Interchangeable Goods in Russian Antimonopoly Law and Public Procurement

 

March 12, 2025

BRACE Law Firm ©

 

When determining a commodity market, it is necessary to establish the presence or absence of interchangeable goods. Furthermore, the interchangeability of goods is significant when assessing compliance with antimonopoly requirements for public procurement.

Businesses occupying a significant market share must understand whether the prohibitions on the abuse of a dominant position provided for by Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition (the "Competition Law"), (the "Law No. 135-FZ"), apply to their activities. To do this, an economic entity must determine the share of the commodity market it occupies.

This article examines in detail:

• the purposes for which the institution of interchangeability of goods is applied in antimonopoly law;
• how and by what criteria the interchangeability of goods is determined;
• the specifics of the interchangeability of certain types of goods.

General Criteria for the Interchangeability of Goods in Antimonopoly Law

According to Clause 3 of Article 4 of the Competition Law, interchangeable goods are goods that can be compared by their functional purpose, application, qualitative and technical characteristics, price, and other parameters in such a way that the purchaser actually replaces or is ready to replace one product with another during consumption (including consumption for production purposes).

Based on this definition, one can identify the following general criteria for the interchangeability of goods:

• comparability of goods by functional purpose, application, qualitative and technical characteristics, price, and other parameters;
• the readiness of the consumer to replace one product with another.

In simple terms, interchangeable goods have characteristics that consumers consider similar, perform similar functions, and are capable of satisfying approximately the same needs. If a consumer is not ready to purchase product A instead of product B, then they are not interchangeable. This is illustrated by a practical example.

In Case No. A58-109/2014, a regional administration of the FAS Russia conducted a study of the automobile fuel market and concluded that Normal-80 gasoline was interchangeable with Regular-92, Premium-95, and Super-98 gasoline. Based on the analysis, the antimonopoly authority decided to include the Company, which sells automobile fuel, in the Register of Economic Entities holding a dominant position in the market. The Company challenged the act of the antimonopoly authority in court. During the judicial review, it was revealed that the questions posed to the purchasers of automobile gasoline were formulated incorrectly, which led to unreliable results. The court decided that a low-grade gasoline cannot be interchangeable with a higher-grade gasoline. The order to include the Company in the Register of Economic Entities holding a dominant position in the market was declared invalid [1].

The Impact of Interchangeability of Goods on Market Definition

According to Clause 4 of Article 4 of the Competition Law, a commodity market is recognized as the sphere of circulation of a product (including foreign-made products) that cannot be replaced by another product, or of interchangeable goods, within the boundaries of which (including geographic ones) the purchaser can acquire the product based on economic, technical, or other possibilities or expediency, and such possibility or expediency is absent outside those boundaries.

Thus, when determining a commodity market, it is necessary to establish the presence or absence of interchangeable goods.

As FAS Russia indicates [2], economic entities often erroneously calculate their market share based on the volume of the entire nomenclature of goods in physical terms or based on the volume of revenue received in monetary terms relative to competitors. For example, the commodity market for medical devices used in hemodialysis consists of dialyzers from various manufacturers (Gambro, Fresenius, B. Braun, Baxter, etc.), the consumer properties of which differ in terms of membrane material and area, priming volume, and filtration coefficient. However, as a result of market analysis, FAS Russia established that, despite existing differences, dialyzers from various manufacturers are interchangeable and form a single commodity market. Conversely, there are bloodlines for hemodialysis in circulation, some of which can be used on artificial kidney machines from various manufacturers, while others are compatible only with machines from a specific manufacturer. The bloodlines mentioned in the second case do not have interchangeable goods and form a separate commodity market consisting of a single product from a specific manufacturer, which, by all indications, may hold a dominant position in the market for such bloodlines.

Thus, identifying interchangeable goods or their absence helps to define a particular commodity market as separate and distinguish it from other commodity markets. This is necessary for assessing the state of the competitive environment and subsequently exercising state control over compliance with antimonopoly legislation.

