Antimonopoly Warnings and Cautions in Russia: A Legal Guide for Businesses

 

January 13, 2025

BRACE Law Firm ©

 

The state policy aimed at reducing administrative barriers to economic development and shifting from prohibitive measures to preventive and proactive ones is reflected in antimonopoly regulation.

In 2012, the third antimonopoly package of amendments [1] introduced the institutes of cautions and warnings into Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition (the "Law on Protection of Competition" or "Law No. 135-FZ"). These measures aimed to prevent or suppress anticompetitive actions without initiating a formal case on violation of antimonopoly legislation. The fourth antimonopoly package [2], adopted in 2016, substantially expanded the scope of these institutes.

According to researchers [3], even in the early years of applying warnings, the number of initiated cases for antimonopoly violations decreased by 12.4% in 2012 and by 27.7% in 2013. According to FAS Russia [4], 464 warnings were issued in 2023 for signs of violating the Law on Protection of Competition, of which 369 documents were voluntarily fulfilled.

This article examines:

• under what circumstances the antimonopoly authority issues a caution or a warning;
• the procedure for sending them;
• the required response measures to be taken and the consequences of non-compliance;
• whether it is possible to challenge cautions and warnings issued by the antimonopoly authority.

Caution against Violation of Antimonopoly Legislation

A caution is a document sent by the antimonopoly authority that cautions against actions (omissions) that may lead to a violation of antimonopoly legislation. The procedure for its issuance is regulated by Article 25.7 of the Law on Protection of Competition.

A caution may be issued to:

• an official of an Economic Entity (a commercial organization, a non-profit organization engaged in income-generating activities, an individual entrepreneur, or a natural person engaged in income-generating professional activities);
• an official of a state authority, a local self-government body, an organization involved in providing state or municipal services, or a state extra-budgetary fund (an "official of the authority").

A caution is issued when signs of a violation of antimonopoly legislation are absent. Furthermore, the Law on Protection of Competition does not establish an exhaustive list of potential violations for which a caution can be issued. It may apply to the threat of violating any antimonopoly norms.

The grounds for sending a caution to an official of an economic entity is a public statement by such person regarding planned behavior on a commodity market, if such behavior may lead to a violation of antimonopoly legislation and, at the same time, grounds for initiating an antimonopoly case are absent. As noted by researchers [5], in practice, this includes statements made, for example, at a conference or during an interview published in print or electronic media, on websites, or in radio and television broadcasts.

To illustrate with an example from judicial practice, in Case No. A21-7325/2014, the head of a group of companies published an announcement on a website stating that a price increase for food products was planned following the first two weeks of applying special economic measures. The territorial Department of FAS (the "UFAS") issued a caution against performing actions that could lead to a violation of the prohibition on anticompetitive agreements between economic entities [6].

Starting March 1, 2025, credible information about planned behavior on the commodity market will also be considered as a ground [7].

The grounds for sending a caution to an official of the authority is any information about actions (omissions) planned by such official that could lead to a violation of antimonopoly legislation, provided that grounds for initiating an antimonopoly case are absent.

We can clarify this with examples from enforcement practice.

In one case, the antimonopoly authority identified that the head of a municipality planned to create a unified heat supply organization and transfer municipal heat networks to it without conducting competitive procedures. The UFAS established that the transfer of rights to such facilities could only be carried out based on a lease agreement concluded following the results of a tender. Consequently, the UFAS sent the head of the municipality a caution against performing the planned actions, as they could lead to a violation of the prohibition on acts of authorities that restrict competition [8].

In another case, an economic entity filed a statement with the antimonopoly authority regarding the actions of a city mayor who planned to strip the entity of its status as a regional waste operator and transfer the powers to another organization. During the review of the materials, the antimonopoly authority established that the mayor was assessing the regional operator’s performance of its obligations. However, no statements regarding planned actions to obstruct the regional operator’s activities were identified; therefore, the UFAS found no grounds to issue a caution [9].

