Trading policies and compliance programs as the instruments of antimonopoly risks management in Russia

Transcription

1 LAW FIRM Trading policies and compliance programs as the instruments of antimonopoly risks management in Russia Yaroslav Kulik Partner, Head of the South Korea Desk, Head of Competition Practice at ART DE LEX Law Firm

2 What is compliance? Compliance means action in accordance with a request or indication, obedience, and is compliance with any internal or external requirements or standards The key element of compliance is a preliminary control or prevention (i.e. management) of legal risks

3 How to manage the risks? IDENTIFY, LEARN and ASSESS what risks the company may face in its daily activity PREPARE to face the risks through IMPELEMNTING a compliance system SUPERVISE performing of compliance program and SECURE that your staff understands it well PREVENT the risk when your staff faces it DEFENT your company and APPEAL to the compliance policy

4 What are the antimonopoly risks to be managed? Abuse of dominance Anticompetitive vertical agreements Anticompetitive arrangements with the state authorities Cartel or other anticompetitive horizontal agreements or concerted actions Conspiracy on tenders and auctions Unfair competition Non-filing Fail to respond to competition authority Inspections by competition authority

5 Dealing with public authorities may breach the competition legislation Violations involving public authorities comprise a significant part of statistics (50% of all violations) Agreements with public authorities specifically refer to the power of authority that might mislead companies concerning the legality of such agreements Public authority may ensure performance of the agreement and thus, increase the risks of liability

6 Dominance caused no restriction of competition may be considered as abuse This is extremely important because abuse of dominance according to the Russian Law On protection of competition includes not only restrictions of competition as a form of abuse but also imposing harm to counterparty

7 Negotiations with bidders and state customer may turn to prison Article 178 of the Criminal Code of the Russian Federations establishes liability for a cartel (horizontal agreement between bidders) The Russian Government introduced a draft Federal law establishing criminal liability for conspiracy of bidder(s) and state customer FAS Russia seeks for criminal liability for conspiracy between members group (now cartels of entities from a single group is not prohibited)

8 What are the end risks to be managed? Turnover-based fine of up to 15% of the company s income Individual and group damages actions Retrieval of illegal income for the budget Personal administrative liability (pecuniary penalty, disqualification) Personal criminal liability (criminal pecuniary penalty, compulsory labor, disqualification, and imprisonment for up to 6 years) Damage to goodwill Audit reports with reservations Downgrade of corporate governance and transparency Other nonmaterial loss

9 What are the benefits of compliance system? Secure the control mechanisms in the company Increase the transparency of financial and business processes in the company Create a clear rules of the game for employees Increase the attractiveness of the company to investors and foreign partners Significantly reduce the risk of corruption offenses Significantly reduce the risk of violating legislation Significantly reduce the size of paid fines and other sanctions imposed by public authorities for violations Streamline business processes Reduce the amount of personal control of the owners and top management of internal processes

10 What is the goal of compliance from the legal point of view? The strategic goal of compliance is to PREVENT breach of competition legislation However, if the breach occurs the company may appeal to compliance program and MITIGATE the liability and AVOID pecuniary fines In this case, responsible employees will be liable for breach of legislation and will bear personal liability

11 What role trading policy plays in compliance system? Trading policy may be a significant part of compliance system in your company along with other documents and instruments On 10 October 2014 during the Annual Conference Antimonopoly Regulation in Russia FAS Russia stated that it welcomes implementation of trading policies by companies operating on the Russian market and declared that if company duly preform its trading policy, it will not face antitrust risks In order to achieve this benefit, the company should receive the approval from FAS Russia on its trading policy

12 When companies need trading policy? You have a huge number of customers/suppliers or different customers/suppliers groups You are a dominant on the market or have few competitors You sell goods and services through distributorship and dealership, agency or franchising schemes (specifically FMCG, automobiles, cosmetics, medical products, equipment) You receives a lot of requests from antimonopoly authorities You violated the competition law in past

13 What are the legal prerequisites to use the benefits of compliance in Russia? FAS Russia has announced development of changes to legislative acts aimed at introducing antitrust compliance as instrument for RELEASE from and MITIGATION of liability Competition Support Association, a leading Russian nongovernmental organization uniting a hundred of top practicing antitrust lawyers and economics leads the expert work The main condition for release form liability is providing sufficient evidences that compliance policy was not only on the paper at time of breach, but it was a REAL WORKING system and willful misconduct or gross negligence of the responsible employee took place

14 LAW FIRM THANK YOU FOR YOUR KIND ATTENTION! Yaroslav Kulik 007 (495)