Agency Name: Federal Antimonopoly Service of Russia Date: November 14, 2008 Tying & Bundled Discounting

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1 Agency Name: Federal Antimonopoly Service of Russia Date: November 14, 2008 Tying & Bundled Discounting This part of the questionnaire seeks information on ICN members analysis and treatment of tying and bundled discounting. The information provided will serve as the basis for a report that is intended to give an overview of law and practice regarding tying and bundled discounting in the respective jurisdictions. Unless otherwise stated, the questions concern unilateral conduct by a dominant firm or firm with significant market power. For the purposes of this questionnaire, tying is defined as a dominant firm (or firm with substantial market power) selling one product (the tying product) only on the condition that the buyer also purchases a different (or tied) product, or agrees that it will not purchase the tied product from another supplier. It also includes the sale of products or services that could be viewed as separate but are sold only together as a bundle. For the purposes of this questionnaire, bundled discounting is defined as discounts or rebates based on a buyer s purchase of two or more different products or services. Unlike tying, bundled discounting arrangements do not prevent buyers from purchasing individual products separately, although the aggregate price of the individual components is typically higher than the price of the bundle. This part of the questionnaire covers only tying and bundled discounting, and not other practices such as exclusive dealing, single branding, and single-product loyalty discounts and rebates. Your responses should therefore not address these practices unless they have a clear and relevant connection to the analysis and treatment of tying and bundling. You should feel free not to answer questions concerning aspects of your law or policy that are not well developed. Answers should be based on agency practice, legal guidelines, relevant case law, etc., rather than speculation. Experience 1. Please state the statutory provisions or legal basis for your agency to address tying and bundled discounts. Are tying and bundled discounts a civil and/or a criminal violation of your jurisdiction s antitrust laws? Do these provisions apply only to dominant firms or to other firms as well? According to the effective Russian antitrust legislation only tying is considered to be a violation prohibited by Article 10(1.3) of the Federal Law No. 135 On Protection of Competition. The Article prohibits not only tying but any imposition of contractual terms on the customer by the supplier that are contrary to the best interest of the customer, i.e. it precludes the supplier from: imposing on a counterparty of contractual terms which are unprofitable for the latter or not connected with the subject of agreement (economically or technologically unjustified and (or) not provided for directly by the federal laws, statutory legal acts 1

2 of the President of the Russian Federation, statutory legal acts of the Government of the Russian Federation, statutory legal acts of the authorized federal bodies of executive authority or judicial acts, requirements on transfer of financial assets, other property, including property rights, as well as consent to conclude a contract on conditions of including in it of provisions, concerning the commodity in which the counterparty is not interested and other requirements). Bundling discounts as such are not directly addressed and considered as an illegal conduct by the Russian antirtust law although establishing such discounts may be considered as a conduct leading to violations of provisions of Article 10 of the Law On Protection of Competition. The sections of Article 10 that are most likely to be violated by budled discounts are: 1.1. establishment and maintaining of monopolistically high or monopolistically low price for a commodity 1.6. economically, technologically or in any other way unjustified establishment of different prices (tariffs) for one and the same commodity if another is not established by the law 1.7. establishment of unjustifiably high or unjustifiably low price of a financial service by a financial organization 1.8. creation of discriminatory conditions 1.9. creation of barriers to entry into the commodity market or leaving from the commodity market for the other economic entities. Both tying and violations of above mentioned provisions by means of establishing bundling discounts are civil violations according to the Russian law. Sanctions for these violations are provided by Article 14(31) of the Russian Code on Administrative Violations in the amount form 1 to 15 percent of the violator s revenue in the relevant market. These provision apply only to dominant firms. 2. If your jurisdiction has specific criteria for analyzing tying or bundled discounting, please describe them and state their source. (e.g., legislation, court decisions, or agency policy statements). The criteria for analyzing tying arrangements are stipulated by Section 1.3. of Article 10 mentioned above. To be recognized illegal tying must contradict to the interest of the customer, i.e. to be unprofitable for the latter or not connected with the subject of agreement... The criterion used for analyzing the legality of using bundling discounts is whether establishing these discounts by a dominant firm leads to violation of one or several provisions of Article 10 cited in the answer to Question 1, i.e. Sections 1.1, 1.6, 1.7, 1.8,

