OREANDA-NEWS. May 26, 2009. The first meeting of the Expert Council on developing competition in the defence-industrial complex and allied industries, at the Federal Antimonopoly Service (FAS Russia) took place, reported the press-centre of FAS Russia.

Representatives of the sector and allied industries as well as the authorities took part in the meeting.

In his introductory speech Alexei Ulyanov, the Head of the Department for Industry Control pointed out that such sector as the defence-industrial complex is one of the most complex and problematic. Recently the FAS Russia's role in the sector has increased considerably. FAS Russia participates in the work on improving institutional framework of the defence-industrial complex. In 2008 FAS Russia initiated and processed more than 15 cases for violating the antimonopoly legislation and discovered more than 30 administrative violations on the relevant goods markets. The Antimonopoly Service also imposed fines for the total amount of more than 13 million Rubles to be paid to the federal budget. Therefore, formation of the Expert Council is very timely.

Andrey Greshnyov, the Head of the Unit for the Defence-Industrial Complex, stated that to improve the state control over pricing for the products of the main contractors for the state defence order, the Department drafted the FAS Russia's proposals on introducing amendments to the Federal Law "On State Defence Order", which tighten antimonopoly control over the sector procurement. Currently the Defence-Industrial Commission, at the Government of the Russian Federation, is finalizing the draft Federal law "On Introducing Amendments to No.213-FZ "On State Defence Order" of 27th December 1995", which should incorporate the FAS Russia's proposals. Amendments and additions to the Federal Law "On Protection of Competition", which is being scrutinized by the State Duma of the Russian Federation, are aimed at preventing violations in the form of fixing monopolistically high prices.

The Expert Council learnt about the outcomes of the cases on antimonopoly violations in the defence-industrial complex and allied industries processed by FAS Russia in 2008-2009.

The discussion focused on the case against "Znamya" Moscow Machine-Building Plant" OJSC, initiated upon a petition of "356АRZ" OJSC, the case against the Russian Ministry of Defence, initiated upon a petition of "Prima" Scientific-and-Production Enterprise" Ltd., and some others.

Mr Greshnyov pointed out that when an antimonopoly body discovers that the sector has problems which require intervention of other governmental agencies or the Government of the Russian Federation, it immediately notifies the relevant agencies and organizations. In particular, FAS Russia established successful cooperation with the Russian Ministry of Defence, Roskosmos (the Federal Space Agency of the Russian Federation) and the Russian Ministry of Industry and Commerce when FAS Russia was investigating the case against "Pskov Electrical Engineering Plant" OJSC.

Discussing the cases processed by FAS Russia, Dmitry Koupov, the Deputy Head of the Department for Industry Control, said that FAS Russia considers violations, related to dealer agreements signed by the companies, one of the most severe restrictions of competition, especially on highly concentrated markets.

The Expert Council showed major interest towards justification of the contracts for design-and-engineering support of the supplied products. Mr Sokolov, representing the Interstate Aviation Committee (MAK) gave a report on that subject. He emphasized that typically the contracts are concluded by the parties on a voluntary basis, and the high cost of the contract services often does not match their scope. There are known cases when the cost of such services considerably exceeded the total cost of the components and the works required to repair an aircraft.

Summing up the discussion, the Expert Council approved in general the FAS Russia's work on discovering, suppressing and preventing violations of the antimonopoly legislation on the defence-industrial complex and allied industries, and on improving the sector-related legislation.

The Expert Council also decided to form three Working Groups: on pricing for the military products; on improving legislation related to the defence-industrial complex; and on design-and-engineering support of supplied products.

Proposals and suggestions for participating in the above Working Groups should be sent to Andrey Greshnyov, the Executive Secretary of the Expert Council, at greshnev@fas.gov.ru or by calling on +7 (499) 795-73-42.