The procedure for sending a caution and its form are approved by Order of FAS Russia No. 285/22 dated April 12, 2022 [10]. A caution is issued in writing and must contain:

• conclusions regarding the grounds for sending the caution;
• the antimonopoly legislation norms that may be violated.

The decision to send a caution must be made no later than 10 days from the day the antimonopoly authority became aware of the grounds for its issuance.

The Law on Protection of Competition does not stipulate an obligation to notify the antimonopoly authority of any actions taken in connection with receiving such a caution. Furthermore, administrative liability or other compulsory measures do not arise from the failure to comply with a caution. Nevertheless, if the person who received the caution subsequently performs the actions (omissions) they were cautioned against, the antimonopoly authority may initiate a case for violation of antimonopoly legislation.

Warning to Cease Actions (Omissions) Containing Signs of Violation of Antimonopoly Legislation

Another form of preventive response by the antimonopoly authority is a warning to cease actions (omissions) that contain signs of a violation of antimonopoly legislation (the "Warning"). A warning is a document sent by the antimonopoly authority to suppress actions (omissions) that lead or may lead to the restriction of competition, the infringement of the interests of other economic entities in the sphere of entrepreneurial activity, or the interests of an indefinite circle of consumers.

The procedure for issuing a warning is regulated by Article 39.1 of the Law on Protection of Competition.

The subjects to whom a warning is issued are identical to those who receive a caution, including officials of economic entities and officials of authorities.

The grounds for sending a warning is the identification of signs of antimonopoly violations by the antimonopoly authority. The list of violations for which a warning is issued is provided in Part 2 of Article 39.1 of the Law on Protection of Competition. These include:

• Specific types of abuse of a dominant position:
  • imposing unfavorable contract terms on a counterparty;
  • economically or technologically unjustified refusal or evasion of concluding a contract with specific buyers (customers) when the capacity to do so exists;
  • economically, technologically, or otherwise unjustified establishment of different prices (tariffs) for the same product;
  • creating discriminatory conditions (conditions for market access, production, exchange, consumption, acquisition, sale, or other transfer of goods whereby an economic entity or several economic entities are placed at a disadvantage compared to others).

For example, in one case, based on citizen appeals, the antimonopoly authority established that a Guaranteeing Supplier had unreasonably set different electricity tariffs for the same category of consumers depending on whether the houses were located within city limits or within a gardening partnership. A warning was issued requiring the application of a uniform tariff for citizens regardless of the location of the household [11].

• Unfair competition in the form of:
  • discrediting (disseminating false, inaccurate, or distorted information that may cause losses to an economic entity and/or damage its business reputation);
  • misleading;
  • incorrect comparison of an economic entity or its goods with another economic entity or its goods;
  • illegal receipt, use, or disclosure of information constituting a commercial or other law-protected secret;
  • other forms of unfair competition not explicitly named in the Law on Protection of Competition.

For instance, in one case, when inspecting a medical clinic's website, the antimonopoly authority found that descriptions of the clinic's specialists used the phrases "best clinic in the city" and "best specialists in the city". The UFAS concluded that this created an impression of the economic entity’s superiority without objective evidence, which constituted unfair competition. The clinic was issued a warning to remove the specified comparisons from the website [12].

• Restriction of competition by acts or actions of authorities.

For example, in one case, the antimonopoly authority identified that a scheme for placing advertising structures approved by a local self-government body did not contain exact addresses of the locations or the permitted types and forms of structures. Consequently, the Novosibirsk UFAS issued a warning to the district administration to amend the approved scheme [13].

In the specified cases, initiating a case without issuing a warning and before the deadline for its fulfillment has passed is not permitted. A warning may also be issued during the consideration of an administrative offense case if the UFAS Commission identifies signs of violations that require a warning and were not known at the time the case was initiated.