3 3. How many in-depth investigations (i.e., beyond a preliminary review) of tying arrangements and (separately) of bundled discounting arrangements has your agency conducted during the past ten years? Please describe what prompted the investigations (e.g., competitor complaints) tying cases per year in average (both in Central Office and Regional Offices). The investigations were prompted by complaints of customers or FAS conducted market research. Information on bundling discounts cases is not collected separately. As it has been mentioned above setting bundling discounts may be recognized illegal in case it leads to violation of the Provisions of Article 10 cited in the response to Question State the number of tying arrangements and the number of bundled discounting arrangements your agency found to be unlawful over the past ten years (1999 to date); include cases resolved informally as well as those that led to a formal decision. If your agency has found any tying and bundled discounting arrangements to be unlawful, please describe the anticompetitive effect and the circumstances that led to the finding. For administrative systems (i.e., the agency issues its own decisions on the legality of the conduct, which may be appealable in court), please state the number of agency decisions finding a violation or settlements that were challenged in court and, of those, the number upheld and overturned. FAS (both Central and Territorial Offices) normally considers tying cases per year among which 1 or 2 are challenged in the court. None of FAS decisions on such cases were overturned in recent years. All the cases are solved formally, i.e. by issuing a FAS order to cease the violation. In Russian practice tying arrangements are normally found to be unlawful on the grounds that they make harm to consumer interest by means on imposing a commodity or service the customer is not interested in and would not buy if he had an alternative source of the tying commodity or service. Bundling discounts would be found unlawful if they lead to the succeeding unlawful exploitive and restrictive practices prohibited by Sections 1.1, 1.6, 1.7, 1.8, 1.9 of Article 10 of the Law On protection of Competition and resulting to the detriment of competition. For judicial systems (i.e., the agency challenges the legality of the conduct in court and the court issues a decision), please state the number of cases 3

4 your agency has brought that resulted in a final court decision that the program violates the competition law or a settlement that includes relief. Also state the number of cases that resulted in a final court decision that the conduct did not violate the competition law. Please state whether any of these cases were brought under a criminal antitrust law. Please provide a short English summary of the leading tying and bundleddiscounting cases in your jurisdiction, and, if available, a link to the English translation, an executive summary, or press release. FAS Territorial Office in Rostov on Don v Kavkazregiongaz August 4, 2008 the 15 th Court of Appeals upheld the decision and the relevant injunction issued by FAS Territorial Office in Rostov on Don on the case it had brought about Kavkazregiongaz open joint-stock company. The latter had a dominant position in the regional market with a share in the relevant market exceeding 90%. The price of the gas and terms of supply were regulated by the sector regulator. The regional gas consumers could not use the alternative gas supply because Kavkazregiongas owned almost all if the gas pipe network in the region. The terms of gas supply provided for concluding an annual contracts for shipment of a specified volume of natural gas to consumers (industrial enterprises and utilities) at a specified price. In 2008 Kavkazregiongaz included a new provision in the contract stipulating that if a customer did not purchase the amount of gas indicated in the contract the unused gas should be stored in Kackazregiongas gas storage tanks at the expense of the customer. At the same time Kavkazregiongaz refused to enter into gas supply contracts with the customers who refused to agree with this provision. The FAS Territorial Office in Rostov on Don considered this practice as violating Section 1.3 of Article 10 of the Law On Protection of Competition since the service of storage of unused gas was actually tied to the service of supplying natural gas. (please see the press-release at 5. Does your jurisdiction allow private parties to challenge tying or bundled discounting in court? Yes/No. If yes, please provide a short description of representative examples of these cases. If known, indicate the number of cases (or an estimate thereof) brought by private parties. Formally private parties are allowed to challenge tying or bundling discounts in the court. However, in practice they use to apply to FAS if they believe such practices to be abusive. Evaluation of Tying Arrangements 6. In your jurisdiction, is the term tying used in a manner different from the definition in the introductory paragraphs above? If so, how? 4