Determining the Interchangeability of Goods for the Purposes of Antitrust Litigation and Control over Economic Concentration

Issues of determining the interchangeability of goods are of critical importance when considering cases involving violations of antimonopoly legislation (primarily for the purpose of establishing the dominant position of an economic entity, facts of unfair competition, or the conclusion of anticompetitive agreements), as well as for state control over economic concentration.

Before making a decision, the antimonopoly authority must conduct an analysis of the state of competition in the commodity market (Part 5.1 of Article 45 of the Competition Law).

The procedure for analyzing the state of competition was approved by FAS Russia Order No. 220 dated April 28, 2010 [3], (the "Order No. 220"). One stage of such analysis is the procedure for identifying interchangeable goods circulating in the same commodity market, which is called the determination of the product boundaries of the commodity market.

The procedure for determining the product boundaries of the commodity market includes:

• Preliminary determination of the product. This determination is carried out based on an analysis of national product classifiers (OKPD 2), trade dictionaries or commodity handbooks, conclusions of specialists with specialized knowledge in the relevant field, and other methods that allow for the unambiguous identification of the product.
• Identification of goods that are potentially interchangeable with the given product. The identification of goods potentially interchangeable with the given product is carried out through expert assessments, as well as an analysis of goods included in the same OKPD 2 classification group as the product under consideration.
• Determination of interchangeable goods. According to Clause 3.8 of Order No. 220, one or more of the following methods are used to determine the interchangeability of goods:

1. The "Hypothetical Monopolist Test". The hypothetical monopolist test is the priority method for determining the interchangeability of goods and involves ascertaining the opinion of product purchasers regarding interchangeable goods. It should be noted that the opinion of buyers may differ depending on the method of their participation in the turnover of the product (wholesale, small-wholesale, or individual purchaser). Such commodity markets should be analyzed separately.

The opinion of buyers is determined through a census or sample survey of buyers, as well as an analysis of the subject matter of the contracts under which the product is sold. As FAS Russia explains [4], it is advisable to conduct a census survey when the number of buyers is small (e.g., no more than 100), they are easily identifiable, and they have the opportunity to participate in the survey.

During the test, buyers answer the question: "What goods and in what volume would they prefer to replace the product with if the price for it increases permanently (for longer than one year) by 5–10%, while the prices for other goods remain unchanged?"

This test allows for determining whether a small but significant and non-transitory increase in the price of a product can induce buyers to purchase another product instead. In the case of a positive answer, the goods are interchangeable and constitute a single commodity market. If the buyers answer this question in the negative, the items are considered different goods.

Furthermore, goods are not classified as interchangeable if more than a year is required to replace the product with another product in the process of consumption, or if the purchaser incurs significant costs due to the replacement, generally exceeding 10 percent of the price of the product (Clause 3.7 of Order No. 220).

Since the opinion of consumers is central to the hypothetical monopolist test, it is extremely important to formulate the questions correctly and conduct the survey accurately.

2. Analysis of pricing and price dynamics, and changes in demand volume when prices change. This method is based on information regarding actual changes in demand in the market when the price of a particular product changes. For example, during an economic crisis, prices for many goods rise, and as a result, consumers switch to other goods. The existence of such switching may indicate the interchangeability of goods. As researchers of this issue indicate [5], the difference between this method and the hypothetical monopolist test is that it analyzes actual market situations rather than a hypothetical one.

3. Calculation of the cross-price elasticity of demand. This method determines the ratio between the change in demand for a specific product and the corresponding change in the price of that product. If products A and B are interchangeable and are within the same product boundaries, then an increase in the price of product A will lead to an increase in demand for product B.

The choice of the last two research methods, unlike the hypothetical monopolist method, must be justified in the analytical report.

Note that according to the legal position of the Supreme Court of the Russian Federation set forth in Clause 56 of the Resolution of the Plenum No. 2 dated March 4, 2021, On Certain Issues Arising in Connection with the Application of Antimonopoly Legislation by Courts, an analytical report on the state of competition does not predetermine conclusions about the presence or absence of an antimonopoly violation, does not have pre-established evidentiary force, and is subject to evaluation by the court alongside other evidence presented in the case materials.

