Commercial Policy in Russian Pharma and Medical Device Markets

 

Anna Ivanova, Associate at BRACE Law Firm ©

September 30, 2023

 

One of the primary documents regulating the activities of economic entities in the pharmaceutical and medical device markets is the trade (commercial) policy of companies. However, current legislation does not contain a definition of the term "commercial policy."

This article examines the specifics of developing commercial policies for pharmaceutical companies and companies in the sphere of medical device circulation. For these purposes, we will examine in detail what constitutes a dominant position of economic entities.

Trade policy is a set of organizational, legal, economic, informational, and other measures implemented by state authorities, local self-government bodies, and economic entities, as well as their associations, in connection with the organization and implementation of trade activities in accordance with the legislation. A distinction is made between state policy in the field of trade activities, the trade policy of organizations, the trade policy of a self-regulatory organization in the sphere of trade, etc. [1]. Nevertheless, in most cases, the terms "commercial policy" and "trade policy" are used as synonyms. In many companies, the "Commercial Policy" is part of the "Marketing Policy" (an official document, a copy of which is provided to the tax inspectorate upon request to identify objects of taxation). First and foremost, rules are fixed regarding the price and other basic commercial terms of work [2]. In this article, the terms "commercial policy" and "trade policy" will also be used as synonyms.

Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition (the "Law on Protection of Competition") contains a prohibition on the abuse of a dominant position. In addition to the application of the federal law by organizations, FAS Russia proposes implementing measures that prevent abuses within the framework of adopting internal regulations. At the same time, FAS Russia views the rules of trade practice as a document that defines the basic principles for the sale of goods by an economic entity holding a dominant position in the market. Simultaneously, it is asserted that an economic entity dominant in the product market must conscientiously observe the adopted rules of trade practice, including avoiding discrimination against counterparties and preventing abuse of its rights when verifying potential and existing counterparties. If a dominant economic entity commits actions contradicting the norms of the Law on Protection of Competition, the antimonopoly authority will assess such actions for violation of Article 10 of said law.

As noted by many experts, rules of trade practice should be viewed as acts of sub-statutory regulation, since they are based on the requirements of antimonopoly legislation and the charter of the economic entity (commercial corporate organization) and must not contradict them. These documents establish mandatory rules of a local nature and do not require state sanctioning but are subject to approval based on decisions of the management bodies of commercial corporations (the Board of Directors) [3].

Depending on the type of activity of the organization, the content of commercial policies may vary. For instance, the emergence of a dominant position in the pharmaceutical market is a fairly frequent occurrence. In particular, this may be related to the supply of vital and essential medicinal products, or the production of a unique product that has no analogues on the market. Furthermore, the rules for selecting counterparties and other provisions enshrined in the commercial policies of such organizations contain certain specifics due to the fact that the subject of supply by such companies is medicinal products.

Dominancy in Pharmaceutical and Medical Device Industries

Recall that according to the general rule of Article 5 of the Law on Protection of Competition, a dominant position is recognized as the position of an economic entity (group of persons) or several economic entities (groups of persons) in the market of a certain product, giving such economic entity (group of persons) or such economic entities (groups of persons) the ability to exert decisive influence on the general conditions of circulation of the product in the relevant product market, and (or) to eliminate other economic entities from this product market, and (or) to impede access to this product market for other economic entities.

The position of an economic entity (excluding a financial organization) is recognized as dominant:

• If its share in the market of a certain product exceeds 50%, unless established during the consideration of a case on violation of antimonopoly legislation or during state control over economic concentration that, despite exceeding said value, the position of the economic entity in the product market is not dominant;
• If its share in the market of a certain product is less than 50%, if the dominant position of such an economic entity is established by the antimonopoly authority based on the unchanging or minimally changing share of the economic entity in the product market, the relative size of shares in this product market belonging to competitors, the possibility of access to this product market for new competitors, or based on other criteria characterizing the product market.