If signs of other antimonopoly violations are present, the issuance of a warning is not provided for. In practice, the question arises whether a warning should be issued if there are signs of multiple violations, where the law only requires a warning for one of them. The Presidium of FAS Russia, in Clarification No. 8 On the Application of the Provisions of Article 10 of the Law on Protection of Competition (the "FAS Clarification No. 8"), stated [14] that when an economic entity performs actions containing signs of violations that simultaneously require a warning and other prohibitions, the antimonopoly authority should issue a warning, and regarding the actions falling under other prohibitions, it should consider initiating a case.

The procedure for sending a warning and its form are approved by Order of FAS Russia No. 57/16 dated January 22, 2016 [15]. A warning is issued in writing and must contain:

• Conclusions on the existence of grounds for its issuance. As clarified in Paragraph 42 of Resolution of the Plenum of the Supreme Court of the Russian Federation No. 2 dated March 4, 2021, On Certain Issues Arising in Connection with the Application of Antimonopoly Legislation by Courts, a warning must contain a preliminary assessment of the person’s actions (omissions) regarding a violation and provide the person with the opportunity to independently eliminate the committed violations. A warning cannot establish facts of a violation, indicate the application of state coercion measures, or apply a measure such as transferring income received from the violation to the federal budget.
• The antimonopoly legislation norms that have been violated.
• The list of required actions. According to Part 1 of Article 39.1 of the Law on Protection of Competition, the antimonopoly authority may issue warnings regarding:
  • the cessation of actions (omissions);
  • the revocation or amendment of acts containing signs of antimonopoly violations;
  • the elimination of causes and conditions contributing to such a violation and the adoption of measures to eliminate its consequences;
  • the liquidation of a unitary enterprise or measures to cease its activities if it was created or operates in violation of the Law on Protection of Competition.

FAS Clarification No. 8 emphasizes that a warning must be substantiated and enforceable. Substantiation implies that the antimonopoly authority should only issue warnings when there are truly clear signs of a violation. Enforceability implies presenting requirements to the economic entity for specific, clearly formulated, unambiguous, and demonstrably performable actions. The absence of a clear list of actions to be performed may serve as grounds for revoking the warning.

For instance, in Case No. A31-1088/2017, the antimonopoly authority received appeals from private passenger carriers regarding the administration's actions in changing transport service conditions. After a municipal act entered into force, the number of carriers decreased from 41 to 13. Perceiving a restriction of competition, the antimonopoly authority issued a warning to bring the act into compliance with federal legislation. Due to non-compliance, the antimonopoly authority found the administration in violation of Part 1 of Article 15 of the Law on Protection of Competition. The court concluded that the warning lacked a clear list of specific actions for the administration to perform and declared the antimonopoly authority's decision invalid [16].

• A reasonable timeframe for fulfilling the warning. The deadline for fulfilling a warning must be at least 10 days. Upon a reasoned petition from the person to whom it was issued, and if there are sufficient grounds to believe the warning cannot be fulfilled within the established period, the antimonopoly authority may extend the deadline (Part 5 of Article 39.1 of the Law on Protection of Competition).

According to Letter of FAS Russia No. SP/106730/18 dated December 25, 2018 [17], when determining a reasonable timeframe, one should ensure the economic entity is granted time commensurate with the actions required. FAS Russia acknowledges that, for the most part, its practice involves a standard deadline: "within 10 days from the date of receipt of this warning".

Unlike a caution, a warning is subject to mandatory consideration by the person to whom it was issued within the specified period. The antimonopoly authority must be notified of the warning’s fulfillment no later than 3 days after the deadline.

If the warning is fulfilled, an antimonopoly case is not initiated, and the official is not subject to administrative liability due to the elimination of the violation (Parts 6 and 7 of Article 39.1 of the Law on Protection of Competition). If it is established after a decision not to initiate a case that false information about the warning's fulfillment was provided, a case may be initiated due to its non-fulfillment.

If a warning is not fulfilled within the established period, the antimonopoly authority is obliged to decide to initiate a case within 10 business days of the deadline's expiration.

