Recovering Damages for Antimonopoly Violations in Russia: Legal Insights and Court Practice

November 18, 2024

BRACE Law Firm ©

Market participants frequently file complaints with the antimonopoly authority regarding violations by other economic entities or government bodies, expecting to receive protection. Based on the results of such reviews, the antimonopoly authority may issue an order to cease violations and/or mandate the transfer of illegally obtained income to the federal budget. However, these measures do not compensate for the losses the applicant incurred due to another party's violation of antimonopoly legislation. To recover such losses, one must file a private law claim for damages in court.

In this article, we use high court practice to analyze who can recover damages and under what circumstances, what must be proven, and provide practical recommendations for recovering damages in the event of antimonopoly violations.

Who May Recover Damages and What Types of Damages are Available?

Under Part 3, Article 37 of Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition (the "Competition Protection Law" or "Law No. 135-FZ"), persons whose rights and interests are violated as a result of a breach of antimonopoly legislation are entitled to file a claim in court for damages.

According to Part 2, Article 15 of the Civil Code, damages include:

• Expenses that the person whose right was violated has incurred or will have to incur to restore the violated right, or the loss of or damage to its property (actual damage);
• Lost income that this person would have received under ordinary conditions of civil circulation if its right had not been violated (lost profits).

Examples of actual damage include the payment of an unreasonably high price (a monopolistically high price, or one inflated due to an artificial reduction in sales volume) or additional expenses a person was forced to pay due to the imposition of unfavorable contract terms. Lost profits include, for instance, loss of income from the sale of goods or the loss of customers.

Any person who believes their rights and interests were violated as a result of an antimonopoly breach may file a claim for damages. As explained in 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 (the "Plenum Resolution No. 2"), persons entitled to compensation include economic entities operating in the relevant commodity market (competitors of the violator), counterparties of the violator, and end consumers, including those who were not direct purchasers of the goods at the inflated price. The latter are also referred to as "indirect buyers".

FAS Russia addresses the possibility of passing on costs to indirect buyers in Clarification of the Presidium of FAS Russia No. 11 dated October 11, 2017, On Determining the Amount of Damages Caused as a Result of Violation of Antimonopoly Legislation (the "Clarification of the Presidium of FAS No. 11"). This refers to situations where an economic entity, whose costs increased due to an antimonopoly violation committed by others (e.g., by purchasing goods at inflated prices), increases the price of its own goods, services, or works, thereby "passing on" its increased financial burden, in whole or in part, to end consumers. The antimonopoly authority expresses the opinion that indirect buyers have the right to demand compensation for their damages in such cases. Unfortunately, we have not found any judicial practice supporting or refuting this position. In our view, this is due to the difficulty of proving damages and the reluctance of individual natural persons to engage in lengthy litigation.

Regarding a "victim" economic entity, the Supreme Court of the Russian Federation clarified that passing on costs to end buyers does not mean the entity suffered no damages from the violation. In such cases, the compensation should be the difference between the inflated price paid by the economic entity and the costs passed on to the buyers (Paragraph 63 of Plenum Resolution No. 2). However, courts do not always recognize the right to recover damages. For example, in Case No. A40-152921/2021, [1] a bank sued a mobile operator for damages amounting to 1,200,000 rubles arising from increased prices for SMS mailing services. During the proceedings, it was established that the plaintiff introduced a new commission for its customers to compensate for SMS notification expenses. Consequently, the bank effectively received income that compensated for its increased costs. The court ruled that passing on additional costs to end consumers by the party harmed by an antimonopoly violation precludes the recovery of damages in its favor and dismissed the claim.

Defendants in such lawsuits may be economic entities or federal and local government authorities that violated antimonopoly legislation. Current civil legislation also provides for the possibility of joint and several liability for persons who jointly caused damages. Furthermore, some researchers [2] believe that involving multiple defendants in a damages case increases the chances of success and significantly facilitates the subsequent enforcement of the judicial act.

Despite the specifics of antimonopoly regulation, the recovery of damages is carried out according to the general rules of civil law. Below we examine what must be proven to satisfy a claim.

What Must Be Proven to Recover Damages?

To recover damages, a plaintiff must prove the existence of the following conditions in aggregate:

• The defendant's unlawful action (omission);
• The existence and amount of damages incurred;
• The causal link between the unlawful actions (omission) and the resulting damages.