Also, the position of each economic entity out of several economic entities (excluding a financial organization) is recognized as dominant if the following conditions are met in aggregate:

• The aggregate share of not more than 3 economic entities, the share of each of which is greater than the shares of other economic entities in the relevant product market, exceeds 50%, or the aggregate share of not more than 5 economic entities, the share of each of which is greater than the shares of other economic entities in the relevant product market, exceeds 70% (this provision does not apply if the share of at least one of said economic entities is less than 8%);
• Over a long period (for at least 1 year or, if such period is less than 1 year, during the existence of the relevant product market), the relative sizes of the shares of economic entities are unchanging or subject to insignificant changes, and access to the relevant product market for new competitors is difficult;
• The product sold or acquired by the economic entities cannot be replaced by another product during consumption (including consumption for production purposes), an increase in the price of the product does not cause a corresponding decrease in demand for this product, and information on the price, conditions of sale, or acquisition of this product in the relevant product market is available to an indefinite circle of persons.

Also, if the share of an economic entity in the market of a certain product exceeds 35% but is less than 50%, the process of establishing the dominant position of such an economic entity includes:

• Assessment of the dynamics of the economic entity's share in the product market, which must be unchanging or subject to insignificant changes;
• Assessment of the relative size of shares in the product market belonging to competitors;
• Assessment of the possibility of access to the product market for new competitors [4].

As noted by the Supreme Court of the Russian Federation, within the meaning of the interrelated provisions of Article 5 of the Law on Protection of Competition, an economic entity is recognized as holding a dominant position in the market if it has the ability to act independently of competitors and consumers (including those purchasing goods to satisfy entrepreneurial needs) in the market of a certain product and, consequently, possesses the ability to independently and unilaterally exert decisive influence on the general conditions of circulation of the product in the relevant product market, eliminate other economic entities from the product market, or impede their access to the product market. In this regard, when verifying the presence of dominance of an economic entity in the product market, its position relative to existing competitors in the market (market share), potential competitors (possibility of market access), and consumers is assessed.

When assessing the possibility of access to the product market for new competitors, the court, among other things, has the right to consider arguments regarding the presence (absence) of administrative barriers to access the market for potential competitors (e.g., the necessity of obtaining licenses and permits to conduct certain activities, mandatory consent of the copyright holder to use intellectual property results) and significant economic advantages of the economic entity (e.g., access to natural resources, production technologies, capital markets); the significance (extraordinary nature) of costs that counterparties of the economic entity must incur in case of switching to purchasing goods from other suppliers. The fact that no new competitors appeared in the market during the investigated period does not in itself testify to dominance in the market.

As a criterion for assessment characterizing the position of an economic entity (seller) relative to consumers, courts have the right to consider whether consumers have the ability to counteract the influence of the economic entity in the product market, for example, due to the significance of the share held by specific consumers in the market and (or) the commercial significance of consumers for the supplier [5].

Article 10 of the Law on Protection of Competition establishes a prohibition on the abuse by an economic entity of its dominant position. In particular, actions (inaction) of an economic entity holding a dominant position are prohibited if the result of such actions involves or may involve the prevention, restriction, or elimination of competition and (or) infringement of the interests of other persons (economic entities) in the sphere of entrepreneurial activity or an indefinite circle of consumers, including the following actions (inaction):