For instance, in Case No. A63-12846/2020, Company X (the Supplier) and Company A (the Buyer) entered into a contract for the supply of Gornaya natural mineral table water. During the performance of the contract, the Supplier significantly increased the price of the mineral water. The Buyer turned to the antimonopoly authority regarding the lawfulness of this increase. The antimonopoly authority recognized the Supplier's actions as an abuse of a dominant position, manifested in the establishment of a monopolistically high price, and issued an order to change the selling price. The Supplier appealed to the court to have the decision and order of the antimonopoly authority declared unlawful. The court appointed a forensic expert to verify the analytical report of the FAS Russia. According to the expert's conclusion, Gornaya water is not the only sodium hydrocarbonate mineral table water; there are other waters with identical properties. The court concluded that the antimonopoly authority incorrectly determined the interchangeable goods and, as a result, made an erroneous conclusion regarding Company X's dominant position, declaring the decision and order of the FAS Russia invalid [6].

It should be noted that the interchangeability of goods must be established when there are signs of an abuse of a dominant position, regardless of the commodity markets in which it was carried out.

Thus, in Case No. A50-17553/2023 [7], the antimonopoly authority found Company P guilty of abusing its dominant position in the aerated concrete blocks market. The Company attempted to challenge the decision and order of the FAS Russia on the grounds of an incorrect determination of interchangeability — specifically, the failure to recognize aerated concrete blocks as interchangeable with other wall materials. The courts pointed out that the analytical report compared aerated concrete blocks and other types of construction materials based on significant properties: geometric parameters, mechanical and physical properties, use in construction, manufacturing process, price, etc. The interchangeability of these goods was not confirmed. The claim was denied.

Therefore, the correct determination of the interchangeability of goods is of key importance in determining the composition of economic entities operating in the commodity market, their shares, the level of concentration of the commodity market, and the overall state of competition in the commodity market.

Interchangeability of Goods and Antimonopoly Requirements for Tenders

Article 17 of the Competition Law establishes antimonopoly requirements for tenders, prohibiting actions that lead or may lead to the prevention, restriction, or elimination of competition.

In particular, the following are prohibited:

• restricting access to participation in tenders, requests for quotations, or requests for proposals in the case of procurement of goods, works, or services for state and municipal needs, unless provided for by federal laws or other regulatory legal acts (Part 2 of Article 17 of Law No. 135-FZ);
• including in lots goods that are not technologically or functionally related to the goods whose supply is the subject of the tender, request for quotations, or request for proposals (Part 3 of Article 17 of the Competition Law).

Although these norms do not directly contain any rules regarding the interchangeability of goods, an analysis of practice shows that it is taken into account by antimonopoly authorities during audits for violations of antimonopoly requirements for tenders. This is illustrated by practical examples.

Thus, in Case No. 074/01/17-1216/2020, a City Administration announced an auction for the supply of a motor grader. A bidder filed a complaint with the antimonopoly authority, pointing out that the technical specifications established characteristics that matched the parameters of a motor grader from only one manufacturer. The operating weight of the motor grader, the length and height of the bulldozer blade, and the tire size were specified as blocking characteristics. The Customer claimed that it established these characteristics according to its needs. The antimonopoly authority analyzed the motor grader market and found that motor graders are manufactured in the Russian Federation by several producers. Based on functional purpose, application, and qualitative and technical characteristics, the interchangeability of motor graders of the class required by the Customer is possible. Furthermore, the Customer did not fully justify the need to establish "blocking" characteristics. The antimonopoly authority concluded that establishing requirements for product characteristics in the documentation that match the parameters of a motor grader from only one manufacturer violated the principle of equal access to tenders and led to a restriction of competition. The Customer's actions were found to be in violation of Part 2 of Article 17 of the Competition Law, and the materials were transferred for the initiation of an administrative offense case against the officials [8].

In another case, No. 025/06/64-599/2021, a Clinic published a notice for an electronic auction for the supply of medical devices (electrosurgical electrodes, electrode holders, and an infusion pump). One of the bidders filed a complaint with the antimonopoly authority regarding the combination of consumer goods and unique goods into a single lot. During the consideration of the case, it was established that the electrodes and holders are used for surgical interventions, while the pump is used for the prolonged, metered administration of highly active medicinal products. The antimonopoly authority concluded that non-interchangeable goods were combined in a single procurement. The Customer's actions were found to be in violation of Part 3 of Article 17 of the Competition Law, manifested in the combination of goods with different functional characteristics that are not technologically related into one lot. The complaint was found to be justified, and an order to eliminate the violations was issued [9].

