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Combating Monopoly Prices

Without being classified as governmental or municipal authorities, or enterprises, or natural monopolies, business entities are not restricted in their right to set any price for their products, works or services. Price control encompasses only cases explicitly specified by the law. For instance, article 40 of the Russian Tax Code sets forth that market prices for goods, works and services shall be used for tax purposes. In addition, any prices established by a taxpayer are regarded as market prices a priori, irrespective of their size, common sense or consistency with the prices for similar goods (works or services) offered by other market players. Therefore, a presumption takes effect that any price is the market price. The possibility to control prices by tax authorities is limited to pricing in transactions between related parties, in external trade and non-cash transactions.
Moreover, tax authorities are empowered to exercise their control only if price fluctuations for the same commodity reached more than 20 per cent within a short period.

The law for businesses in a dominant position is another case of price control by antimonopoly authorities. It is all a question of so called monopoly high or low prices.

The competitive struggle is an integral part and a driving force of entrepreneurial activities, and pricing policy is among its essential instruments. However, those business areas where monopolies exist and the competition has already been significantly restricted due to a lop-sided market development, the principle of price freedom may give rise to abusive practices. In the initial period of capitalism formation, the first laws governing entrepreneurial activities were various trust laws aimed at restricting primarily monopolies’ efforts.

In accordance with paragraph 1 of article 10 of the Federal Law on Competition Protection(1), a business entity in a dominant position is prohibited from taking any action (inaction) which results or may result in prevention, restriction or elimination of competition and (or) infringement of third party interests, including the establishment and maintenance of high or low monopoly prices.

But businesses are more interested in specific measures safeguarding them from abusive practices of monopolies, rather than in general declarations. In their turn, monopolies want to be aware of what steps to take to avoid statutory sanctions and restrictions. This article discusses various procedures to safeguard against unfair competition in a form of high or low monopoly prices.

How to identify a monopoly price

A high or low monopoly price refers to a price set by a business entity in a dominant position if the price exceeds the cost of commodity production and sale, derived profit, and the price established under the impact of competition in a commodity market, which is comparable in terms of the composition of buyers or sellers, conditions of commodity circulation, conditions of market access, governmental regulation, including taxation, customs and tariff regulation (hereinafter referred to as the “Comparable Commodity Market), if such market exists in the Russian Federation or beyond its territory(2).

In translating this long definition into Russian we get the following statement: A high or low monopoly price may only be set by a business that holds a dominant position in a certain market. If a business does not hold such a position, none of its prices will be classified as high or low monopoly prices. However, even if the business holds a dominant position in a market, not every of its prices will be regarded as high or low. For this purpose the price have to meet two criteria:

  • First, it should exceed the total cost of commodity production and sale (i.e. production cost), and profit rates (trade mark-ups). In market conditions, however, a trade mark-up on a commodity is not subject to regulation; therefore this criterion is not sufficient.
  • Second, if there is a commodity market in the Russian Federation or beyond its borders where conditions are comparable with the selling conditions of the commodity in question, the price of such a commodity should not exceed the price set in the comparable commodity market.

“The comparable commodity market” is a legal and technical abbreviation to indicate a commodity market that is comparable in terms of the composition of buyers or sellers, conditions of commodity circulation, conditions of market access, governmental regulation, including taxation, customs and tariff regulation.

Only with the combination of these two conditions, a price set by an entity in a dominant position may be classified as a high or low monopoly price(3).

How to determine a dominant position

Only business entities that hold a dominant position in a certain commodity market may establish high or low monopoly prices, and only they may be prohibited to set such prices.

Therefore, to identify an entity’s dominant position is the first necessary step in recognizing prices as high or low. An entity’s dominant position is determined with reference to its share in a certain commodity market. At the same time, unless proven otherwise, an entity’s share in a commodity market is deemed equal to the share indicated in the Register of business entities.

If a business entity’s share in a certain commodity market does not exceed 35 per cent, its position may not be recognized as dominant(4). However, the fact itself that a commodity market share exceeds 35 per cent is also not enough to determine that a business entity holds a dominant position.