• Establishment or maintenance of a monopolistically high or monopolistically low product price;
• Withdrawal of goods from circulation, if the result of such withdrawal was an increase in the price of the goods;
• Imposing on a counterparty contractual terms that are unfavorable to them or unrelated to the subject of the contract (economically or technologically unjustified and (or) not expressly provided for by regulatory legal acts or judicial acts requirements for the transfer of financial funds, other property, including property rights, as well as consent to conclude a contract conditioned upon the inclusion of provisions regarding goods in which the counterparty is not interested, and other requirements);
• Economically or technologically unjustified reduction or cessation of product production, if there is demand for this product or orders for its supply are placed, provided there is a possibility for its profitable production, as well as if such reduction or cessation of product production is not expressly provided for by regulatory legal acts or judicial acts;
• Economically or technologically unjustified refusal or evasion from concluding a contract with individual buyers (customers) in the event of the possibility of production or supply of the relevant product, as well as if such refusal or evasion is not expressly provided for by regulatory legal acts or judicial acts;
• Economically, technologically, or otherwise unjustified establishment of different prices (tariffs) for the same product;
• Establishment by a financial organization of an unreasonably high or unreasonably low price for a financial service;
• Creation of discriminatory conditions;
• Creation of obstacles to access to the product market or exit from the product market for other economic entities;
• Violation of the pricing procedure established by regulatory legal acts;
• Manipulation of prices in the wholesale and (or) retail electric energy (capacity) markets.

It should be noted that the list of actions of a dominant economic entity that can be recognized as abuse is open-ended.

Methods of proving the fact of said abuses may vary. It is also worth noting that the law lacks a definition of the concept "indefinite circle of consumers" Consequently, in practice, questions may arise regarding the understanding of this term. As noted by the Supreme Court of the Russian Federation, the concept of an indefinite circle of consumers is used not in the sense of the impossibility of establishing the number of such persons at a given moment in time, but in the context of the multiplicity (non-singularity) of the number of consumers as market participants whose rights and legitimate interests may be affected by the actions of a person holding a dominant position, based on the nature of the abuse of market power committed by such person and the consequences of such violations. A different approach to interpreting this norm essentially leads to the establishment of unjustified differences in the scope of the prohibition on abuse of rights for subjects dominant in the market, which does not meet the principle of equality of all before the law [6].

Also, according to the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 2 dated March 4, 2021, in the event of a dispute, the antimonopoly authority is obliged to prove that the behavior of the economic entity constitutes an abuse committed in one of the forms indicated above.

In turn, the economic entity has the right to prove that its behavior does not constitute an abuse of a dominant position, as it is incapable of leading to adverse consequences for competition in the market and (or) has a reasonable justification. When assessing the presence of abuse, the court takes into account the legitimate interests of this entity, which any market participant has the right to pursue regardless of its position in the market — for example, related to compliance with safety rules when carrying out activities, the necessity of fulfilling other mandatory or customary requirements for the relevant sphere of activity, and ensuring the economic efficiency of its own activities as a market participant.

To avoid prosecution by antimonopoly authorities, FAS Russia recommends that economic entities align their activities with the norms of antimonopoly legislation, determine product markets that are potentially non-competitive, and develop and implement an internal document (trade policy) on the selection of counterparties, interaction with them, and termination of work with counterparties [7].

From these perspectives, an important method of preventing violations of antimonopoly legislation, including by economic entities dominant in product markets, can be considered the application of rules of trade practice, also referred to in competition law literature as commercial, trade-sales, or marketing policies [8].

Next, let us consider the main features of developing commercial policies for companies in the sphere of circulation of medicinal products and medical devices.

Commercial Policy of Pharmaceutical and Medical Device Companies

They can be conditionally divided into general provisions of commercial policies implemented by all economic entities, and provisions implemented by the pharmaceutical business. Let us examine in more detail the main provisions that must be in the commercial policy.

The main document clarifying the requirements for the content of commercial policy is the Recommendations of FAS Russia on the development and application of commercial policies by economic entities holding a dominant position in the markets of medicinal products and markets of medical devices (the "FAS Recommendations"), approved by the Presidium of FAS Russia on June 17, 2015, within the framework of which it is recommended to observe the following requirements for commercial policies and their implementation.

1. Determination of Share in Product Markets of Medicinal Products and Markets of Medical Devices.

The fact that an organization holds a dominant position in the market is not in itself a violation but imposes additional obligations on economic entities. Such companies include, among others, manufacturers and distributors of medicinal products and medical devices. At the same time, companies often make mistakes in calculating their share in the product market for the purpose of determining the criteria for classifying themselves as economic entities holding a dominant position.

