OREANDA-NEWS. May 06, 2013. Due to some comments in mass media regarding the draft Federal Law “On Introducing Amendments to Article 178 of the Criminal Code of the Russian Federation and Some Legislative Acts”, which indicate adverse changing of legislative approaches to criminal liability for violating the antimonopoly law, and entrepreneurs’ enquiries on this issue, FAS would like to state the following:

The draft law clarifies crime elements specified in Article 178 of the Criminal Code of the Russian Federation, details the leniency procedures with regard to persons that assist in crime exposure and determines the procedures for using materials obtained as a results of investigative activities of law enforcement bodies in antimonopoly cases.

1. On the issue of corpus delicti specified in Article 178 of the Criminal Code of the Russian Federation.

Mass media and petitions to FAS Russia claim that contrary to the current edition of Article 178 of the Criminal Code, which classify prevention, restriction or elimination of competition by concluding a cartel or repeatedly abusing dominance as a crime, the draft law proposes to hold criminally liable for the fact of concluding cartel or repeatedly abusing dominance regardless of the consequences for competition from exercising such actions.

At the same time, this comment does not correspond with the text body of the draft law.

The norms of Article 178 of the Criminal Code are blanket – referring to industry law that disclose the content of signs of a relevant corpus delicti. In this case, the content of corpus delicti, specified in Article 178 of the Criminal Code is disclosed in the federal Law “On Competition Protection”, which prohibits cartels and determines what exactly is cartel and what is the dominant position, and what are possible forms of abusing dominance.

In view of the blanket (reference) nature of the norms of Article 178 of the Criminal Code, its construct does not provide for full disclosure of all elements of a crime, specified in the antimonopoly law, in the Article of the Criminal Code. Most of the Articles of the Criminal Code are formed in such a manner.

It means that to classify an act specified in Article 178 of the Criminal Code in the version of the draft law it is necessary to establish all cartel elements or a particular form of abusing dominance provided for by the Law “On Protection of Competition”.

Regarding cartels, such elements include: first, definition of the geographic and product market boundaries according to the rules specified by the antimonopoly law (otherwise, it is impossible to establish the facts of selling goods on the same market by the agreement participants); second, establishing competitive relations between producers or sellers of the goods; third, an agreement resulting in fixing (maintaining) prices, dividing the market, reducing goods production or boycott of certain buyers. Such consequences of agreements between competitors, due to Article 11 of the Federal Law “On Protection of Competition”, are recognized restrictive and eliminating competition and are prohibited per se. Agreements between competitors that lead to other consequences do not constitute corpus delicti and under a threat (possibility) of restricting competition shall be punished by administrative sanctions. The forth mandatory condition (sign) of a criminally punishable cartel is such consequences as inflicting damages upon physical persons, organizations or the state in the amount of no less than one million Rubles or gaining income in the amount of no less than five million Rubles.

The same provisions apply for imposing criminal liability for repeatedly abusing market dominance. To hold administratively liable it is necessary to: 1) establish the dominant position of an economic entity on the basis of market analysis carried out in accordance with the antimonopoly law; 2) for the Commission of an antimonopoly body to make a decision under Chapter 9 of the Federal Law “On Protection of Competition” establishing the fact of abusing dominance by an economic entity that fixed monopolistically high or low price, unreasonably refused or avoided concluding a contract, restricted market entry (Clauses 1, 3, 9 Part 1 Article 10 of the Federal Law “On Protection of Competition”); 3) by a decision of the antimonopoly body establish a fact that abusing market dominance resulted in inflicting damages upon physical persons, organizations or the state in the amount of no less than one million Rubles or gaining income in the amount of no less than five million Rubles; 4) establish that abusing dominance takes place for the fourth time within the past three years out of the abuses that fully meet the above provisions.

At the same time it is necessary to take into account that according to the Supreme Court of the Russian Federation the enforcement practice of Article 178 of the Criminal Code is insignificant. For instance, in 2010 – the first half of 2012 the Courts of the Russian Federation convicted only three persons under Article 178. Only in 2012 the antimonopoly bodies exposed 89 cartels. There are no sentences on abusing market dominance.

