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Deterrence effect assessment of dominance abuse provisions in the Russian antitrust law

Priority areas of development: economics, law

The research focuses on one of the most important issues of the competition policy - the problem of competition restrictions, supported by large companie.

The object of the research in 2014 was antitrust policy in Russia in the field of abuse of dominant position and the effects of competition restrictions from the side of the major market participants.

  1. The goal of the research: was to evaluate the efficiency of alternative measures of competition legislation and enforcement in relation to the major (dominant) sellers, which can restrict competition and use market power to the prejudice of customers and other counterparties.
  2. Methodology: To fulfill this goal the study was conducted, which includes the following areas of analysis:

Methods of competition policy (special for the Russian market) in relation to large companies, in particular trade practices (trade policies);

  1. Two ways of Russian antitrust enforcement in this field were shown - the application of antitrust prohibitions in the field of the abuse of dominant position and vertical (restricting competition) agreements;
  2. The possibility of using antitrust prescriptions to prevent abuse of dominant position and other violations of the competition law was analyzed;
  3. The level of the economic analysis in the cases of antitrust violations in 2008 – 2012 was described (by analyzing the database of first instance courts decisions);
  4. Concepts of network effects (in consumption) were described, including the ways of solving the market borders identification problem;
  5. Effects of bidding procedures (in public procurement) were demonstrated, taking into account the abuse of dominant position problem.

Empirical base of research:

  1. Theory and practice of using antitrust prescriptions (in relation to large companies) were summarized;
  2. The relationship between the development of antitrust legislation and the development of economic theory in the field of vertical agreements was shown (based on the experience of the US and the European Union). The formation of the Rule of reason (effect-based) approach was described.
  3. The base of Russian arbitral courts decisions in relation to large companies (application of Article 10 and Article 11 of the Competition Law for the period 2008-2012) was formed. Basic problems of the enforcement in this area were shown (using the example of the oil market);
  4. The international review of litigations against payment systems was made, the complexity of antitrust enforcement in the case of very strong network effects was shown;
  5. Problems of competition protection in public procurement were discussed, analyzing the case of the Russian pharmaceutical market.

Results of research:

  • The developing model of trade practices in Russia has no analogues in theory or in international practice. Traditional antitrust policy is based on prohibitions and penalties for their violation, not on prescriptions. In the situation of reduced opportunities for competition authority and also for the company to anticipate the consequences of business strategy, the content of corporate trade practice may just repeat the norms of legislation, or might restrict seller severely. It was proved that trade practices couldn’t effectively provide equal conditions for the acquisition of goods and services for counterparties.
  • The drawbacks of different ways of vertical agreements classification were described. It was proved, that for the identification of competition restriction, the criteria of cooperative specific investments should be used.
  • It was demonstrated that modern theoretical models of vertical agreements (including models of Chicago School, post - Chicago School, institutional economics) are based often on particular courts decisions. Courts decisions are based on the economic theory to a much lesser extent.
  • Two methods of government intervention - tariff regulation and antitrust policy – basically demonstrate fundamental differences. These contradictions can be considered as a source of certain harm to customers and counterparties, which increases the risk of false accusations of the abuse of dominant position.
  • In markets with a particular structure (including with the presence of network effects) economic analysis can’t be limited by a standard approach and may require the use of a wider range of instruments. In this case the dominance of large sellers becomes inevitable. Different approaches to the market borders identification can detect various restricting competition factors in such sectors with different consequences for enforcement.
  • The example of the pharmaceutical market demonstrates main factors of companies  justification / accusation in the field of restricting competition in the auction. It is shown that the bidding procedures (English auctions) are able to support some forms of abuse of dominant position.

Level of implementation, recommendations on implementation or outcomes of the implementation of the results: Ways of improving the effectiveness of the use of antitrust policy tools in the field of abuse of dominant position and the competition restriction from the side of  major market participants were proposed, taking into account the risks of external effects and type 1 and 2 errors. The results of this study can be used both in the development of the antitrust legislation, and by companies, in order to adapt their business practice to the requirements of the law. 


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