This conclusion follows from the provisions of Articles 15 and 1064 of the Civil Code. Failure to prove any one of these conditions results in a denial of the claim. Their presence or absence is assessed by the court in each specific case based on the facts and the evidence presented by the parties, making such disputes complex and somewhat unique.

Below, we detail the specifics of proving each element using examples from judicial practice.

Unlawful Conduct of the Defendant

One of the key conditions for recovering damages is the defendant's unlawful conduct. In this context, unlawfulness implies that a specific person committed an action or omission, concluded an agreement, or issued an act that contradicts antimonopoly legislation. For example, a person violated the prohibition on concluding anti-competitive agreements or sold goods using intellectual property results unlawfully. The violator's fault is presumed unless proven otherwise (Part 2, Article 1064 of the Civil Code).

The Competition Protection Law does not require filing a complaint with the antimonopoly authority before filing a lawsuit in court. In practice, two strategies may be used:

• The claim is based on a decision by the antimonopoly authority establishing that the defendant's actions, omissions, agreements, or acts violated antimonopoly legislation (referred to in foreign jurisdictions as follow-on claims);
• The person harmed by the violation does not utilize the administrative form of protection before filing the lawsuit (referred to in foreign jurisdictions as stand-alone claims).

The burden of proof differs depending on the chosen strategy. If the antimonopoly authority has established a violation, the plaintiff is exempt from proving this fact and from justifying a legal interest in protecting its rights. However, the defendant may present evidence to the court to refute the antimonopoly authority's findings. If no such decision exists, the burden of proving the violation, including market analysis, rests with the plaintiff (Paragraph 61 of Plenum Resolution No. 2).

Note that the probability of succeeding in a damages claim without a corresponding FAS decision is low. As researchers on this topic correctly point out, [3] this is due to the lack of — or significant limitations on — the plaintiffs' ability to prove complex antimonopoly offenses. The specifics of certain commodity markets and limited access to necessary information often mean that a violation can only be confirmed after a lengthy antimonopoly investigation. This is illustrated by the following example from judicial practice.

In Case No. A40-74893/23-5-598, [4] Individual Entrepreneur S. sued Individual Entrepreneur G. to recognize a violation of the right to fair competition and to recover damages of 339,768 rubles. The plaintiff used an online platform to sell its goods and discovered a significant volume of ordered but uncollected items. After an analysis, the plaintiff concluded the defendant was making these orders. As a result, the plaintiff's rating and sales volume dropped significantly, and it incurred delivery costs for 3,432 items returned from pickup points. The court stated that if the violation was not established by an antimonopoly authority, the burden of proof rests on the plaintiff. The evidence provided (screenshots of correspondence) did not confirm unfair competition. The court dismissed the claim, and the Supreme Court of the Russian Federation refused to review the decision.

Consequently, obtaining a decision from the antimonopoly authority regarding the violation significantly reduces both the risk of claim dismissal and the costs for the injured party.

Determining the Amount of Damages

The fact of an antimonopoly violation alone does not create an unconditional obligation to compensate the victim. One must prove the existence and amount of damages. As noted, damages include actual damage and lost profits.

Actual damage includes not only expenses actually incurred but also those that will be incurred to restore the violated right. As researchers note, [5] successful recoveries of actual damage are common in cases where a violator refuses to perform or avoids concluding a contract, abuses a dominant position, or violates antimonopoly requirements for tenders. Furthermore, courts recognize as actual damage the expenses incurred in connection with proceedings before antimonopoly authorities (legal representation fees, [6] evaluation costs, and the collection and securing of evidence [7]).

This is illustrated by Case No. A60-15297/2022. [8] A customer held an auction for the supply of suture material with an Initial Maximum Contract Price (IMCP) of 12,544,157 rubles. The application of Company L. was rejected for failing to meet documentation requirements, and the contract was awarded to another bidder. FAS initially deemed the complaint regarding the rejection unfounded. However, arbitration courts subsequently declared the FAS decision unlawful and the contract with the winner invalid. Based on these rulings, Company L. sued the Customer and the Procurement Department for actual damages of 469,046 rubles on a joint and several basis. The plaintiff presented an agency agreement under which an agent was hired to find auctions, study documentation, and prepare applications. The plaintiff had paid 439,046 rubles in agency fees for the specific auction and 30,000 rubles for legal representation during the FAS review. While the court of first instance dismissed the claim, the appellate and cassation courts ruled that the plaintiff should have been declared the winner. Under the circumstances, the agency fee payments constituted damages directly caused by the unlawful rejection of the application. The damages were recovered from the Procurement Department as the entity responsible for determining suppliers. The Supreme Court of the Russian Federation refused to review the case.