5 The term tying is used in the same manner as in the introductory paragraphs. 7. Please explain the competitive concern(s), if any, generally associated with tying in your jurisdiction, e.g. maintaining dominance/substantial market power in the tying market, distortion of or harm to competition in the tied product market, exploitation of consumers, exclusion of competitors, price discrimination, other. The major competitive concern associated with tying in Russia is exploitation of consumers. Tying is implicitly prohibited by Section 1.3 of Article 10 of the Law On Protection of Competition that generally prohibits imposition of contractual terms on consumers by a dominant firm that are not desired or contradict to the interests of consumers. 8. What specific tests, if any, are applied to determine under the competition law whether two products or services are separate rather than a single integrated product? The tests used are situation specific, although the most widely used test is whether the tying product can be used for the needs of the customer without the tied product. 9. In what market(s) e.g., the tying or the tied market must effects, if any, be shown to demonstrate an illegal tie? In the tying market cancellation or limiting shipment of tying product in case of the customer refusal to buy the tied product must be shown. a. What specific types of effects must be shown, e.g. market distortion, market foreclosure, harm to consumer welfare? Harm to consumer welfare must be shown. b. What degree of proof is required? Must the effect be actual, likely, or potential? For providing the proof of the tying arrangement it should be stated in the contract suggested to the customer by the supplier and also the official refusal of the supplier to sell the tying product without the customer s consent to buy the tied product must be shown. Therefore the effect must be actual. 10. Does intent play a role, and if so what role and how is it demonstrated? Implicitly the intent does play role since the tying arrangement should be stated in the contract suggested to the customer by the supplier. 5

6 Evaluation of Bundled Discounting 11. In your jurisdiction, is the term bundled discounting used in a manner different from the definition in the introductory paragraphs above? If so, how? Bundled discounts as an abusive practice is not frequently used by the marked dominant firms although it is very often used by non-dominant firms, like retail stores. Therefore, for the purposes of antitrust enforcement the term is not strictly defined, however, generally it is understood in the same manner as in the definition from the introductory paragraph of this Questionnaire. 12. Please explain the competitive concern(s), if any, generally associated with bundled discounting in your jurisdiction, e.g. maintaining dominance/ substantial market power, distortion of or harm to competition, exploitation of consumers, exclusion of competitors, price discrimination, other. Actually, all of the concerns mentioned in this question are associated with bundled discounting. 13. Does price-cost comparison play a role in the evaluation of bundled discounting? Yes/No. If yes, please describe the comparison used and the role that it plays. Please also indicate if recoupment plays a role and, if so, what role it plays. Price-cost comparison does play role in evaluating bundled discounts by FAS and the Russian courts. However, it would be applied to each of the products included in the bundle separately as well as the market definition and establishment of dominance of the company under consideration in the relevant market. Further, the antitrust authority or the court would establish whether the price of each product from the bundle fits in the definition of the monopoly low price as provided by Article 7 of the Law On Protection of Competition: Article 7. Monopolistically Low Price of a Commodity 1. Monopolistically low commodity price (except financial service) is a commodity price established by an economic entity occupying a dominant position if: 1) this price is lower than the price which in the competitive conditions at the comparable commodity market is established by economic entities which are not included in one and the same group of persons with purchasers or sellers of the commodity and are not occupying a dominant position in such a comparable commodity market; 2) this price is lower than the sum of expenses necessary for production and sale of such commodity. 2. The commodity price is not recognized as monopolistically low if it does not meet at least one of the criteria mentioned in part 1 of the present article. The commodity price is not recognized monopolistically low if its establishment has not resulted in restriction of competition because of reduction of the number of economic entities which are not included in one and the same group of persons with the purchasers or sellers of the commodity in the relevant commodity market. The commodity price is not recognized to be monopolistically low if it is established by a subject of the natural monopoly within the limits of the tariff for such commodity determined by the 6

