period from the date the administrative decree entered into force and within a year from the moment the administrative fine was paid (Part 1, Clause 2, Article 4.3 of the CAO RF);
• If the violation is of a continuing nature and continues for more than a year (Note 3, Clause 1 to Article 14.31 of the CAO RF); [29]
• If the concerted actions caused damage in an amount of more than one million rubles or the violator extracted income as a result in an amount of more than five million rubles (Note 3, Clause 2 to Article 14.31 of the CAO RF);
• If the entity untruthfully or untimely provided the antimonopoly authority with necessary information for calculating the administrative fine or failed to provide such information at all. This circumstance is recognized as aggravating in the simultaneous presence of two conditions. First, if such information was requested from the entity by the antimonopoly authority during the consideration of the case. Second, if the violator had previously been held liable for such non-provision of information and, at the same time, the term during which they are considered subjected to punishment (meaning a year from the moment of paying the previous administrative fine) has not expired (Note 3, Clause 3 to Article 14.31 of the CAO RF).

The statute of limitations for being held administratively liable for concerted actions is 1 year and is calculated from the day the decision of the antimonopoly authority in which the violation is recorded enters into force (Parts 1, 6, Article 4.5 of the CAO RF). The administrative statute of limitations should be distinguished from the term during which the antimonopoly authority can initiate a case within the framework of the Law on Protection of Competition. This term is 3 years from the moment the violation was committed or from the moment it was discovered if the violation is of a continuing nature.

The Ministry of the Russian Federation for Antimonopoly Policy and Entrepreneurship Support explained in 2002 that a continuing antimonopoly violation must be distinguished from a repeated one:

• A repeated violation consists of several identical actions that pursue a single goal and are united by a single intent;
• A continuing violation is a long-term failure by an entity to fulfill its duties, meaning continuous behavior. Such a violation begins with some action and ends when the entity itself ceases the violation or when such behavior is interrupted in a compulsory manner. [30]

If guided by these explanations, concerted actions contain signs of both repeated and continuing violations. On the one hand, they represent uniform acts committed with a single goal; therefore, they can be regarded as a repeated violation. On the other hand, such behavior must exert a negative influence on the commodity market, and for this, time is necessary. For example, if several companies raised prices for a product, these prices must be in effect for a certain period of time so that other market players have time to react. Furthermore, the rule for counting the statute of limitations for being held administratively liable established in the CAO RF speaks specifically of the continuing nature of this violation: the statute of limitations is calculated not from the day a specific action was committed (for example, the public announcement of the initiator about the change in rates), but from the moment of official recognition of the fact of the violation recorded in the decision of the antimonopoly authority.

Final Conclusions

In conclusion, it can be inferred that to reduce the risks of being accused of violating antimonopoly legislation, every commercial turnover participant must carefully monitor their behavior in the market. In particular, this concerns pricing and contractual policies, including when participating in auctions. Every action of an economic entity must be caused by an objective and reasonable necessity, whether economic or industrial. Unmotivated acts committed simultaneously by several persons in the same commodity market (for example, increasing rates for a product) may cause interest from antimonopoly authorities or provoke complaints from competitors. The absence of direct interaction between such accomplices does not prevent them from being held liable, because concerted actions (unlike cartels) do not assume any agreement between the entities.

Characteristic signs by which illegal concerted actions can be distinguished:

• The initiator of concerted actions publicly declares their strategy in the market;
• After the initiator's public statement, other participants follow their example;
• There is no direct agreement (neither oral nor written) between the accomplices regarding the coordination of this behavior scheme; interaction occurs according to the chain reaction principle;
• Participants in concerted actions pursue personal benefit (interest);
• The scheme of such behavior is not motivated by objective valid reasons;
• All participants are independent of each other and do not belong to the same group of persons;
• All participants occupy a significant part of the commodity market that allows them to exert an influence on the state of competition: eight percent each and twenty percent in aggregate;
• Such actions negatively affect the commodity market, primarily the state of competition.

If the antimonopoly authority has initiated a case regarding concerted actions, the entity should take into account some simple rules:

• The prescription of the antimonopoly authority must be executed within the established period and notified in writing. Such execution will help mitigate administrative punishment;
• It is recommended to respond to the requests of the antimonopoly authority promptly and as detailed as possible. This can also be regarded as a mitigating circumstance;
• It is desirable to prepare a detailed economic justification for the change in pricing or production policy. This will help prove that the actions are caused by valid reasons, in which case they will not be considered illegal;
• If an administrative case has been initiated based on the commission of concerted actions, standard defense methods under the CAO RF will not always help. A fine is imposed even if the violation is committed for the first time, and such a violation is not, in principle, minor;
• If the behavior indeed has an anticompetitive character and it is impossible to justify it by objective reasons, it is recommended to send a statement with a voluntary recognition to the antimonopoly authority. Such an act is a priority ground for mitigating liability. The earlier the statement is filed, the greater the likelihood of being exempt from the fine.

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References

1. Shaikheev T.I., On the Concept of "Concerted Actions of Economic Entities" and Judicial Practice on this Category of Cases, Arbitration Disputes, 2013, No. 4; Soyfer T.V., "Ban on Concerted Actions of Economic Entities as a Ground for Limiting the Freedom of Contract", Journal of Russian Law, 2017, No. 1.
2. Decision of the Kirov OFAS of Russia dated July 5, 2012, in Case No. 24/03-12.
3. Decree of the FAS of the Volga District dated June 22, 2011, in Case No. A57-9134/2010.
4. Decision of the Trans-Baikal OFAS of Russia dated April 25, 2017, No. 02-05-3-2017; Decision of the Tomsk OFAS of Russia dated June 30, 2021, in Case No. 070/01/11.1-39/2021.
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11. Shaikheev T.I., "On the Concept of "Concerted Actions of Economic Entities" and Judicial Practice on this Category of Cases", Arbitration Disputes, 2013, No. 4.
12. Decree of the FAS of the North Caucasus District dated February 22, 2011, in Case No. A32-24150/2008.
13. Shaikheev T.I., "On the Concept of "Concerted Actions of Economic Entities" and Judicial Practice on this Category of Cases", Arbitration Disputes, 2013, No. 4.
14. Decree of the Eleventh Arbitration Court of Appeal dated March 1, 2012, in Case No. A65-23766/2010.
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20. Shaikheev T.I., "On the Concept of "Concerted Actions of Economic Entities" and Judicial Practice on this Category of Cases", Arbitration Disputes, 2013, No. 4.
21. Decree of the Arbitration Court of the Volga District dated October 4, 2016, No. F06-12918/2016 in Case No. A65-20903/2015.
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23. Clause 18 of the Plenum of the Supreme Arbitration Court of the Russian Federation dated June 2, 2004, No. 10, On Certain Issues Arising in Judicial Practice When Considering Administrative Offense Cases.
24. Decree of the Altai Republic OFAS of Russia dated December 29, 2020, No. 004/04/14.32-84/2020; Decree of the Altai Republic OFAS of Russia dated March 25, 2020, No. 004/04/14.32-55/2020.
25. Decree of the Orenburg OFAS of Russia dated July 14, 2022, in Case No. 056/04/14.32-365/2022.
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30. Clause 5 of the letter of the Ministry of the Russian Federation for Antimonopoly Policy and Entrepreneurship Support dated October 18, 2002, No. SD/15395, On the Clarification of Certain Provisions of the Code of Administrative Offenses of the Russian Federation.