Practice shows that recovering lost profits is more difficult, as courts often dismiss such claims due to a lack of proof of their existence. For instance, in Case No. A56-31511/2023, [9] a company sued an enterprise for lost profits of 6,670,200 rubles. The claim alleged that the enterprise avoided competitive procedures by concluding six contracts with a single-source supplier for road salt, depriving the plaintiff of potential profit. The court ruled there was no evidence of lost profits, specifically failing to show the plaintiff's real possibility of winning the procurement, or concluding and performing the contracts, had they been conducted properly.

Courts also frequently deny lost profits due to a failure to prove the specific amount. However, this has begun to change. In 2015, the Supreme Court of the Russian Federation, in Paragraphs 12 and 14 of Plenum Resolution No. 25 dated June 23, 2015, noted that since lost profits represent unrealized income, their calculation is generally approximate and probabilistic. This fact alone cannot serve as grounds for dismissing a claim. The amount of damages must be established with a reasonable degree of certainty.

In Case No. A45-15457/2023, [10] Company L. sued Company T. for lost profits of 2,341,656 rubles caused by an antimonopoly violation. The plaintiff held a patent for a "Facade Insulation System." A regional FAS office had established that Company T. violated the prohibition on unfair competition by manufacturing and using facade panels that utilized Company L.'s patent. The plaintiff argued that its lost profits consisted of the profit it failed to receive from selling its panels for a specific apartment building renovation. It provided an economic calculation based on its financial performance reports. The court agreed with the antimonopoly authority's findings and the plaintiff's calculation, stating that the lost profit is determined by the revenue the plaintiff would have received from supplying its own products rather than "counterfeit" ones. The court awarded the damages and 500,000 rubles in legal fees. The appellate court upheld the decision.

Various economic methodologies are used in practice to calculate damages. Plenum Resolution No. 2 suggests the following methods:

• Comparing prices before, during, and/or after the violation;
• Analyzing financial performance indicators (industry profitability);
• Using other market analysis tools.

The choice of method depends on the type of antimonopoly violation. Approaches and examples are detailed in Clarification of the Presidium of FAS No. 11 and Clarification of the Presidium of FAS Russia No. 6 dated June 25, 2015, On Proving and Calculating Damages Caused by Violation of Antimonopoly Legislation. According to these clarifications, arbitration courts have accepted the following calculation methods:

• The difference between the value of products planned for sale but not realized and the expenses associated with preparing those products for sale;
• The difference between an economically justified price and a price inflated by a dominant subject;
• Costs for purchasing equipment or performing work due to the imposition of unfavorable contract terms.

While these clarifications are not mandatory, they serve as useful tools. Calculating damages from antimonopoly violations is complex, requiring deep economic and legal expertise and often the involvement of experts.

How to Prove Causation in Antimonopoly Damages Claims?

Practice shows that proving a causal link between the antimonopoly violation and the damages is the most difficult task. A significant number of claims are dismissed due to a lack of evidence regarding this connection.

According to the position established by the Supreme Arbitration Court of the Russian Federation in Determination No. VAS-18333/12 dated April 8, 2013, the causal link must be direct (immediate). Furthermore, according to Paragraph 1.2.3 of Clarification of FAS No. 11, a direct causal link exists when, in a chain of consecutive events, no other circumstances significant for civil liability exist between the unlawful conduct and the damages. This is illustrated by Case No. A56-51830/2020. [11]

Company V. sued Company K. for lost profits of 3,319,057 rubles. The plaintiff alleged that the defendant constantly interfered in its business activities by demanding sales restrictions, prohibiting shipments under signed contracts, and threatening to terminate their dealer agreement. The court ruled that the plaintiff's arguments regarding potential income were exclusively subjective and probabilistic and were not supported by evidence. The court found no causal link between the defendant's actions and the alleged lost profits and dismissed the claim.

