30 September 2024

FAS Russia Inspections: A Comprehensive Legal Guide to Antimonopoly Audits and Compliance

September 30, 2024

BRACE Law Firm ©

The key task of antimonopoly authorities is the prevention and suppression of monopolistic activity and unfair competition in commodity markets. This task is implemented through state control over compliance with antimonopoly legislation via inspections conducted by FAS Russia and its territorial authorities.

Any economic entity may face an antimonopoly authority inspection, including natural monopolies, large corporations, product distributors, retail chains, and small businesses. State authorities and local self-government bodies also fall under this control. According to the Unified Register of Inspections, antimonopoly authorities conducted more than 70 inspections in 2024 alone. During an inspection, the antimonopoly authority is endowed with broad powers and can hold entities liable based on the results.

In this article, we consider:

Types and grounds for conducting inspections;
Rules for carrying out control measures;
Powers of antimonopoly authority employees during an inspection and liability for non-compliance with the legal requirements of the control body;
The procedure for challenging decisions and actions of antimonopoly authorities.

Due to the limited format, this article does not cover inspections regarding compliance with the legislation of the Russian Federation on the contract system for the procurement of goods, works, and services to meet state and municipal needs.

Regulation of FAS Russia and Its Territorial Authorities’ Inspections

The primary regulatory act governing the procedure for antimonopoly inspections is Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition (the "Law on Protection of Competition" or "135-FZ").

Note that Federal Law No. 294-FZ dated December 26, 2008, On Protection of the Rights of Legal Entities and Individual Entrepreneurs in the Exercise of State Control (Oversight) and Municipal Control (the "Law on Protection of Rights During State Control" or "294-FZ") applies to antimonopoly inspections only to the extent that it does not contradict the Law on Protection of Competition. This exception is established in part 4 of Article 1 of the specified law. For example, unlike the norms of 294-FZ, unscheduled inspections by an antimonopoly authority do not require prior coordination with the prosecutor's office.

FAS Russia and its territorial authorities are the bodies authorized to conduct control.

The subjects of control (the "inspected person") include:

Federal executive authorities;
State authorities of the constituent entities of the Russian Federation, local self-government bodies, and other bodies or organizations performing the functions of said bodies;
State extra-budgetary funds;
Commercial organizations and individuals, including individual entrepreneurs;
Non-profit organizations (when they carry out entrepreneurial activity or coordinate the economic activity of other economic entities, and only regarding compliance with prohibitions on monopolistic activity, unfair competition, and the use of state and municipal preferences).

Scheduled and Unscheduled Antimonopoly Inspections

Inspections by FAS Russia and its territorial authorities may be scheduled or unscheduled.

Under part 2 of Article 25.1 of 135-FZ, the grounds for a scheduled inspection is the expiration of three years from the date of:

The creation of the legal entity or organization or the state registration of the individual entrepreneur;
The completion of the last scheduled inspection of the inspected person by the antimonopoly authority.

Like many other control bodies, FAS Russia applies a risk-oriented approach. This approach involves selecting the timing and types of control measures depending on the risk assessment of causing harm (damage) to interests protected by law. The criteria for assigning the activities of legal entities and individual entrepreneurs to risk categories during state control over compliance with antimonopoly legislation were approved by Government Decree No. 213 dated March 1, 2018 (the "Decree No. 213"). This regulation establishes the following frequency for scheduled inspections of legal entities and individual entrepreneurs:

For the medium risk category: not more than once every 3 years;
For the moderate risk category: not more than once every 5 years;

For the low risk category: scheduled inspections are not conducted.

Risk categories are assigned according to the criteria established by Decree No. 213, taking into account the type of activity and the revenue of the economic entity. Thus, retail chains with revenue from the sale of goods exceeding 400 million rubles, and natural monopoly subjects or those carrying out regulated activities with a necessary gross revenue of more than 10 billion rubles, are classified as medium risk.

Economic entities with revenue exceeding 10 billion rubles operating in the production and sale of medicinal products and medical devices, provision of medical services, communication services, transport services, housing and communal services, and transportation of oil and petroleum products via pipelines, etc., are classified as moderate risk. Classification into extremely high and high risk categories is not provided for.

Information regarding a scheduled inspection is indicated in the consolidated plan for scheduled control (oversight) measures for the next calendar year, which is posted on the website of the Prosecutor General's Office. The inspected person must be notified of a scheduled inspection at least 3 business days before it begins by sending a copy of the inspection order via registered mail with acknowledgment of receipt or another available method.