Thus, when preparing procurement documentation, it is necessary to evaluate it for compliance with the general principles of antimonopoly regulation, including whether the requirements for the product's characteristics correspond to several interchangeable goods. Otherwise, it will be necessary to justify to the antimonopoly authority the need to purchase a product from a specific manufacturer.

The specifics of determining the interchangeability of medicinal products in public procurement are discussed separately below.

Interchangeability of Medicinal Products

Medicinal products are a special type of goods whose use can significantly affect human life and health. Due to their specificity, it would be incorrect to use general criteria to determine their interchangeability.

At the same time, for a long time, the interchangeability of medicinal products for the purpose of establishing violations of antimonopoly requirements for tenders was determined by FAS Russia through letters and clarifications that were recommendatory in nature. Generally, the antimonopoly authority focused on the International Nonproprietary Name (INN) as the key criterion for interchangeability. As a consequence, medicinal products with different dosages (e.g., 40 mg/0.4 ml and 40 mg/0.8 ml) could be recognized as interchangeable. In some cases, even medicinal products with different INNs or grouping names were recognized as interchangeable by the antimonopoly authority [10]. Other characteristics, such as the dosage form, priming volume, number of units in secondary packaging, etc., according to the regulatory authority, do not affect the therapeutic properties of the drugs and their interchangeability at all.

Such an approach caused bewilderment in the medical and pharmaceutical communities and did not contribute to the uniformity of law enforcement practice. Customers had to defend their right to purchase the necessary medicinal products using complex arguments: clinical recommendations, conclusions of experts and chief specialists, etc. The situation began to change after the entry into force of amendments [11] to Federal Law No. 61-FZ dated April 12, 2010, On Circulation of Medicinal Products (the "Law on Circulation of Medicinal Products"), which introduced the institution of interchangeability.

According to the definition given in the Law on Circulation of Medicinal Products, an interchangeable medicinal product is a medicinal product with proven therapeutic equivalence or bioequivalence in relation to a reference medicinal product, having an equivalent qualitative and quantitative composition of active ingredients, composition of excipients, dosage form, and method of administration (Clause 12.3 of Article 4 of the Law on Circulation of Medicinal Products).

According to Article 27.1 of the Law on Circulation of Medicinal Products, the criteria for the interchangeability of medicinal products are:

• equivalence (for biosimilars — comparability) of the qualitative and quantitative characteristics of pharmaceutical substances (APIs);
• equivalence of the dosage form;
• equivalence or comparability of the composition of excipients;
• identity of the method of administration and use;
• compliance of the manufacturer with the Good Manufacturing Practice (GMP) rules.

More details on the criteria for interchangeability can be found in our specialized article [12].

Note that according to Decree of the Government of the Russian Federation No. 1357 dated September 4, 2020, On Approval of the Rules for the Use of Information on Interchangeable Medicinal Products for Medical Use and the Provision of Clarifications on Issues of Interchangeability of Medicinal Products for Medical Use, these interchangeability criteria are used:

• by medical workers when prescribing drugs to patients and by pharmaceutical workers when selling medicinal products;
• when conducting public procurements of medicinal products.

When considering cases of abuse of a dominant position in the market for medicinal products, the antimonopoly authority may be guided by general criteria for interchangeability, which raises serious doubts. The aforementioned general criteria for interchangeability are not adapted for the pharmaceutical market, where consumer choice is significantly hindered due to information asymmetry.

