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Bsics of Competition in KR

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advo_cat Arman

on 6 November 2013

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Transcript of Bsics of Competition in KR

Basics of Competition
in the Kyrgyz Republic
Free adversarial system of commercial legal entities in the market
Extends to any natural or legal persons and public authorities
Antitrust legislation of the KR consists of the Law on Competition, the Law on Natural and Permitted Monopolies in the Kyrgyz Republic, etc.
Regulating authority - the Department for Competition Development under the Ministry of Economy
Fair and healthy competition:
prevents unjustified increase of prices
reduces the costs of goods and services
stimulates quality improvement
of goods and services
equal opportunities for
business development
encourages the development
and implementation of
innovative solutions in the business
Criteria of restricted competition
Reduction in the number of companies
Companies refuse from independent actions in the market
Unjustified increase or decrease of prices
anticompetitive concerted actions
of companies in the market
Anticompetitive agreements
between companies
other circumstances
What
Competition
is?

Abuse by
Natural and Permitted Monopolies

Anticompetitive agreements
Unfair competition
Violations in
procurement of goods

The use of discriminatory and exclusive conditions
Domination - is an extraordinary position of the company, allowing to
influence on the general conditions of the market (to set the price, volume and range of products, etc.);
remove other companies from market;
and (or) impede access to the market to other companies;
A Company shall be recognized as monopoly (dominant) if:
its share in the market of a particular product equals or exceeds 35%;
its share exceeds the limit set by a public authority;
has market power allowing to cause significant effect on the market ;
shares of companies in the market have not changed or have changed slightly during the year;
access to the market for other companies is complicated;
saled or purchased goods are irreplaceable;
growth of prices does not effect on reduction of demand;
Dominant companies
Shall be included in the State Register of Natural and Permitted Monopolies

After the registration, they are under direct state regulation and supervision in accordance with the Law on Natural and Permitted Monopolies in the Kyrgyz Republic.
The market power of the dominant

reduction in production release at increasing of prices;
reduction of purchased volume (procurement), or refusal from procurement, as well as maintenance of high or low purchase prices;
excess in actual level of costs, attainable in the most efficient growth of production;
the level of trade costs in excess of economically justified;
obstruction or restriction of competitiors' access to the necessary factors of production or distribution channels;
constant extraction of profit is higher than normal;
agreements between competitors on supply of essential goods and services, use patents, "know-how", etc.;
inadequate level of technological progress;
awkward expence items in the stucture of costs, such as payment for the creation of an organized lobbying entity or excessive entertainment expenses;
the presence of market power in other geographic markets, including the world market
Dominant companies shall refrain from:
Establishing, maintaining monopolistically high or prices;
Withdrawal of goods from circulation, as a result of increase of the goods' prices;
Intrusion of unfavorable conditions of the contract to the counterparty;
Unreasonable reduction or elimination of production of goods;
Unreasonable refusal or failure to enter into contracts with individual customers;
Unreasonable establshment of different prices for the same goods;
Creating discriminatory conditions;
Unjustified reduction or cessation of the production of the goods if there was a demand for this product;
Creating barriers to market access or exit to other companies;
Violation of pricing;
Materials of public authorities, indicating the presence of a violation of the antimonopoly legislation;
Statements of legal entities and individuals;
Media reports;
Violation of the antimonopoly legislation;
Considering of cases is base upon
Договоренность компаний в письменной или устной форме;
Может быть выражена в виде согласованных действий;
Между конкурирующими и неконкурирующими субъектами
Ограничивают или могут ограничивать конкуренцию
Антиконкурентные соглашения ограничивающие конкуренцию
Subjects of agreements
Pricing;
Sphere of influence;
Conditions of sale;
Intellectual property;
Regulation of production volume, negotiating the terms of sales;
Hiring issues;
The main types of agreements:
Price-fixing arrangement (agreement on establishing and maintaining the same price of the goods or services);
Collusion on dividsion of the market (i.e. on a territorial basis)
Collusive tendering (where bidders agree among themselves which of them will win the bid and get the maximum price contract with a subsequent redistribution of funds among themselves)
The effect of anticompetitive agreements
Restriction of competition among market participants;
Monopolization of production and distribution of goods;
Establishment of monopoly price mandatory for all parties to the agreement ;
Suppression competition from foreign companies not participating in the agreement;
Obtaining higher profits at the expense of consumers.
Horizontal agreements
On establishment (maintenance) of prices, discounts, allowances, etc.;
On increase, decrease or maintain prices at the same level;on division of the market
On elimination or restriction of access to the market
On coordination of production volume;
On unjustified refusal to conclude the agreement
On artificial increase (decrease) of prices;
On unreasonable reduction or cessation of supply;
On establishment of standard terms of contracts creating unfavorable conditions to consumers;
On establishment of price discrimination;
Vertical agreements
Imposing conditions that are not favorable to the counterparty
Conditions that prohibit the sale competitors' goods
Having terms on procurement of goods frim certain seller only;
Having terms on price restrictions for resale, limiting territory or number of consumers;
Concerted actions
The market environment in which competing companies act in concert without signed agreements.