As FAS Russia notes in its recommendations: "Economic entities often erroneously calculate the share they occupy based on the volume of the entire nomenclature of goods sold in physical terms or based on the volume of revenue received in monetary terms relative to competitors. However, it is necessary for economic entities to separate the entire nomenclature of goods into product markets of a certain product in accordance with the features of the concept of a product market. Such features are: the sphere of circulation of the product(s), the boundaries (including geographical) of the market, as well as the consumer's ability to purchase the product. When determining the product market, it is necessary to establish the presence or absence of interchangeable goods."

To avoid a formal approach to establishing the presence or absence of conditions for a collective dominant position, each of the quantitative and qualitative characteristics of the product market must be established in the order and based on sources of information on product markets provided by the Order of FAS Russia No. 220 dated April 28, 2010, "On Approving the Procedure for Analyzing the State of Competition in the Product Market" (the "Procedure for Analysis of Competition") [9]. Thus, according to Clause 5 of the Procedure for Analysis of Competition, when analyzing the state of competition in a product market, the following are used as initial information about product markets:

• Official statistical information data;
• Information obtained from tax, customs, and other state bodies, the Central Bank of the Russian Federation, and local self-government bodies;
• Information obtained from individuals and legal entities, including information provided by the buyer(s) of the given product, including as a result of their selective survey, as well as information provided by sellers of the given product;
• Results of economic and commodity examinations, conclusions of specialized organizations, as well as individual specialists and experts;
• Data from departmental and independent information centers and services;
• Data from consumer associations and producer associations;
• Mass media reports;
• Data from the antimonopoly authority's own studies and data from antimonopoly authorities of other states;
• Data from marketing and sociological studies, selective surveys, and questionnaires of economic entities, citizens, and public organizations;
• State standards, technical specifications, and other norms;
• Appeals of individuals and legal entities to the antimonopoly authority;
• Data from studies of the state of competition in the relevant product market previously conducted by antimonopoly authorities;
• Data from other sources.

Thus, FAS cites as one example: "During the procedure of peritoneal dialysis, medicinal products in the form of a solution from various manufacturers are used; however, it has been established that the medicinal product belongs to the category of special solutions for peritoneal dialysis created to increase the adequacy of peritoneal dialysis and has no analogues from other manufacturers. Accordingly, in cases where a doctor decides on the necessity of using specifically this solution, it is not possible to replace it with medicinal products of other manufacturers... However, representatives of the pharmaceutical company erroneously calculated the share of the medicinal product based on other medicinal products for peritoneal dialysis, including those of other manufacturers".

Thus, the determination of interchangeable goods, the composition of market participants, and the determination of the shares of each of them is of particular importance.

2. Correlation with Transnational Legal Acts.

For foreign companies or companies with a foreign element, the Foreign Corrupt Practices Act (the "FCPA") and the UK Bribery Act (the "UBA") may apply.

In particular, the FCPA applies to improper payments to a wide range of persons, but primarily concerns payments to officials. The term "official" is understood by American law much more broadly than by Russian anti-corruption legislation. While Russian anti-corruption legislation prohibits payments to civil servants and certain other categories of persons performing public functions, American law also prohibits payments to managers, directors, and employees of state-owned or state-controlled institutions or commercial enterprises, such as oil and gas companies, hospitals, and schools [10].

The UBA applies to any organization that conducts business or owns part of a business in the UK. Furthermore, it does not matter where the offense was committed. Subjects falling under this Law are companies registered in British territory, as well as persons associated with an organization registered in this territory [11].

Many organizations, especially pharmaceutical ones, quite often work not only within the Russian market but also carry out supplies within the international market; therefore, such legal acts of a cross-border nature may extend to their activities.

However, it is categorically forbidden to violate the requirements of Russian antimonopoly legislation under the "guise" of compliance with the FCPA and/or UBA.