Nevertheless, there are successful examples of recovering lost profits, and the amounts can be substantial. In Case No. A40-14800/2014, [12] Russian pharmaceutical company B. sued foreign pharmaceutical concern T. for over 408 million rubles in lost profits for refusing to sell a medicinal product used to treat multiple sclerosis. The parties had a framework agreement for the secondary packaging and sale of the product in Russia, for which the defendant was to pay the plaintiff 16.5% of the contract amounts. Later, the defendant decided to sell the product through its own Russian representative office and refused to supply the plaintiff. Consequently, the plaintiff had to withdraw its bid from a Ministry of Health tender, which the defendant's representative office then won. The plaintiff calculated damages based on the 16.5% profit it would have received. While the cassation court initially overturned the lower courts' rulings for lack of causation, the Supreme Court of the Russian Federation ultimately recognized the plaintiff's claims as lawful, even though the manufacturer's representative had offered lower prices at the auction.

While many "rejection" decisions still occur — due to failures to establish unlawfulness, the existence of damages, or causation — successful cases confirm that proving damages for antimonopoly violations is possible.

Procedural Issues in Recovering Damages

As previously noted, filing a court claim for damages does not require a mandatory prior administrative appeal to the antimonopoly authority. However, when a claim is filed after an antimonopoly case is closed, the antimonopoly authority is joined as a third party not filing independent claims (Paragraph 61 of Plenum Resolution No. 2). We believe the antimonopoly authority should be involved as a third party in all such disputes, as it can provide expert conclusions on market conditions, the market shares and positions of participants, and other relevant factors.

The statute of limitations for these cases is three years from the day the person knew or should have known about the violation and the identity of the proper defendant. As clarified by the Supreme Court, the statute of limitations is suspended for the duration of the administrative review of the antimonopoly violation under the Competition Protection Law. The period continues to run from the day those time limits expire or the day the antimonopoly authority issues its decision (Paragraph 64 of Plenum Resolution No. 2).

Summary and Conclusions

• The antimonopoly authority is not authorized to resolve civil disputes regarding the recovery of damages; such claims must be filed in court.
• To recover damages, one must prove the aggregate existence of: unlawful conduct, the existence and amount of damages, and the causal link between the conduct and the damages.
• It is advisable to file a complaint with the antimonopoly authority before filing a lawsuit, as a favorable decision will strengthen the plaintiff's position.
• To increase the chances of success, it is expedient to involve competent specialists to select and secure evidence and calculate damages.

Despite the challenges discussed, the practice of recovering damages from antimonopoly violators is expanding, with an increasing number of claims filed and a higher percentage of cases won. With professional legal support, these claims serve as an effective mechanism for protecting the rights of economic entities harmed by antimonopoly violations.

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References

1. Resolution of the Arbitration Court of the Moscow District dated September 23, 2022 No. F05-20471/2022 in Case No. A40-152921/2021.
2. Sulimenko A.D. Recovery of Damages Caused by Violation of Antimonopoly Legislation // Jurist. 2019. No. 7. pp. 61–69.
3. Tormagova, Podguzova, Recovery of Damages for Violation of Antimonopoly Legislation // Group of Companies, 2015, No. 9.
4. Determination of the Supreme Court of the Russian Federation dated June 24, 2024 No. 305-ES24-9036 in Case No. A40-74893/2023.
5. Kokorina V.O., Bechina Yu.V., Netrusova E.A. Compensation of Damages Caused by Violation of Antimonopoly Legislation // Competition Law. 2015. No. 2. pp. 25–30.
6. Resolution of the Arbitration Court of the North-Western District dated December 20, 2018 No. F07-15144/2018 in Case No. A13-18918/2017.
7. Resolution of the Arbitration Court of the Urals District dated May 30, 2017 No. F09-2344/17 in Case No. A07-11962/2016.
8. Determination of the Supreme Court of the Russian Federation dated July 17, 2023 No. 309-ES23-11908 in Case No. A60-15297/2022.
9. Resolution of the Arbitration Court of the North-Western District dated October 21, 2024 No. F07-10531/2024 in Case No. A56-31511/2023.
10. Resolution of the Seventh Arbitration Appellate Court dated August 29, 2024 No. 07AP-2772/24.
11. Resolution of the Arbitration Court of the North-Western District dated February 14, 2022 No. F07-17480/2021.
12. Determination of the Supreme Court of the Russian Federation dated May 10, 2016 No. 123-PEK16 in Case No. A40-14800/2014.