Actions that are caused by the same for all circumstances, i.e. tax changes, changes in commodity prices on world markets, etc., are not deemed to be Concerted Actions
At concerted actions
Companies consciously put their behavior in dependence on the behavior of other parties, thereby eliminating the risk typical for competition;
Companies render economic pressure through threats of harm or promises of privileges in order to force other entities to adhere to certain policies;

Companies are pressing on other businesses in order to compel them:
to join the agreement;
to go on merger;
to adhere to the single behavior in the market in order to curb on competition.
Criteria for restriction or impede of competition
Detection of anticompetitive agreements
Stage I:

Determination of market and special features of the goods;
Determination of geographical borders of the market; ;
Determination of range of market participants involved in the agreement;
Determination of market shares;
Stage II:

Determination of companies' capacity to restrict competition and (or) prejudice the interests of consumers
The proof of anti-competitive agreements
1. There shall be documentary proof;

2. NO documentary proof ------> there shall be an analysis of:
simultaneous (or within 3 days) increase / decrease in prices;
establishment of uniform prices at different cotst of acquisition and sale of goods;
reconciliation of the change in prices and volumes of supplies of goods;
agreement on an artificial increase or decrease in prices, etc.;
By results of consideration, antitrust boldy shall make decision on:
termination of agreements
restitution
restoration of production or supply;
termination or amendment of contracts contradicting to the law;
elimination of other anti-competitive behavior;
imposition of penalties, including the reimbursement of illegal income;
refer cases to the judiciary, law enforcement bodies;
dismissal of the case in absence anticompetitive agreements.
Participant of the agreement, voluntarily declaring on the conclusion of an anticompetitive agreement and completing all the conditions specified by the antimonopoly authority, can be exempted from legal liability fully or partially.
October 2009, the cartel of manufacturers of power transformers was uncovered due to the application of Siemens under leniency program of the European Commission.
The Cartel included included such companies as ABB, AREVA T & D, ALSTOM, Fuji Electrics, Hitachi and Toshiba.

The total amount of the fine was more than 67.6 million euros
Unfair competition is deemed to be any activity
with the purpose of obtaining an advantage;
contradicting to the laws, business customs, standards of integrity, prudence, justice;
may cause or have caused losses to competitors or damage to business reputation;
Goods-related
Causing damage to
business reputation
Others
marking of good with irrelevant distinctive emblem misleading consumets of its properties
unauthorized copying
of competitors' products
deliberate bulk selling of
goods with the purpose of
price manipulation
direct recreation of a
competitor's product
concealment of non-conformity
of the goods to its purpose
or its requirements
unlawful use of a trademark,
appellation of origin,
brand name, brand image
disclosure in a distorted form of data on scientific, technical and production capabilities of the competitor
deliberate violation or
derangement of the
business relationship of competitor
The distribution of false and distorted information about business authority and financial position of competitor
unlawful acquisition, use
or disclosure of trade secrets competitor
distribution of any information
that could mislead consumers
about the product and
the competitor
illegal means of influence
on employees of the competitor
illegal means of influence to adoption and enforcement of a competitor's decisions
unreasonable call (address) to other subjects of the market with the purpose of distortion of business ties of a competitor or impeding the establishment of such relations;
Antimonopoly violations to the procurement of goods
1) coordination of procurement activities of participants by its organizators of the customers;
2) creation of preferential conditions for participation in procurement;
3) violation of the procedure for determining the winner of the procurement;
4) the participation of the organizators of procurement or customers, including thier employees, in procurement;
Violations of antitrust legilsation
Effect on supply-and-demand balance of goods on certain market
Restriction of companies involved in the agreement to decide on its economic issues independently;
Legal Liability
The conclusion of anticompetitive agreements is punished by:
a fine up to 15% from the offender's income from the sale of goods (works, services) on the market where the violation occurred.
Unfair competition is punished by a fine from 500 to 1000 estimates
Violation of antitrust legilsation can be punished by enprisonment for up to 5 years!
Legislation of the United States prescribes penalties for
Any contract, association or conspiracy aimed at:
restriction of trade or commerce;
monopolization or attempted monopolization, and the union
and conspiracy to monopolize.
An individual can be fined up to $ 1 million and imprisonment of up to 10 years for each criminal offense;

The Company can be fined up to $ 100 million for each criminal offense
World fines
52 mln USD;
60 mln USD;
42 mln USD;
350 mln USD;
Legal practice of Russian Federation
Administration of Yakutia installed special retail trade margins on socially important food products purchased from Yakutopttorg OJCSC, thereby limiting competition among suppliers. The breach was discovered by experts Yakutsk Federal Antitrust Service.

Sakha Arbitration Court (Yakutia) held a decision to abolish the illegal allowances and its lawfulness was affirmed further
Russian Federal Antitrust Service has recognized a Motor Factory ZMZ violating the law on Protection of Competition. ZMZ required its disributors to refrain ftom selling of its products to competitors and threatened to cancel all discounts.

FAS held to eliminate violation of the Law
Thank you for attetion!
Appliсability
Abuse of Natural and Permitted Monopolies
Unfair
competition
Anticompetition
agreements
Procurement
of
goods
Conditions placing certain companies to unequal positions in comparative to others
manufacturing
conditions
terms of exchange, consumption, purchase, sale
market
access conditions
Dominant companies shall refrain from:
Full transcript