FAS Russia considers that the FCPA and UBA are part of antimonopoly legislation, as they prohibit companies from buying and otherwise influencing the actions and decisions of officials or state bodies to obtain advantages in the market. However, if under the pretext of executing FCPA and UBA legislation, individual pharmaceutical companies dominant in the Russian market conduct illegal selection of their distributors, expressed in presenting excessive unjustified requirements to distributors and their reputation, subjective assessment when making decisions on cooperation with distributors, refusals to conclude or continue distribution agreements with certain distributors, etc., then such ranking of distributors will be considered a violation of Russian legislation on protection of competition.

3. Criteria for Selecting Counterparties by a Pharmaceutical Company and Companies in the Sphere of Medical Device Circulation.

One of the most fundamental and controversial points for a company's commercial policy is the development of criteria for selecting counterparties.

FAS Russia reports that if the list of criteria for selecting a potential counterparty is not exhaustive, the criteria are not formulated clearly, are unclear, or can be interpreted differently, then in the presence of a complaint about the action of an economic entity holding a dominant position regarding signs of Article 10 of the Law on Protection of Competition, the antimonopoly authority may qualify such actions as abuse of a dominant position.

FAS Russia does not establish precise criteria but provides clarifications that requirements for a counterparty may touch upon legal, financial, and business aspects of the counterparty's activity. Criteria for selecting counterparties may include, among others:

• Registration as a legal entity (individual entrepreneur);
• Absence of tax and fee arrears;
• Absence of liquidation or bankruptcy procedures regarding the counterparty;
• The counterparty's activity is not suspended;
• Presence of necessary licenses held by the counterparty;
• Absence of criminal record and criminal prosecution among persons holding managerial positions in the counterparty and its founders;
• Absence among persons holding managerial positions in the counterparty and its founders, as well as members of their families, of
• Persons holding state positions and having a conflict of interest.

It is important to note that said list is open-ended and depends on the organization's profile of activity. However, criteria must be clear with the possibility of unambiguous interpretation.

For example, FAS Russia considers it a violation: "...to refuse to conclude sales contracts with distributors in case of suspicions of violation by the buyer of anti-corruption legislation, based on data about counterparties obtained from unofficial sources (internet publications, media reports, phone calls, etc.) and not supported by official decisions on identified facts by authorized state power bodies. At the same time, companies do not consider it necessary to transfer materials in their possession containing signs of violation of legislation, including anti-corruption legislation, to the relevant competent bodies. Such a procedure for making decisions on concluding sales contracts is of a subjective and corrupt nature, and the existence of such a right may stimulate the dissemination of knowingly false information about distributors both by their competitors and by the importing companies themselves".

4. The Process of Selecting Counterparties by a Pharmaceutical Company and Working with Them.

According to FAS Russia recommendations, any trade policy, in addition to the above, should include a standard (model) contract with all essential terms of the contract (a template of which is publicly available on the Internet for free access by all potential and existing counterparties), and a counterparty (potential counterparty) application form. Furthermore, the terms of the contract and the provisions of the trade policy must not contradict each other.

In addition, the process of selecting counterparties must be set out in detail, disclosing all possible stages of considering applications for cooperation (for concluding a contract), disclosing information about persons (positions) who influence decision-making, make decisions, are members of the application review commission (if any), about the maximum deadline for considering such applications at each stage of verification, and about the possibility of extending verification deadlines with justification of possible reasons.

Thus, the antimonopoly authority considered it a violation when a commercial policy stated that the total term for document analysis should not exceed 3 months. However, if the deadline for a potential counterparty's response to a question posed during document verification exceeded 14 calendar days, the total term for application analysis was automatically extended by the period for providing a response by the potential counterparty exceeding 14 calendar days. Such conditions indicate the absence of maximum deadlines for considering applications.

It is important to note that justified differentiation of working conditions with counterparties is not prohibited if economically substantiated. For example, reducing the product price for a larger purchase volume. At the same time, it is important to clearly prescribe such volumes in the trade policy.