7 body regulating natural monopolies. The recoupment issue is implicitly embedded in this definition by a notion that the price cannot be considered as a monopoly low one unless the number of competitors is decreased (Section 2 of Article 7) and, therefore, the company exercising monopoly low price can recoup its losses from below the cost sales by increasing its sales volume and/or per unit price of its goods/services. I.e. applicably to each of the goods from the bundle the predatory pricing analysis would be applied. 14. What sort of effects, if any, must be shown to demonstrate an illegal bundled discount? For example, must market distortion, market foreclosure, harm to consumer welfare or any other effect be shown? Applicably to each of the goods from the bundle same effects as in a predatory pricing case should be demonstrated. Market foreclosure would be most important among them in Russia. a. What degree of proof is required? Must the effects be actual, likely, or potential? The effect must be actual. 15. Does intent play a role, and if so what role and how is it demonstrated? The intent to foreclose the market is actually presumed but not considered separately. Presumptions and Safe Harbors 15. Are there circumstances under which tying or bundled discounting is presumed illegal? Yes/No If yes, please explain, including whether the presumption is rebuttable and, if so, what must be shown to rebut the presumption. Tying is presumed illegal when exercised by a dominant firm and obviously negatively affect the interests of consumer. The presumption is rebuttable. Bundling discounting is not presumed illegal under any circumstances. 16. Are there any circumstances under which there is a safe harbor? Are there any circumstances under which there is a presumption of legality? Please explain the terms of any presumptions or safe harbors. Tying and bundling discounts are presumed legal for companies below the dominance threshold. Justifications and Defenses 17. What justifications or defenses, if any, are permitted (e.g., reduced manufacturing or distribution costs, meeting competition, product reputation, 7

8 technological linkages) for tying or bundled discounting? a. Please specify the types of justifications and defenses that your agency considers in the evaluation of tying arrangements, the role they play in the competitive analysis, and who bears the burden of proof. b. Please specify the types of justifications and defenses that your agency considers in the evaluation of bundled discounts, the role they play in the competitive analysis, and who bears the burden of proof. Any practice in violation of the provisions of Article 10 relevant to tying and bundling discounts can be recognized legal if it meets the provisions of Article 13: Article 13. Permissibility of Actions (Inaction), Agreements, Concerted Practices, Transactions, Other Actions 1. Actions (inaction) of economic entities provided for in part 1 of article 10 of the present Federal Law (except actions (inaction) stated in items 1, 2, 3, 5, 6, 7 and 10 of part 1 of article 10 of the present Federal Law), agreements and concerted practices provided for in parts 2 and 3 of art. 11, deals, other actions provided for in articles of the present Federal Law can be recognized as permissible if such actions (inaction), agreements and concerted practices, transactions, other actions do not create for particular persons opportunity to eliminate competition in the relevant commodity market, do not impose restrictions superfluous for achievement of the goal of these actions (inaction), agreements and concerted practices, transactions, other actions on the participants or third persons and also if they result or can result in: 1) perfection of production, sale of goods or stimulation of technical, economic progress or raising of competitive capacity of the Russian goods in the world market; 2) obtaining by consumers of benefits (advantages) which are proportionate to the benefits (advantages) obtained by the economic entities in the result of actions (inaction), agreements and concerted practices, transactions, other actions. 2. The Government of the Russian Federation has the right to determine the cases of permissibility of agreements and concerted practices meeting the conditions stated in items 1 and 2 of part 1 of the present article (general exemptions). General exemptions, concerning agreements and concerted practices indicated in part 2 of article 11 of the present Federal Law, are defined by the Government of the Russian Federation on proposal of the federal antimonopoly authority, are introduced for a specific period of time and provide for: 1) type of agreement or concerted practice; 2) conditions which cannot be considered as permissible in regard to such agreements or concerted practices; 3) obligatory conditions for ensuring competition which should be contained in such agreements; 8

