Federal Law No. 135-FZ: Russia's Framework for Competition Protection
Maintaining a fair and open marketplace is essential for economic stability and growth. In the Russian Federation, this balance is maintained through Federal Law No. 135-FZ, titled "On the Protection of Competition." Legislated on July 26, 2006, and entering into force on October 26, 2006, this law serves as the primary legal instrument for preventing monopolies and ensuring fair play across various sectors of the economy.
The Federal Antimonopoly Service (FAS)
The execution of antitrust and competition policies is managed by the Federal Antimonopoly Service of Russia (FAS). Established on March 9, 2004, via Presidential Decree №314, the FAS is a federal-level executive governmental organ. Under the leadership of Igor Artemyev, the FAS was responsible for the initiation and development of Law No. 135-FZ.
The FAS possesses broad authority to regulate the commodity market and financial services. Its jurisdiction extends beyond the borders of the Russian Federation, allowing it to oversee international operations and transactions that may result in anti-competitive effects within the Russian marketplace. One of its primary roles is the approval of company mergers; the FAS mandates prior approval if the merging companies exceed specific asset thresholds.
The FAS has a history of challenging global tech giants to ensure market fairness. Following trends seen in the European Union and the United States, the FAS brought Microsoft to court on June 4, 2009, for anti-competitive behavior. More recently, in 2021, the agency fined Google for alleged violations of Russian advertising law.
[ไม่มีภาพประกอบ]Defining Market Dominance
Unlike some Western European competition laws, Russian law utilizes specific numerical thresholds to presume the existence of dominance—a position of market power that allows a company to act independently of competitors.
Individual Dominance Thresholds
- Presumed Dominant: A company is automatically presumed dominant if it holds more than 50% of the market share.
- Established Dominance: If a company holds more than 35% of the market share, the FAS must formally establish dominance.
- Non-Dominant: Companies with less than 35% market share are generally not considered dominant, unless the FAS proves otherwise through market stability analysis and competition reviews.
Collective Dominance
Collective dominance occurs when multiple entities together control a significant portion of the market. This is recognized if each entity holds more than 8% of the market share and the aggregate share meets the following criteria:
- Over 50% for no more than 3 entities.
- Over 75% for no more than 5 entities.
Additionally, a "safe harbour" margin of up to 20% market share per company is permitted for agreements between companies operating in different segments of a supply chain.
Enforcement and Legal Penalties
Federal Law No. 135-FZ does not operate in isolation. To strengthen enforcement, the Code of Administrative Offences was amended to increase the liability associated with anti-competitive practices. Punitive financial measures are typically calculated as a percentage of the company's revenues.
For severe or repeated abuses, company directors may face criminal liability. Prohibited actions include establishing unjustified high or low monopoly prices, evading contracts with individual customers, or creating barriers to prevent other entities from entering the market. In such cases, directors can be sentenced to up to 7 years in prison.
Furthermore, the law restricts public procurement policies and government aid at the federal, provincial, and municipal levels to prevent state-sponsored anti-competition.
Key Facts
- Law Name: Federal Law No. 135-FZ "On the Protection of Competition."
- Effective Date: October 26, 2006.
- Regulatory Body: Federal Antimonopoly Service (FAS).
- Dominance Trigger: Presumed at >50% market share; investigated at >35%.
- Collective Dominance: Triggered if 3 entities hold >50% or 5 entities hold >75% (with each >8%).
- Maximum Prison Sentence: Up to 7 years for directors in cases of repeated abuse.
| Category | Market Share Threshold | Legal Status |
|---|---|---|
| Individual | > 50% | Presumed Dominant |
| Individual | 35% - 50% | Dominance must be established by FAS |
| Individual | < 35% | Generally not dominant |
| Collective (3 entities) | > 50% (each > 8%) | Collective Dominance |
| Collective (5 entities) | > 75% (each > 8%) | Collective Dominance |
Frequently Asked Questions
What is the primary purpose of Federal Law No. 135-FZ?
The law is designed to protect competition within the Russian marketplace by preventing monopolies and regulating anti-competitive behavior in both commodity and financial service markets.
Who is responsible for enforcing this law?
The Federal Antimonopoly Service (FAS) of Russia is the executive governmental organ responsible for controlling the execution of antitrust and competition laws.
Can the FAS regulate companies located outside of Russia?
Yes, the FAS has the mandate to oversee transactions and operations taking place outside Russia if those actions have anti-competitive effects on the Russian market.
What happens if a company director repeatedly abuses a monopoly position?
Company directors can be held criminally liable for repeated abuses—such as price manipulation or blocking market entry—and may face prison sentences of up to 7 years.
How is collective dominance determined?
Collective dominance is established if each entity involved has more than 8% market share, and their combined share exceeds 50% (for up to 3 entities) or 75% (for up to 5 entities).