5. Termination of Work by a Pharma Company with a Counterparty.

The procedure and grounds for terminating work with a counterparty must be detailed in the relevant document (trade policy). The list of grounds must be exhaustive, justifications clearly formulated, clear, and unambiguously interpreted.

Thus, grounds for terminating work with a counterparty include:

• Liquidation of the counterparty;
• Occurrence of circumstances due to which the counterparty ceased to meet the approved criteria for selecting a counterparty and working with them;
• Cessation of economic activity by the counterparty;
• By agreement of the parties;
• Emergence of reconciled and confirmed debt for payment of goods with the definition of a uniform threshold debt amount and the inability (refusal) of the counterparty to repay it.

In this regard, we believe that the commercial policy may be supplemented by other grounds. Since there is no prohibition on introducing additional conditions for terminating legal relations with a counterparty. However, such conditions must be substantiated and not allow discrimination against counterparties on far-fetched grounds or grounds requiring a subjective assessment by the person making the decision to terminate legal relations.

6. Documentary Formalization of Commercial Policy.

FAS Russia, within the framework of its recommendations, draws attention to the fact that when implementing commercial policy, it is important to document each stage of the process, pay attention to the mandatory registration of incoming and outgoing correspondence, indicating the correspondent, subject and details of letters, and a summary of content.

Processes for considering cooperation applications, as well as decisions based on results, must be recorded in relevant documents (questionnaires, standard forms, certificates, reports, minutes) with signatures and indication of persons participating in management decisions. The result of analyzing the activity of a counterparty (potential counterparty) for compliance with criteria established by the trade policy should be a decision on refusal to conclude or on concluding (extending) a contract. For example, the antimonopoly authority recognized as unsubstantiated a decision by the head of an organization to refuse cooperation with a potential counterparty based on discussions with the financial director, legal director, and regional advisor on corporate regulation and procedure control, as there were no documents confirming the conduct of each stage of decision-making procedures, nor written documents reflecting the recommendations received from said employees.

It is also recommended to send letters (requests, responses with the adopted decision) to the address of counterparties (potential counterparties) with further clarification of information on its delivery to the addressee via notification through electronic communication channels or by courier with return receipt or by mail with return receipt. For example, the antimonopoly authority identified a case where the trade policy provided for sending notification of an adopted decision via electronic, facsimile, or postal communication, which did not guarantee receipt of the letter by the commercial partner. At the same time, with the aim of delaying the consideration procedure, the company sent letters to "erroneous" addresses.

In addition to the requirements indicated above, we consider it possible to recommend additionally familiarizing relevant employees with the commercial policy in writing and clarifying the procedure for their work and assessment of counterparties and potential customers. It is also recommended to specify the conditions for access and the positions of employees who will carry out the implementation of the commercial policy.

Specifics of Commercial Policies for Pharmaceutical and Medical Device Sectors

In addition to general requirements imposed on commercial policies of all organizations holding a dominant position, special attention should be paid to the specifics of commercial policies of pharmaceutical companies due to the fact that their activity has specific characteristics.

It is also necessary to pay attention to the fact that FAS Russia in its recommendations cites a quite significant number of violations identified specifically in the commercial policies of pharmaceutical organizations.

Thus, a pharmaceutical company concluded a framework agreement with a Russian economic entity on long-term cooperation in the supply of a medicinal product in "in bulk" packaging. As established by FAS Russia, the parties conscientiously fulfilled their obligations from 2010 to 2013. In accordance with the preamble of the framework agreement, it was a general agreement and the basis for individual contracts concluded by the parties. However, the pharmaceutical company refused to supply the medicinal product to the counterparty in favor of its subsidiary, despite the fact that the framework agreement was in effect and the parties did not initiate its termination. At the same time, the pharmaceutical organization conditioned the continuation of cooperation with the counterparty on the latter undergoing a full-scale check for compliance with the requirements of the anti-corruption legislation of a foreign state through the involvement of foreign specialists. Simultaneously, no documentarily recorded order of the authorized management body of the economic entity holding a dominant position regarding the termination of cooperation with the counterparty was presented, nor was there any indication of any decisions of authorized state bodies regarding conducting a check in relation to the counterparty or holding it liable for violation of anti-corruption or other legislation. Furthermore, the obligation of a counterparty to undergo a check under the anti-corruption legislation of other countries is not provided for by the legislation of the Russian Federation.