9 4) obligatory conditions under which such concerted practices are permissible. 3. General exemptions can provide, alongside with the conditions indicated in part 2 of the present article, for the other conditions which agreements and concerted practices should satisfy. Policy 18. What policy considerations does your jurisdiction consider with respect to tying and bundled discounts? You may wish to address the following sorts of issues: Are tying and bundled discounting common? Does your jurisdiction generally consider them to be procompetitive? Does your answer depend on whether the firm is dominant? Does your jurisdiction view tying and bundled discounting by a dominant firm as generally anticompetitive? What competitive concern(s), if any, are generally associated with tying and bundled discounts in your jurisdiction? Tying and bundling discounting are not common practices addressed by FAS. As shown above these practices may be generally considered in the context of other unilateral abuses addressed by Article 10. In any case these practices must be conducted by a dominant firm for FAS or/and the courts consider them anticompetitive. The competitive concerns associated with these practices were described above in the answers to Questions 7, Please provide any additional comments that you would like to make on your experience with tying and bundled discounting and enforcement in your jurisdiction. This may include, but is not limited to, whether there have been or whether you expect there to be major developments or significant changes in the criteria by which you assess tying and bundled discounting. There may be changes in assessing tying and bundling discounts in the course of possible revision of the Russian antitrust legislation. 9

10 Agency Name: Federal Antimonopoly Service of Russia Date: November 14, 2008 Single-Product Loyalty Discounts and Rebates This part of the questionnaire seeks information on ICN members analysis and treatment of loyalty discounts and rebates. The information provided will serve as the basis for a report that is intended to give an overview of law and practice regarding loyalty discounts and rebates in the respective jurisdictions. Unless otherwise stated, the questions concern unilateral conduct by a dominant firm or firm with significant market power. For this questionnaire, loyalty discounts and rebates are defined as discounts or rebates on units purchased of a single product, conditioned upon the level or share of purchases. This part of the questionnaire concerns only treatment of single-product discounts rather than pricing practices involving multiple products (bundling, tying, and related practices). You should feel free not to answer questions concerning aspects of your law or policy that are not well developed. Answers should be based on agency practice, legal guidelines, relevant case law, etc., rather than speculation. Experience 1. Please state the statutory provisions or legal basis that allow your agency to address loyalty discounts and rebates. Are loyalty discounts a civil and/or a criminal violation of your jurisdiction s antitrust laws? Do these provisions apply only to dominant firms or to other firms as well? Loyalty discounts as such are not a violation of the Russian antitrust law unless: I. the resulting product prices fall below the cost of production and fell under the definition of monopoly low prices as provided in Article 7 of the Law On Protection of Competition: Article 7. Monopolistically Low Price of a Commodity 1. Monopolistically low commodity price (except financial service) is a commodity price established by an economic entity occupying a dominant position if: 1) this price is lower than the price which in the competitive conditions at the comparable commodity market is established by economic entities which are not included in one and the same group of persons with purchasers or sellers of the commodity and are not occupying a dominant position in such a comparable commodity market; 10

11 2) this price is lower than the sum of expenses necessary for production and sale of such commodity. 2. The commodity price is not recognized as monopolistically low if it does not meet at least one of the criteria mentioned in part 1 of the present article. The commodity price is not recognized monopolistically low if its establishment has not resulted in restriction of competition because of reduction of the number of economic entities which are not included in one and the same group of persons with the purchasers or sellers of the commodity in the relevant commodity market. The commodity price is not recognized to be monopolistically low if it is established by a subject of the natural monopoly within the limits of the tariff for such commodity determined by the body regulating natural monopolies. In this case loylaty discounts will be considered as a restrictive practice and the loylaty discount case will be reduced to a predetory pricing case, specifically, a violation of Section 1.1 of Article 10 of the Law On Protection of Competition. II. setting loyalty discounts result into creation of descriminatory conditions for different purchasers prohibited by Section 1.6 of Article 10 of the Law On Protection of Competition. According to this Provision economically, technologically or in any other way unjustified establishment of different prices (tariffs) for one and the same commodity if another is not established by the law is illegal. In this case the analysis of loylaty discounts will be reduced to that of price descrimination. I.e. loyalty discounts may be illegal in Russia if they are used for predetory pricing (restrictive practice) or price descrimination (exploitive practice) purposes. Loyalty discounts can be recognized illegal only in case they are established by a dominant firm, according to Article 10. Establishment of loyalty discounts in the conditions described above is a civil vilation. 2. How many in-depth investigations (i.e., beyond a preliminary review) of loyalty discount and rebate programs has your agency conducted during the past ten years? Please describe what prompted the investigations (e.g., competitor complaints). Since the establishment of loyalty discounts can be addressed by two different sections of Article 10 the loyalty discounts cases are registered under these two different sections. Exact statistics on loyalty discounts as such are not available, therefore. The estimated number of loyalty discounts cases in Russia is most likely to vary between 20 and 30 per year. 3. State the number of loyalty discounts and rebate programs that your agency found to be unlawful over the past ten years (1999 to date) see the answer to Question 2; include cases resolved informally as well as those that led to a formal decision most of the cases are resolved formally, although about 10% of the cases may be resolved informally. If your agency has found any loyalty discounts and rebate programs to be unlawful, please describe the anticompetitive effect and the circumstances that led to the finding. 11