Note that Government Decree No. 336 dated March 10, 2022, On the Peculiarities of Organizing and Exercising State Control (Oversight) and Municipal Control, established that until 2030, scheduled inspections are conducted only for control objects assigned to extremely high and high risk categories. However, these restrictions do not extend to state control over the implementation by regional executive authorities of powers in the spheres of natural monopolies and state regulation of prices (tariffs), economic concentration, and several others. Furthermore, the moratorium does not apply to unscheduled inspections.

The grounds for an unscheduled antimonopoly authority inspection are:

Materials received from law enforcement agencies, other state bodies, local self-government bodies, public associations, or business ombudsmen indicating signs of a violation of antimonopoly legislation;
Messages and statements from individuals, legal entities, or media reports indicating signs of a violation of antimonopoly legislation;
Expiration of the deadline for fulfilling an order issued based on the results of a case involving a violation of antimonopoly legislation or during state control over economic concentration;
Instructions from the President of Russia or the Government of Russia;
Discovery by the antimonopoly authority of signs of a violation of antimonopoly legislation.

Notification of an unscheduled inspection is carried out at least 24 hours before it begins by any available method. Notification of the start of an unscheduled inspection is not carried out if it is conducted regarding the conclusion of agreements that restrict competition.

Regardless of the type, FAS Russia inspections are conducted in the form of on-site and document-based audits.

A document-based inspection is conducted at the location of the antimonopoly authority. The subject of such an audit includes documents at the disposal of the control body, reports of previous inspections, materials from cases on violations of antimonopoly legislation and administrative offenses, and documents received from the inspected person.

An on-site inspection is conducted at the location of the inspected person. An on-site inspection is carried out if, during a document-based inspection, it is not possible to:

Verify the completeness and reliability of the information contained in the documents of the inspected person at the disposal of the antimonopoly authority;
Assess the compliance of the inspected person's activities with the requirements of antimonopoly legislation without conducting the corresponding control measure.

The Procedure for Antimonopoly Authority Inspections

The procedure for antimonopoly authority inspections is governed by the FAS Russia Administrative Regulation for the Performance of the State Function of Conducting Inspections of Compliance with the Requirements of the Antimonopoly Legislation of the Russian Federation, approved by FAS Russia Order No. 340 dated May 25, 2012 (the "Regulation").

An inspection is conducted based on an order from the head of the antimonopoly authority. The inspection order must contain the following information:

The name of the antimonopoly authority, the full names and positions of the persons authorized to conduct the inspection, as well as experts and representatives of expert organizations involved;
The name of the legal entity or the full name of the individual entrepreneur being inspected, and the address of the location or residence of the inspected person;
The goals, tasks, subject of the inspection, and its duration;
The legal grounds for the inspection;
The deadlines and list of control measures;
The list of administrative regulations for conducting control measures;
The start and end dates of the inspection.

The duration of an inspection must not exceed 1 month. In exceptional cases, based on reasoned proposals from the officials conducting the inspection, the head of the antimonopoly authority may extend this period for an additional 2 months. Grounds for extending the inspection period include the need to conduct expert examinations, research, or tests; the need to translate documents submitted by the inspected person in a foreign language into Russian; and other necessary measures without which it is impossible to assess the inspected person's compliance with antimonopoly laws.

The Subject of an Antimonopoly Inspection

The subject of an inspection is the inspected person's compliance with the requirements of antimonopoly legislation while carrying out its activities, as well as the fulfillment of an antimonopoly authority order previously issued in connection with a violation of antimonopoly legislation.

Starting a FAS Inspection: Action Algorithm for the First Hours

If you face an inspection, we recommend the following algorithm:

Thoroughly study the inspection order and make copies of it. Errors in the inspection order may serve as grounds for challenging it.
Do not allow entry into premises or territory without the presentation of a copy of the inspection order and official identification.
Appoint an authorized representative who will be present during the antimonopoly inspection and interact with FAS employees.
Instruct employees about the ongoing inspection and the procedure for interacting with FAS staff.
Document the progress of the inspection, examine the documents of specialists and witnesses involved, and obtain copies of the protocols drawn up during the control measures.
Do not refuse to comply with the legal requirements of FAS employees. However, you should not provide excessive information or documents.
Maintain regular interaction with FAS employees during the control measures.
If you lack sufficient professional knowledge in antimonopoly regulation and interaction with control bodies or resources, involve competent external lawyers specializing in antimonopoly law. This will help minimize the risks of adverse consequences at the inspection stage.

Powers of FAS Employees During Inspections

The subject of the inspection is the inspected person's compliance with antimonopoly law and the fulfillment of previous orders. The powers of FAS officials during an inspection, as well as the rights and obligations of inspected persons, are also regulated by the Law on Protection of Competition and the Regulation.