Thus, in the presence of a cooperation agreement, if an economic entity holding a dominant position economically or technologically unjustifiably refuses (evades) fulfillment of obligations under such an agreement, the antimonopoly authority may recognize such actions as non-compliant with antimonopoly legislation.

FAS Russia draws attention to the importance not only of the existence of the trade policy itself but also of its content (presence of a clear conceptual apparatus and transparent non-discriminatory criteria for selecting counterparties and cooperating with them in such policy), availability of the policy to an unlimited circle of persons, as well as the practice of execution of said policy by the dominant economic entity.

In addition to said requirements, we consider it possible to note that in the commercial policy of a pharmaceutical company, it is permissible to establish conditions regarding the presence of a valid license for pharmaceutical activity, including activity for storage, transportation, and sale of medicinal products (depending on the subject of the contract planned for conclusion and its other terms).

Also, one cannot fail to draw attention to the necessity for the counterparty to possess, based on ownership rights or other legal rights, documentarily confirmed presence with the partner/potential partner, based on ownership rights or other legal grounds, of premises, main equipment, and transport vehicles necessary for carrying out licensed activities.

Accordingly, as a criterion for assessing the legal capacity and business reputation of a potential counterparty, it is possible to recommend introducing such a condition as the absence, at the moment of verification, of facts of conducting an inspection by an authorized state body in connection with alleged violations of license requirements. If the pharmaceutical company developing the commercial policy becomes aware of an inspection by an authorized body regarding the compliance of the partner/potential partner, its warehouse premises, transport vehicles, and technical equipment with license requirements in connection with an alleged violation of license requirements, it is possible to empower the pharmaceutical company with the right to suspend the verification procedure until the completion of the inspection and demand from the partner/potential partner the provision of the inspection body's act on the results of the inspection or information on the decision of authorized bodies regarding holding liable for violation of license requirements.

However, if the conditions indicated above are introduced into the commercial policy of a pharmaceutical company, they must apply to all counterparties/potential counterparties. Also, general deadlines for considering applications of potential counterparties must be mandatorily established, taking into account their extension and possible suspension, with the designation of clear criteria for making relevant decisions on extension/suspension.

Commercial Policy Violations and Liability

The fact of violation of the provisions of Article 10 of the Law on Protection of Competition is established by the commission of the antimonopoly authority in the procedure provided for by Chapter 9 of the Law on Protection of Competition and is recorded in the decision on the case of violation of antimonopoly legislation.

In accordance with Part 1.2 of Article 28.1 of the CAO RF, this decision is grounds for initiating a case on an administrative offense provided for by Article 14.31 of the CAO RF.

Part 1 of Article 14.31 of the CAO RF provides for administrative liability for the commission by an economic entity holding a dominant position in the product market, excluding a natural monopoly entity, of actions recognized as abuse of a dominant position and impermissible in accordance with the antimonopoly legislation of the Russian Federation, if such actions lead or may lead to infringement of the interests of other persons and, at the same time, the result of such actions is not and cannot be the prevention, restriction, or elimination of competition. Specifically, such an offense entails the imposition of an administrative fine on officials in the amount of 15,000 to 20,000 rubles, and on legal entities – from 300,000 to 1,000,000 rubles.

Simultaneously, Part 2 of Article 14.31 of the CAO RF provides for administrative liability for the commission by an economic entity holding a dominant position in the product market of actions recognized as abuse of a dominant position and impermissible in accordance with the antimonopoly legislation of the Russian Federation, if the result of such actions is or may be the prevention, restriction, or elimination of competition, or the commission by a natural monopoly entity of actions recognized as abuse of a dominant position and impermissible in accordance with the antimonopoly legislation of the Russian Federation.