For example, in Case No. A40-297158/24-21-2228 [13], the antimonopoly authority recognized Company N's actions as an abuse of a dominant position in the market for the medicinal product for the treatment of breast cancer with the INN Lapatinib, manifested in the establishment and maintenance of a monopolistically high price, and issued an order to terminate the violation by establishing an economically justified price. The case was based on an analytical report following an analysis of the state of competition in the commodity market. The Company challenged the decision and order of the antimonopoly authority in court. The court pointed out that FAS Russia did not conduct a hypothetical monopolist test and did not establish interchangeable medicinal products, limiting itself to a letter from the FSBI "SCEEMP" about the absence of other manufacturers of medicinal products with the INN Lapatinib. At the same time, Company N presented evidence confirming the possibility of replacement with drugs with other active ingredients and INNs for the treatment of the specified disease. The decision and order of the FAS Russia were declared invalid.

Interchangeability of drugs in accordance with Article 27.1 of the Law on Circulation of Medicinal Products is determined by the Ministry of Health of Russia within a single INN based on the conclusion of a commission of experts from the FSBI "Scientific Center for Expertise of Medical Products".

The correctness of such an approach to determining interchangeability in public procurement was supported by the Supreme Court of the Russian Federation in Case No. AKPI17-441 [14]. In this case, Teva LLC succeeded in challenging FAS Russia Letter No. AD/6345/16 dated February 3, 2016, regarding the interchangeability of medicinal products for the treatment of patients with multiple sclerosis with the INN Glatiramer acetate. In the letter, the antimonopoly authority expressed the opinion that medicinal products with the INN "Glatiramer acetate" in a dosage of 20 mg/ml (when used once a day) and in a dosage of 40 mg/ml (when used three times a week) should be recognized as interchangeable. The Supreme Court of the Russian Federation pointed out that a conclusion on the interchangeability of a medicinal product for medical use can only be made by a commission of experts from an expert institution under the jurisdiction of the Ministry of Health of Russia. It declared the relevant clauses of the FAS Russia letter invalid.

The determination of the interchangeability of medicinal products during state and municipal procurement has additional specifics.

When purchasing medicinal products for state and municipal needs, customers are required to use the specifics of the description of medicinal products for medical use approved by Decree of the Government of the Russian Federation No. 1380 dated November 15, 2017 [15], (the "Decree No. 1380"). According to the provisions of this act, when describing the object of procurement, Customers are required to specify:

• the dosage form of the drug, including, inter alia, equivalent dosage forms;
• the dosage of the medicinal product with the possibility of supplying the medicinal product in a multiple dosage and double quantity or in non-multiple equivalent dosages that allow for achieving the same therapeutic effect.

As a general rule, when describing the object of procurement, information on the interchangeability of medicinal products for medical use is used (Clause 7 of Decree No. 1380). This information is contained in the List of Interchangeable Medicinal Products, posted on the official website of the Ministry of Health of Russia on the Internet. This List must be updated at least once a month, taking into account the established interchangeability for new registered medicinal products and changes made to the registration dossier for registered medicinal products. However, in practice, this List is not updated with the specified frequency and is not convenient to use from a technical standpoint.

An additional source for the interchangeability of medicinal products can be the Unified Structured Catalog of Medicinal Products (the "ESKLP"), which is part of the Unified State Health Information System in the Sphere of Healthcare (EGISZ) and contains the section "Groups of Interchangeable Medicinal Products". The ESKLP is posted on the official website of the Ministry of Health of Russia.

However, when using it for these purposes, the following should be kept in mind. As the Ministry of Health of Russia explains [16], information from the ESKLP is for reference purposes only. The use of the ESKLP for the purpose of determining interchangeability is not provided for by any regulatory act. There are contradictions between the List of Interchangeable Medicinal Products and the ESKLP.

At the same time, as researchers of this issue indicate [17], information from the ESKLP can be a help for customers in justifying the decision made on the equivalence of dosage forms and dosages, which is already confirmed by law enforcement practice.

For instance, in Case No. 077/06/106-8031/2024 [18], the Customer was purchasing a medicinal product with the INN Colistimethate sodium. The dosage forms "powder for solution for injection, infusion, and inhalation" and "lyophilizate for solution for injection, infusion, and inhalation" were specified as equivalent. One of the bidders filed a complaint against the provisions of the notice, stating that the drug in the form "powder for solution for intravenous administration and inhalation" was not specified as interchangeable. In support of its position, the complainant referred to the List of Interchangeable Medicinal Products, which indicated their interchangeability. The antimonopoly authority pointed out that this List indicates the interchangeability of certain drugs, rather than the equivalence of the dosage forms of such drugs, and therefore, when determining equivalent dosage forms of a drug, one should be guided by ESKLP data.