Article 25.4 of the Law on Protection of Competition provides that, while exercising control, antimonopoly authority employees have the right of unhindered access to the premises (territory) of the inspected person upon presentation of official identification and the inspection order.

During an inspection, antimonopoly authority officials are entitled to:

Inspect territories and premises (excluding the residence of the inspected person), documents, and objects;
Request documents and information;
Obtain explanations.

Below, we consider the rights and duties of antimonopoly authority employees during control measures in more detail.

1. Inspection Conducted by FAS

The procedure for conducting an inspection is governed by Article 25.3 of the Law on Protection of Competition. The inspection is carried out to clarify circumstances relevant to the audit. The inspected person and (or) its representative, as well as other persons involved by the antimonopoly authority, may participate in the inspection.

The inspection is carried out in the presence of at least 2 witnesses. Any individuals not interested in the outcome of the case may be called as witnesses. Antimonopoly authority employees are not permitted to participate as witnesses. If special knowledge is required for the inspection, specialists and (or) experts may be involved. Where necessary, photography, filming, or video recording may be used, and copies of documents and electronic data carriers may be made.

Based on the results of the inspection, a protocol is drawn up according to the form approved by the Regulation.

Obstruction of access may lead to administrative liability under part 2 of Article 19.4.1 of the CAO RF, Obstruction of the Lawful Activity of an Official of a State Control (Oversight) Body Resulting in the Impossibility of Conducting or Completing an Inspection. The fine for officials ranges from 5,000 to 10,000 rubles, and for legal entities from 20,000 to 50,000 rubles.

For instance, in one case involving an unscheduled inspection of a Company, FAS Russia demanded access to the computers of the general director and several employees. During the inspection of the premises, a workstation presumably belonging to the general director was found; however, the inspected person's employees refused to provide full access (login, password). FAS specialists took independent actions to obtain access and copy data from this computer. During these actions, the computer was disconnected from the general network, and the account was blocked. Officials concluded that there was a targeted disconnection of the general director's computer and a blocking of his account. A report on the obstruction of access during the inspection was drawn up. By order of a magistrate, a company official was held administratively liable under part 2 of Article 19.4.1 of the CAO RF and fined 5,000 rubles. Efforts to challenge the order in a higher court were unsuccessful.[1]

Furthermore, since August 19, 2024, Article 19.4.3 of the CAO RF has introduced administrative liability for obstructing inspections regarding compliance with the prohibition on concluding anticompetitive agreements. The fine for officials ranges from 30,000 to 50,000 rubles; for legal entities, the fine depends on the total revenue from the sale of all goods, works, and services for the previous calendar year:

Not more than 120 million rubles: 100,000 rubles;
From 120 to 800 million rubles: 500,000 rubles;
From 800 million to 2 billion rubles: 1,000,000 rubles;
More than 2 billion rubles: 2,000,000 rubles.

2. FAS Request for Documents and Information

The procedure for requesting documents and information is governed by Article 25.4 of the Law on Protection of Competition.

Requests are made via a reasoned demand sent to the inspected person by mail with acknowledgment of receipt or delivered against a signature. The form for the demand for documents is approved by the Regulation.

Requested documents must be submitted by the inspected person within 3 business days in the form of certified copies. If necessary, officials may examine original documents. If it is impossible to submit documents and information within the specified deadlines, the inspected person must notify the FAS employees conducting the inspection in writing, stating the reasons and the timeframe within which they can be provided. The deadline for such notification is 1 day from the receipt of the demand. After receiving the notification, the FAS official decides to establish a new deadline or refuses to extend the deadline, providing justification. A copy of the decision is sent to the inspected person by any available method.

Failure to submit information within the established deadline or the submission of deliberately unreliable information entails administrative liability under part 5 of Article 19.8 of the CAO RF. The fine for officials ranges from 10,000 to 15,000 rubles; for legal entities, from 50,000 to 500,000 rubles.

In one case involving an unscheduled on-site inspection of a Joint-Stock Company, the antimonopoly authority issued a demand for documents and information regarding meetings, negotiations, and other forms of interaction with participants in the tender credit market. The Company responded that no interactions had occurred, except for a meeting with the vice-governor. The antimonopoly authority decided that the inspected person, possessing the requested information, failed to provide details on the date and participants of the meeting, did not attach correspondence, and did not report on the outcome of the interaction. The Joint-Stock Company was held liable under part 5 of Article 19.8 of the CAO RF and fined 200,000 rubles. The Company appealed to court to have the FAS Russia order declared unlawful. It argued that the requirements did not relate to the subject of the inspection and were not properly reasoned. The court decided that the demand was necessitated by the progress of the inspection and that the duty to provide reasoning does not mean that full information on the essence of the case and the goals of requesting the documents must be disclosed to the recipient. The court upheld the FAS Russia decision but, noting it was a first-time offense, reduced the fine to 50,000 rubles.[2]

3. Obtaining Explanations

During an inspection, officials may, upon a reasoned demand, obtain explanations from individuals, managers, employees of organizations, and officials of state and local authorities or state extra-budgetary funds. The procedure for obtaining them is governed by Article 25.4.1 of the Law on Protection of Competition.