In Case No. A38-559/2019, a company sent letters to state authorities and customers alleging that organizations maintaining fire alarms did not comply with technical regulations. The letters also claimed that only this company possessed specialized, expensive equipment for compliant maintenance. These actions led some customers to refuse contracts with competitors. The antimonopoly authority concluded the information was false and issued a warning to withdraw all letters. The warning was not fulfilled on time. The letters were only withdrawn during the formal case proceedings. The UFAS found a violation of Article 14.1 of the Law on Protection of Competition for disseminating false information about competitors. Additionally, an official of the company was fined 12,000 rubles under Part 1 of Article 14.33 of the CAO RF for unfair competition. Challenges in courts, including the Supreme Court of the Russian Federation, were unsuccessful [18].

Challenging Warnings and Cautions of Antimonopoly Authorities

In Paragraph 3 of the Review of Judicial Practice on Issues Arising from the Consideration of Competition Protection Cases and Administrative Offense Cases in the Specified Sphere [19], the Supreme Court of the Russian Federation established in 2016 that a warning is a non-normative legal act and may be challenged in court.

Challenging is conducted according to the rules of Chapter 24 of the APC RF ("Challenging Non-normative Legal Acts, Decisions, and Actions (Omissions) of State Authorities"). In court, the following circumstances must be proven collectively:

• the inconsistency of the challenged decision or action (omission) with the law or another legal act;
• the violation of the applicant's rights and legitimate interests in the sphere of entrepreneurial or other economic activity, or the illegal imposition of obligations or creation of other obstacles to such activity.

In Case No. A40-317064/2019, which reached the Supreme Court, FAS Russia issued a warning to a grid company for refusing to sign a supplementary agreement to an electricity transmission contract. The counterparty proposed excluding certain supply points where services were allegedly not provided. The antimonopoly authority found signs of a violation of the Article 10 prohibition on unjustified refusal to contract. The grid company challenged the warning. The courts concluded that FAS Russia failed to prove signs of abuse of dominance in the refusal. Resolving a civil dispute over contract amendments does not fall within FAS Russia’s powers. The courts declared the warning invalid [20].

However, as stated in the aforementioned Review, judicial control when appealing a warning should be limited by the specifics of its issuance, its objectives, the proportionality of the prescribed measures, and their enforceability. Specifically, since a warning is issued upon discovering signs of an offense rather than the fact itself, judicial review should focus on whether such signs existed to justify the warning.

It should be noted that, according to the position of antimonopoly authorities, challenging a warning in court does not prevent the initiation of an antimonopoly case. At the same time, under Part 3 of Article 47 of the Law on Protection of Competition, the antimonopoly authority may suspend the case proceedings until the arbitration court adopts a final judicial act.

A different position has been formed in judicial practice regarding cautions. In the previously mentioned Case No. A21-7325/2014, the courts concluded that a caution does not possess the characteristics of a non-normative legal act because:

• it does not contain mandatory requirements;
• compliance is not ensured by the power of state coercion, and non-compliance does not create legal consequences or obstacles for economic activity.

Consequently, it is not subject to challenge in court. This position was supported by the Supreme Court. Similar positions were subsequently adopted by other arbitration courts [21]; therefore, challenging a caution as an independent act of an authority does not appear effective.

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Conclusions

1. The institutes of cautions and warnings are preventive measures, but several differences exist between them.
2. A caution is issued when signs of a violation are absent, aimed at preventing an official of an economic entity or an authority from committing a violation. A caution can be issued for a threatened violation of any antimonopoly norms. There is no legal obligation to notify the antimonopoly authority of a caution’s fulfillment. No administrative liability or other compulsory measures arise from non-compliance. Thus, a caution is a preventive document preceding an actual violation, which is confirmed by judicial practice refusing to allow challenges to such acts.
3. A warning is issued when actions (omissions) of officials contain signs of a violation, aimed at suppressing such violations. Warnings are not issued for all types of violations, but only those explicitly listed in the Law on Protection of Competition. Issuing a warning is an obligation of the antimonopoly authority. A warning is subject to mandatory consideration, and the authority must be notified of its fulfillment. If not fulfilled, the authority initiates an antimonopoly case. Thus, a warning is a more effective response tool and has a suppressive character. This institute allows for the elimination of violations without lengthy prosecution or administrative liability.
4. The introduction of warning and caution institutes should be viewed positively, as they shifted the focus from liability measures to preventive, proactive, and suppressive measures, creating more flexible tools for competition regulation.