The antitrust laws set forth the following criteria to determine a dominant position:
  • if an entity’s share in a certain commodity market exceeds 50 per cent, pursuant to paragraph 1 of part 1 of article 5 of the Competition Law the position of such an entity shall be recognized as dominant, unless proven otherwise(5).
  • if an entity’s share in a certain commodity market exceeds 50 per cent, the dominant position of such an entity shall be established only by the antimonopoly authorities based on its steady (or with minor fluctuations) market share, a relative size of competitors’ shares in the same commodity market, opportunities of market access for new competitors, or other criteria characterising the market(6).

To determine a dominant position of an entity, whose share does not exceed 50 per cent, the antimonopoly authorities have to investigate and to prove the existence of the above listed grounds within a framework of a separate procedure(7).

Given the above mentioned circumstances, to determine whether a business entity holds a dominant position or not, first of all, it is necessary to establish, whether the entity is included in the Register of business entities, whose share in a certain commodity market exceeds 35 per cent. These data are available on the official web-site of the Federal Antimonopoly Service of Russia (FAS), who is authorised by the Russian Government to maintain such registers. The registers are classified into federal and regional depending on the presence of respective commodity markets. Pursuant to paragraph 8 of part 1 of article 23 of the Competition Law, the antimonopoly authorities shall maintain the Register of business entities. The Russian Government establishes the procedure of register formation and maintenance. The existing Rules on Formation and Maintenance of the Register of Business Entities, whose share in a certain commodity market exceeds 35 per cent, were adopted by Resolution No.896 issued by the Russian Government on 19.12.2007 (hereinafter referred to as the “Rules”).
If, according to the Register, an entity’s share in a certain commodity market exceeds 50 per cent, we may definitely assert that, unless proven otherwise, the entity holds a dominant position in the commodity market.
If, according to the register, an entity’s share in a certain commodity market exceeds 35 per cent, but is less than 50 per cent, one should lodge a request with FAS local office or headquarters to determine the entity’s position.

A common situation is when a business entity is not included in any of the existing registers. This fact itself does not mean that its share in the commodity market is less than 35 per cent, or that its position may not be recognized as dominant.

The Plenum of the Supreme Arbitration Court of Russia has explained that in dealing with disputes about violations committed by an entity who is not in the Register of business entities, a court may not object to recognizing it as an entity in a dominant position only because of not being included in the Register. An entity’s share in a certain commodity market and its dominant position may be determined on the basis of other documents(8).

How to determine high or low monopoly prices

A person, who believes that his rights have been violated due to setting and maintaining high or low monopoly prices by an entity in a dominant position, has a right to claim for the elimination of such infringements of antitrust laws. To protect his infringed rights, the person may either apply to antimonopoly authorities (an administrative procedure), or directly to an arbitration court (a judicial procedure), or to both authorities simultaneously. The setting and maintenance of a monopoly price already infringes third party rights, and does not require any further substantiation(9).

The law does not bear any indication that civil rights may not be protected in the administrative procedure (when antimonopoly authorities review matters of antitrust violations) if there is an opportunity to apply to an arbitration court or, on the contrary, is an obligatory condition to go to court(10).

However, if during judicial proceedings the court establishes that a plaintiff has applied both to the antimonopoly authorities and the arbitration court, the latter is recommended to suspend proceedings, in accordance with part 5 of article 158 of the Russian Code of Arbitration Procedure, until the antimonopoly authorities make a decision(11).

In its turn, the FAS may object to reviewing a complaint if such a complaint is reviewed by a court or by an arbitration court(12).

Depending on a size of a dominating entity’s share in a commodity market, a person, whose right has been infringed, has the following options:

1) If an entity that has set monopoly prices is included in the Register and its share in a commodity market exceeds 50 per cent, a person, whose rights have been infringed, may lodge a complaint with a local office (at a violation or a violator’s current location) or the federal headquarters of the FAS(13). A similar claim may be filed with an arbitration court at the current location of a dominating entity. It is possible, but not recommended, to apply to the FAS and an arbitration court at the same time.