Such a violation entails the imposition of an administrative fine on officials in the amount of 20,000 to 50,000 rubles or disqualification for a term of up to 3 years; on legal entities – from 1/100 to 15/100 of the amount of the offender's revenue from the sale of the product (work, service) in the market of which the administrative offense was committed, or the amount of the offender's expenses for the acquisition of the product (work, service) in the market of which the administrative offense was committed, but not more than 1/50 of the aggregate amount of the offender's revenue from the sale of all goods (works, services) and not less than 100,000 rubles; and in the event that the amount of the offender's revenue from the sale of the product (work, service) in the market of which the administrative offense was committed, or the amount of the offender's expenses for the acquisition of the product (work, service) in the market of which the administrative offense was committed exceeds 75% of the aggregate amount of the offender's revenue from the sale of all goods (works, services), or the administrative offense was committed in the market of goods (works, services) the sale of which is carried out at prices (tariffs) regulated in accordance with the legislation of the Russian Federation – in the amount of 3/1000 to 3/100 of the amount of the offender's revenue from the sale of the product (work, service) in the market of which the administrative offense was committed, or the amount of the offender's expenses for the acquisition of the product (work, service) in the market of which the administrative offense was committed, but not more than 1/50 of the aggregate amount of the offender's revenue from the sale of all goods (works, services) and not less than 100,000 rubles.

Thus, violation of the requirements of the Law on Protection of Competition through abuse of a dominant position in the market entails the imposition of very serious sanctions on organizations. In this regard, as noted by many specialists, the commercial policy of an enterprise must contain the principles of the distribution system, division of clients by sales channels, pricing, provision and methods of calculating discounts, and logistical and financial working conditions.

A correctly constructed policy interests both distributors and retail trade, which creates a natural "pull" for the product and makes it available to the consumer. The choice of policy depends on the existing or expected turnover, investment possibilities, the influence of existing brands, competitiveness, and specifics of the specific product market [12].

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References

[1] GOST R 51303-2023. National Standard of the Russian Federation. Trade. Terms and Definitions, approved by the Order of Rosstandart dated June 30, 2023, No. 469-st.

[2] Distribution System. Tools for Creating Competitive Advantage. Sorokina T.

[3] Rules of Trade Practice in Competition Law. Ashfa D.M. Actual Problems of Russian Law. 2023, No. 3.

[4] Conditions for Recognizing the Dominant Position of an Economic Entity. Immunities for Certain Economic Entities Regarding the Establishment of Facts of Dominant Position Presence for Them. Sphere of Application of the Prohibition on Abuse of Dominant Position. Delimitation of Powers of FAS Russia and Other Controlling Bodies. Murmansk OFAS Russia. November 20, 2017.

[5] 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.

[6] Review of Judicial Practice of the Supreme Court of the Russian Federation No. 1 (2018), approved by the Presidium of the Supreme Court of the Russian Federation on March 28, 2018.

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

[8] Measures of Preventive Impact on Economic Entities Holding a Dominant Position. Khokhlov E.S. // Zakon. 2017. No. 4. P. 132 - 140.

[9] Clarification No. 15 of the Federal Antimonopoly Service "On Holding Liable for Abuse of Dominant Position by Economic Entities Recognized as Collectively Dominant", approved by the Minutes of the Presidium of FAS Russia dated October 24, 2018, No. 11.

[10] American Law on Corruption Operates in Russia. Nelmis D. Vedomosti. June 2, 2010.

[11] Anti-Corruption Regulation and Antimonopoly Compliance: Russia, USA, UK. E. Sokolovskaya, Y. Glubokaya. Competition and Law, No. 2, 2016.

[12] Principles of Building the Commercial Policy of an Enterprise. Supplier's Practicum. Leonov D. 2017.