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References

[1] Federal Laws No. 401-FZ dated December 6, 2011, On Amending the Federal Law On the Protection of Competition and Certain Legislative Acts of the Russian Federation (the "Law No. 401-FZ"), and No. 404-FZ, On Amending the Code of Administrative Offenses of the Russian Federation (the "Law No. 404-FZ").

[2] Federal Law No. 275-FZ dated October 5, 2015, On Amending the Federal Law On the Protection of Competition and Certain Legislative Acts of the Russian Federation.

[3] Bashlakov-Nikolaev I.V., The Antimonopoly Authority as a Preventive Control Body // Modern Lawyer, 2014, No. 4.

[4] FAS Russia Telegram channel: https://t.me/fasrussia/3664.

[5] Procedures in Competition Law: Textbook (Ed. S.A. Puzyrevsky) // Prospekt, 2019.

[6] Resolution of the Arbitration Court of the North-Western District dated May 7, 2015, No. F07-2318/2015 in Case No. A21-7325/2014.

[7] Federal Law No. 344-FZ dated October 14, 2024, On Amending the Federal Law On the Protection of Competition.

[8] Warning of the Udmurt Administration of FAS Russia dated March 15, 2016, On the Termination of Actions Containing Signs of Violation of Antimonopoly Legislation.

[9] Decision of the Tyva Administration of FAS Russia dated April 17, 2020, On the Refusal to Initiate a Case.

[10] Order of FAS Russia No. 285/22 dated April 12, 2022, On Approval of the Procedure for Issuing a Warning on the Inadmissibility of Actions That May Lead to a Violation of Antimonopoly Legislation, and its Form.

[11] Notice of the Penza Administration of FAS Russia dated October 2, 2024, No. 2-01-03/21-2024.

[12] Notice of the Kurgan Administration of FAS Russia dated September 27, 2024, No. AI/2901/24.

[13] Notice of the Novosibirsk Administration of FAS Russia dated November 28, 2024, No. 054/01/15-3082/2024.

[14] Approved by the Protocol of the Presidium of FAS Russia No. 11 dated June 7, 2017.

[15] Order of FAS Russia No. 57/16 dated January 22, 2016, On Approval of the Procedure for Issuing a Notice to Cease Actions (Omissions) Containing Signs of Violation of Antimonopoly Legislation.

[16] Resolution of the Arbitration Court of the Volga-Vyatka District dated April 27, 2018, in Case No. A31-1088/2017.

[17] Letter of FAS Russia No. SP/106730/18 dated December 25, 2018, On Certain Issues Arising During the Consideration of Cases on the Violation of Antimonopoly Legislation, and the Issuance and Execution of Notices.

[18] Ruling of the Supreme Court of the Russian Federation No. 301-ES19-28107 dated January 6, 2020, in Case No. A38-559/2019; Resolution of the FAS Russia administration in Case No. 03-07/19-2019 dated February 21, 2018, on an administrative offense.

[19] Approved by the Presidium of the Supreme Court of the Russian Federation on March 16, 2016.

[20] Ruling of the Supreme Court of the Russian Federation No. 305-ES21-24079 dated December 24, 2021, in Case No. A40-317064/2019.

[21] Resolution of the Arbitration Court of the Moscow District dated May 20, 2021, No. F05-11481/2021; Resolution of the Twelfth Arbitration Appeal Court dated February 9, 2016, in Case No. A06-5352/2015.