Before obtaining explanations, the antimonopoly authority official explains to said persons their rights under Article 51 of the Constitution of the Russian Federation (the right not to testify against oneself, one's spouse, or close relatives), their duties under 135-FZ, and their right to provide explanations in the presence of an attorney or another person providing legal assistance. Explanations are given in writing, signed by the specified persons, and attached to the inspection materials.

Note that this norm was introduced only in December 2022, so the practice of its application is still emerging.

In addition to rights, the law establishes the duties of FAS employees during inspections. Specifically, paragraph 1.6 of the Regulation provides that during inspections, antimonopoly authority officials must:

Comply with the legislation of the Russian Federation and the rights and lawful interests of the inspected person;
Conduct the inspection based on an order from the head of the antimonopoly authority;
Conduct the inspection only while performing official duties, and on-site inspections only upon presentation of official identification and a copy of the head's order;
Not prevent the manager, other official, or authorized representative of the inspected person from being present during the inspection and providing explanations on matters relating to the subject of the inspection;
Provide the manager and (or) representative of the inspected person present at the audit with information and documents relating to the subject of the audit;
Not demand documents or other information from the inspected person whose submission is not provided for by Russian legislation or which are at the disposal of other state or local authorities or their subordinate organizations;
Familiarize the manager, other official, or authorized representative of the inspected person with the results of the audit;
When determining measures to be taken regarding discovered violations, consider the severity of the violations, their potential danger to life, health, or state security, or for the occurrence of natural or man-made emergencies, and avoid unreasonable restrictions on rights and lawful interests;
Not disclose information constituting a state, commercial, official, or other law-protected secret obtained by the antimonopoly authority.

A refusal to fulfill the duties assigned to FAS employees may be challenged in court. In Case No. A56-27969/2020 [3], the Tariff Committee appealed to court seeking to declare unlawful a FAS decision to refuse the submission of documents. The court established that the antimonopoly authority had scheduled an unscheduled on-site inspection of the Committee based on an application from an economic entity. The Committee requested the antimonopoly authority provide this document but was refused. The court concluded that, under the Law on Competition and paragraph 1.6 of the Regulation, the antimonopoly authority must provide the applicant with the document that served as the reason for the inspection and may not demand any justification for receiving it. The court declared the FAS decision unlawful and ordered the submission of the requested document.

Under Article 26 of the Law on Protection of Competition, antimonopoly authority employees bear civil, administrative, and criminal liability for the disclosure of commercial, official, or other law-protected secrets. Furthermore, harm caused to an individual or legal entity resulting from the disclosure of law-protected secrets is subject to compensation from the Treasury of the Russian Federation.

Documenting the Results of a FAS Inspection

Based on the results of an antimonopoly authority inspection, an Act of Inspection is drawn up, which must contain:

The date, time, and place of the Act of Inspection;
The name of the antimonopoly authority and the full names and positions of the persons who conducted the inspection;
Details of the inspection order;
The name of the inspected person and the full name of the manager or authorized representative present during the inspection;
The date, duration, and place of the inspection;
Information on the results of the inspection, including identified signs of a violation of antimonopoly legislation;
The signatures of the official(s) who conducted the inspection.

Protocols, explanations from the inspected person, and other materials are attached to the Act of Inspection.

The Act of Inspection is drawn up in 2 copies, one of which is delivered or sent via registered mail with acknowledgment of receipt to the inspected person or its representative no later than the final day of the inspection period. Within 15 days of the date of receipt of the Act of Inspection, the inspected person may submit written objections to the antimonopoly authority, which are attached to the report.

If violations of antimonopoly legislation are discovered during control measures, an Order is also issued specifying the necessary measures to eliminate the violations and the deadlines for fulfillment. If the identified violations do not fall within the antimonopoly authority's competence, the inspection materials are transferred to the appropriate state authority according to jurisdiction.

Additionally, to prevent violations of antimonopoly legislation, the antimonopoly authority may issue a Warning. The grounds for its issuance is information about actions (omissions) that may lead to a violation of antimonopoly legislation. The procedure for sending it was approved by FAS Russia Order No. 285/22 dated April 12, 2022.