Furthermore, more complex situations regarding the determination of the interchangeability of medicinal products occur in practice. For example, medicinal products may be recognized as interchangeable, but the indications for use according to the instructions for use may differ. Obtaining an interchangeable medicinal product in such a case may not satisfy the Customer's needs.

Thus, issues regarding the interchangeability of medicinal products during public procurement still cause a significant number of disputes, and law enforcement practice is not uniform. In this regard, we recommend that customers, when describing the object of procurement, carefully study the state of the commodity market and analyze their own needs in addition to formal compliance with legislative requirements.

In conclusion, we note that the institution of interchangeability of goods is of great importance in analyzing the state of competition, as well as in conducting public procurements. At the same time, despite the apparent regulation in specialized legislation, the determination of interchangeability of goods depends on a significant number of factors, which does not contribute to the stability of law enforcement practice.

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References

[1] Resolution of the Arbitration Court of the East Siberian District dated October 23, 2014, No. F02-4622/2014 in Case No. A58-109/2014.

[2] Recommendations of FAS Russia on the Development and Application of Commercial Policies by Economic Entities Holding a Dominant Position in the Markets for Medicinal Products and the Markets for Medical Devices, approved by the Presidium of FAS Russia on June 17, 2015.

[3] Order of FAS Russia No. 220 dated April 28, 2010, On Approval of the Procedure for Conducting Analysis of the State of Competition on the Commodity Market.

[4] Clarification of FAS Russia No. 17, On Certain Issues of the Analysis of the State of Competition, approved by the protocol of the Presidium of FAS Russia No. 3 dated April 10, 2019.

[5] Competition Law (edited by M.A. Egorova and A.Yu. Kinev) // Yustitsinform, 2018.

[6] Resolution of the Arbitration Court of the North Caucasus District dated August 24, 2022, No. F08-8193/2022 in Case No. A63-12846/2020.

[7] Resolution of the Arbitration Court of the Urals District dated October 23, 2024, No. F09-5489/24 in Case No. A50-17553/2023.

[8] Decision of the Chelyabinsk Administration of the FAS Russia dated November 10, 2020, in Case No. 074/01/17-1216/2020.

[9] Decision of the Primorsky Administration of the FAS Russia dated May 26, 2021, in Case No. 025/06/64-599/2021.

[10] Letter of the Federal Antimonopoly Service No. IA/11648/18 dated February 21, 2018, On the Formation of Documentation for the Procurement of Medicinal Products with the Grouping Names "Albumin", "Human Albumin", "Albumin Human".

[11] Federal Law No. 429-FZ dated December 22, 2014, On Amending the Federal Law On Circulation of Medicinal Products.

[12] See: https://brace-lf.com/informaciya/farmatsevticheskoe-i-meditsinskoe-pravo/vzaimozamenyaemost-lekarstvennykh-preparatov.

[13] Resolution of the Ninth Arbitration Court of Appeal dated November 8, 2018, No. 09AP-50640/2018 in Case No. A40-91633/18-120-1046.

[14] Decision of the Supreme Court of the Russian Federation No. AKPI17-441 dated July 24, 2017, On Declaring Invalid Paragraphs Twenty-Two, Twenty-Eight, Twenty-Nine, Thirty of the Letter of the Federal Antimonopoly Service dated February 3, 2016, No. AD/6345/16 "On Consideration of the Appeal".

[15] Decree of the Government of Russia No. 1380 dated November 15, 2017, On the Specifics of the Description of Medicinal Products for Medical Use, which are the Object of Procurement for the Provision of State and Municipal Needs.

[16] Letter of the Ministry of Health of Russia No. 18-2/I/2-8895 dated June 25, 2020.

[17] Alexandrov G. Innovations in Medical Procurement 3.0 // Progoszakaz.rf, 2020, No. 8.

[18] Decision of the Moscow Administration of the FAS Russia dated June 11, 2024, in Case No. 077/06/106-8031/2024.