Thus, the existing and proposed version of Part 1 Article 178 of the Criminal Code do not allow to recognize as a crime the acts of preventing, restricting or eliminating competition or repeatedly abusing dominance, and, moreover, the fact of concluding cartels without consequences. One of mandatory consequences of the actions specified in Article 178 of the Criminal Code in all cases is inflicting heavy damages upon physical persons, organizations or the state (over one million Rubles) or gaining large income (five million Rubles). The proposed version adheres to the binding nature of these consequences as signs of crimes specified in Article 178 of the Criminal Code.

These consequences are the criteria for delineating a crime in question and related elements of an administrative violation (Article 14.32), for which such consequences are not obligatory.

In view of the above, the draft law does not provide for holding criminally liable, and only in line with the principles of legal drafting methodology clarifies the version of Article 178 of the Criminal Code, emphasizing its reference (blanket) character.

2. Mass media and petitions to FAS indicate that the draft law introduces criminal liability for actions that by themselves are not socially dangerous.

As mentioned above, specifying the wording of the draft law, Article 178 of the Criminal Code does not change the list of actions incurring criminal liability.

The draft law does not introduce criminal liability for actions without consequences. It is proposed to introduce liability for concluding a cartel agreement as well as abusing market dominance that caused such socially dangerous consequences as inflicting heavy damages or gaining large income.

In such a manner the Criminal Code constructs most of the so-called materially defined crimes that typically have related elements of administrative violations, not foreseeing socially dangerous consequences.

3. Publications state that the draft law simplifies the procedures for holding administratively liable for cartels and repeatedly abusing market dominance, since to establish corpus delicti it will suffice to prove a fact of committing one of such actions.

Such concerns are not based on the content of the proposed draft law.

The draft law does not simplify holding criminally liable for cartels and repeatedly abusing market dominance because to establish corpus delicti it does not suffice to establish the facts of committing one of the actions. It will be necessary to reveal, document and substantiate (apart from a violation proved under the norms of the antimonopoly law) one of the consequences specified in the law (inflicting damages upon members of the public, organizations or the state in the amount of no less than a million Rubles or gaining an income in the amount of no less than five million Rubles).

Analysis of the enforcement practice on the cases on the violations under Article 178 of the Criminal Code shows that the number of criminal cases initiated under this Article has been negligent even after the amendments were introduced to this Article in 2009 (gaining large income was specified as a mandatory alternative consequence of an action). As mentioned above, the Courts of the Russian Federation convicted only three persons under 178 of the Criminal Code in 2010 – the first six months 2012.

4. The petition signed by entrepreneurs states that although the draft law contains a leniency provision for a person that committed a violation and was the first to report about the violation, there is a real danger of abusing this opportunity by unfair entrepreneurs and using it to eliminate competitors from the market.

In theory such a danger may take place, but the 5-year practice of applying the leniency programme to the cartel participants who voluntary cooperate with the antimonopoly and law enforcement bodies proves absence of such facts. The cartel organizer shall be punished more severely because its leading role in a violation is an aggravating factor.

The established enforcement practice eliminates the danger of unfair application of the leniency programme to a cartel participant.

Also, a person that is not a cartel member cannot take part in the leniency programme but can be held liable for deliberately misleading accusations, particularly coupled with faking evidence for prosecution (Article 306 of the Criminal Code).

Thus, the draft federal law devised by FAS and agreed upon with the Ministry of Interior, the Investigative Committee of the Russian Federation and the Supreme Court of the Russian Federation legally details the elements of violations under Article 178 of the Criminal Code and clarifies the blanket nature of the existing norm. It does not change the scope of the violation signs and corpus delicti. In view of the established practice of suppressing violations of the antimonopoly law, it will facilitate holding persons, who committed economic crimes, criminally liable, excluding unreasonable criminal prosecution, which, in its turn, will protect fair competition on the markets of the Russian Federation.