12 As described in the answer to Question 1, to be found unlawful setting loyalty discounts must have either restrictive effect similarly to predatory pricing or exploitive effect similarly to price discrimination. For administrative systems (i.e., the agency issues its own decisions on the legality of the conduct, which may be appealable in court), state the number of agency decisions finding a violation or settlements that were challenged in court and, of those, the number upheld and overturned. Normally, 30 to 40 per cent of FAS decisions, including these on loyalty discounts are challenged in the court. More than 90% of these decisions are upheld by the court. For judicial systems (i.e., the agency challenges the legality of the conduct in court and the court issues a decision), state the number of cases your agency has brought that resulted in a final court decision that the conduct violates the competition law or a settlement that includes relief. Also state the number of cases that resulted in a final court decision that the conduct did not violate the competition law. Please state whether any of these cases were brought under a criminal antitrust law. None. Please provide a short English summary of the leading loyalty discount and rebate cases in your jurisdiction, and, if available, a link to the English translation, an executive summary, or press release. June 21, 2008 FAS lodged a case against Lukoil, Gazpromneft, TNC-BP Holding, NK Rosneft, and Surgutneftegaz alleging then in violation of Sections 1.1, 1.6 and 1.8 of Article 10 of the Law On Protection of Competition. FAS found that discounts established by these companies for aviation kerosene, black oil and diesel fuel to certain wholesalers were conditioned upon the share of purchases and led to discrimination of other wholesalers that had to acquire these type of fuel at monopoly high price. FAS found Gazpromneft and TNC-BP guilty in violation of the Article mentioned. Decision on Lukoil and Rosneft is pending till December Gazpromneft and TNC-BP were established liable to serve an administrative penalty a turnover based fine of 1-2% of the company turnover for previous financial year in the relevant market (the exact amount of fine is to be established). 4. Does your jurisdiction allow private parties to challenge loyalty discounts and rebates in court? Yes/No. If yes, please provide a short description of representative examples of these cases. If known, indicate the number of cases brought (or an estimate thereof) by private parties. Theoretically a private party can challenge the conduct involving loyalty discounts in the court. However, no suits have been brought to the court so far. 12

13 Evaluative Criteria 5. In your jurisdiction, is the term single-product loyalty discounts and rebates used in a manner different from the definition in the first paragraph above? If so, how? No. 6. What are your jurisdiction s criteria for evaluating the legality of loyalty discounts and rebates? Loyalty discounts are considered to be a legal practice unless they can be reduced to predatory pricing or price discrimination by a dominant firm. In this case all the elements of predatory pricing or price descrimination analysis apply. Please see the FAS response to the Questionnaire on predatory pricing and price discrimination for more details and consider them as a response for Questions 6 9 of this Questionnaire on loyalty discounts. a. What anticompetitive effects or other criteria make loyalty discounts and rebates abusive? Must the practice exclude or threaten to exclude rivals from the market? If only threatened exclusion is required, how is it determined? If neither actual nor threatened exclusion is required, what other factors are considered? b. Does intent play a role, and if so what role and how is it demonstrated? c. Does price-cost comparison play a role? If so, please describe the comparison(s) used and the role that it plays. In your answer, you may wish to address the following sorts of issues: What cost measures are used (e.g., average variable cost, average avoidable cost, average total cost)? Are price and cost compared with respect to all of a firm s sales to a particular customer or only with respect to incremental sales? How significant a role does the cost test play (e.g., is pricing below the relevant cost measure required or a pre-requisite to prove illegality? Does pricing above cost prove legality)? Please also indicate if recoupment plays a role and, if so, what role it plays. Presumptions and Safe Harbors 7. Are there circumstances under which loyalty discounts or rebates are presumed illegal? No If yes, please explain, including whether the presumption is rebuttable and, if so, what must be shown to rebut the presumption. 8. Has your jurisdiction developed any safe harbors governing loyalty discounts or rebates? No If yes, please explain the terms of the safe harbor. 13