2) If an entity that has set monopoly prices is included in the Register and its share in a commodity market varies from 35 to 50 per cent, a person, whose rights have been infringed, shall first apply to the FAS. According to the mentioned above, the presence of an entity with a market share of 35-50 per cent in the Register does not automatically mean that it is in a dominant position. Only antimonopoly authorities, within a framework of a separate procedure, may determine an entity’s position. Courts are not empowered to determine whether a business entity holds a dominant position. But if, for instance, the FAS establishes that the violator is in a dominant position, but refuses to recognize its prices as high or low, a complaint may be lodged with an arbitration court, since a dominant position of a business entity will be already duly determined.

Similar steps should be taken if a violator is included in none of registers.

The Administrative Regulation of the FAS on the initiation and reviewing of matters on violations of the Russian antitrust law (Order No.447 issued by the FAS on 25.12.2007) presents the FAS major requirements as to content, preparation and other requirements on filing a complaint against antitrust violations.

Implications of recognising monopoly prices as high or low

While making a decision on a monopoly price, the FAS issues a violation notice(14). The notice specifies a deadline for corrective actions. The antimonopoly authorities control the execution of issued violation notices. Failure to comply with the deadline indicated in a violation notice entail administrative consequences(15).

A court ruling also obliges a defendant to take corrective actions.

There is deference only in effective dates of decisions. The FAS’s decision comes into effect upon its issue, but may be appealed in a court or with a senior antimonopoly authority within three months. At the same time, filing an appeal with senior authorities does not suspend either a decision or a violation notice. In addition, if a decision of the antimonopoly authority is challenged in a court, its violation notice shall be suspended until the court ruling take effect(16).

The ruling of the arbitration court becomes effective in a month period from the moment a decision was issued(17). Prior to the expiration date, a court ruling has no legal force and may not be implemented. A ruling of the arbitration court may be challenged in a court of appeal within a month from the date of such a ruling.(18)


(1) - Federal law No.135-FZ on Competition Protection, dated 26.07.2006, hereinafter referred to as the “Competition Law”
(2) - Subpara 1 of para 1 of articles 6-7 of the Competition Law
(3) - Order No.А65-27531/2008 issued by the Federal Antimonopoly Service (FAS) for Volga Okrug (district) on 13.10.2009 and Ruling No.F04-6283/2009 issued by the FAS for West-Siberian Okrug (district) on 14.10.2009
(4) - Paragraph 2 of article 5 of the Competition Law
(5) - Subparagraph 7 of paragraph 13 of Resolution No.30 issued by the Plenum of the Supreme Arbitration Court of the Russian Federation on 30.06.2008
(6) - Subparagraph 2 of paragraph 1 of article 5 of the Competition Law
(7) - Order No.А25-190/2009 issued by the FAS for North-Caucasus Okrug (district) on 22.12.2009
(8) - Subparagraph 6 of paragraph 13 of Resolution No.30 issued by the Plenum of the Supreme Arbitration Court of the Russian Federation on 30.06.2008
(9) - Order No.F04-6413/2009 issued by the FAS for West-Siberian Okrug on 22.10. 2009
(10) - Subparagraph 1 of paragraph 20 of Resolution No.30 issued by the Plenum of the Supreme Arbitration Court of the Russian Federation on 30.06.2008
(11) - Subparagraph 2 of paragraph 20 of Resolution No.30 issued by the Plenum of the Supreme Arbitration Court of the Russian Federation on 30.06.2008
(12) - Paragraph 4.9 of the Administrative Regulation of the FAS on the initiation and reviewing of matters on violations of the Russian antitrust law (Order No.447 issued by the FAS on 25.12.2007)
(13) - Paragraph 3.6 of the Administrative Regulation of the FAS on the initiation and reviewing of matters on violations of the Russian antitrust law (Order No.447 issued by the FAS on 25.12.2007)
(14) - Paragraph 2 of article 50 of the Competition Law
(15) - Paragraph 2 of article 51 of the Competition Law
(16) - Article 52 of the Competition Law
(17) - Paragraph 1 of article 180 of the Russian Code of Arbitration Procedure
(18) - Paragraph 1 of article 259 of the Russian Code of Arbitration Procedure