Appealing the Results of an Antimonopoly Inspection

Under part 1 of Article 52 of the Law on Protection of Competition, a decision and (or) order of the antimonopoly authority may be challenged in court, and those of a territorial antimonopoly authority may also be challenged before the FAS Russia collegial body.

1. Pre-trial Procedure for Appealing a Decision or Order Resulting from an Antimonopoly Inspection

Legally, a complaint against a decision or order of a territorial antimonopoly authority may be filed by any person who participated in the corresponding case regarding a violation of antimonopoly legislation. Compliance with the pre-trial procedure before applying to court is not mandatory (part 5 of Article 4 of the APC RF).

The appeal period is 1 month from the date the antimonopoly authority's decision and (or) order is adopted (part 6 of Article 23 of the Law on Protection of Competition).

The grounds for changing or canceling a territorial antimonopoly authority's decision is a violation of uniformity in the application of antimonopoly legislation by antimonopoly authorities.

2. Judicial Procedure for Appealing a Decision or Order Resulting from an Antimonopoly Inspection

Decisions and orders issued based on an inspection are challenged in the arbitration court at the location of the antimonopoly authorities that adopted these acts. Furthermore, as the Supreme Court of the Russian Federation explained[4], an antimonopoly authority order appointing an inspection and an order to initiate a case on a violation of antimonopoly legislation may also be challenged in court, but only regarding grounds that preclude their issuance (e.g., violation of permissible frequency, scheduling an unscheduled inspection in the absence of established grounds or required coordination, or expiration of the statute of limitations for considering the case).

Challenges are handled in the procedure provided for by Chapter 24 of the APC RF, Consideration of Cases on Challenging Non-normative Legal Acts, Decisions, and Actions (Inaction) of State Bodies, Local Self-Government Bodies, Other Bodies, Organizations Endowed by Federal Law with Separate State or Other Public Powers, and Officials.

The period for challenging is 3 months from the date of the antimonopoly authority’s decision and (or) order. If the acts were previously appealed to the FAS Russia collegial body, the judicial challenge period is 1 month from the date the collegial body's decision enters into force. Upon acceptance of the application by the court, the execution of the antimonopoly authority order is suspended until the court decision enters into force, except for orders issued to state or local authorities.

To have the court satisfy the application, the following circumstances must be proven in aggregate:

Inconsistency of the challenged decision and (or) order with the law or another legal act;
Violation of the applicant's rights and lawful interests in the sphere of entrepreneurial or other economic activity, the illegal imposition of duties, or the creation of other obstacles to such activity.

The grounds for canceling an antimonopoly authority's decision and (or) order can include both incorrect application of antimonopoly laws and procedural violations. Examples include a violation of territorial jurisdiction, refusal to involve interested parties in the case, or a violation of the procedure for documenting control acts. A successful example is Case No. A40-124857/2017 [5], which reached the Supreme Court of the Russian Federation.

In that case, a territorial antimonopoly authority decided that the actions of Company D., T., and Joint-Stock Company D. violated the Law on Protection of Competition by concluding an agreement to maintain prices at auctions. The economic entities filed a complaint with FAS Russia, but it was denied. The entities then applied to the arbitration court to declare the FAS Russia decision — which left their complaints against the territorial OFAS decision unsatisfied — invalid. The court of first instance denied the claims. The appellate court established that the territorial OFAS decision was not signed by the Commission's chairperson, which is a substantial violation leading to the illegality of the non-normative act. It declared the FAS Russia decision unlawful and ordered FAS Russia to eliminate the violations by re-examining the complaints. The Supreme Court of the Russian Federation found no grounds for reviewing this decision.

However, note that cases in this category are quite complex. Depending on the circumstances, it will be necessary to select specific arguments for challenging and evidence to support them. Legal support from the start of control measures to the adoption of decisions based on the inspection results can minimize business losses and increase the chances of successfully challenging antimonopoly authority acts.

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References

Decision of the Savelovsky District Court of Moscow dated January 20, 2022, No. 12-780/22(12-6769/21).
Ruling of the Supreme Court of the Russian Federation dated March 28, 2019, No. 305-ES19-2038.
Resolution of the Thirteenth Arbitration Appellate Court dated October 21, 2020, No. 13AP-22510/2020 in Case No. A56-27969/2020.
Paragraph 51 of the Resolution 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.
Ruling of the Supreme Court of the Russian Federation dated November 28, 2018, No. 305-KG18-19606 in Case No. A40-124857/2017.