14 Justifications and Defenses 9. What types of justifications and defenses, if any, are available to the dominant firm (e.g., efficiencies, meeting competition)? Please specify the role they play in the competitive analysis and who bears the burden of proof. Justifications and defenses are available in accordance with Article 13 of the Law On Protection of Competition (please its citation below). Article 13. Permissibility of Actions (Inaction), Agreements, Concerted Practices, Transactions, Other Actions 1. Actions (inaction) of economic entities provided for in part 1 of article 10 of the present Federal Law (except actions (inaction) stated in items 1, 2, 3, 5, 6, 7 and 10 of part 1 of article 10 of the present Federal Law), agreements and concerted practices provided for in parts 2 and 3 of art. 11, deals, other actions provided for in articles of the present Federal Law can be recognized as permissible if such actions (inaction), agreements and concerted practices, transactions, other actions do not create for particular persons opportunity to eliminate competition in the relevant commodity market, do not impose restrictions superfluous for achievement of the goal of these actions (inaction), agreements and concerted practices, transactions, other actions on the participants or third persons and also if they result or can result in: 1) perfection of production, sale of goods or stimulation of technical, economic progress or raising of competitive capacity of the Russian goods in the world market; 2) obtaining by consumers of benefits (advantages) which are proportionate to the benefits (advantages) obtained by the economic entities in the result of actions (inaction), agreements and concerted practices, transactions, other actions. 2. The Government of the Russian Federation has the right to determine the cases of permissibility of agreements and concerted practices meeting the conditions stated in items 1 and 2 of part 1 of the present article (general exemptions). General exemptions, concerning agreements and concerted practices indicated in part 2 of article 11 of the present Federal Law, are defined by the Government of the Russian Federation on proposal of the federal antimonopoly authority, are introduced for a specific period of time and provide for: 1) type of agreement or concerted practice; 2) conditions which cannot be considered as permissible in regard to such agreements or concerted practices; 3) obligatory conditions for ensuring competition which should be contained in such agreements; 4) obligatory conditions under which such concerted practices are permissible. 3. General exemptions can provide, alongside with the conditions indicated in part 2 14

15 of the present article, for the other conditions which agreements and concerted practices should satisfy. Policy 10. What policy considerations does your jurisdiction consider with respect to loyalty discounts and rebates? You may wish to address the following sorts of issues: Are loyalty discounts and rebates common? Does your jurisdiction generally consider them to be procompetitive? Does your answer depend on whether the firm offering the discounts is dominant? Does your jurisdiction view loyalty discounts and rebates by a dominant firm as generally anticompetitive? What competitive concern(s), if any, are generally associated with loyalty discounts and rebates in your jurisdiction? Loyalty discounts are mostly common to non-dominant companies with possible exemption of large retail stores that may have dominant position in some regional markets. They are generally considered as a procompetitive practice unless the price is reduced to the level corresponding to the definition of monopoly low price or price discrimination consideration apply. 11. Please provide any additional comments on your experience with loyalty discounts and rebates. You may wish to address whether there are significant policy and/or practical considerations that may lead to greater or lesser agency enforcement against loyalty discounts and rebates pursuant to your unilateral conduct rules, e.g., concern with the risks of false positives/false negatives and/or the presence or lack of evidence of consumer harm. 15