The object of the research in 2016 included the optimal combination of different instruments of competition policy, including pecuniary penalties and the system of antitrust prescriptions in Russia, taking into account type 1 errors and scale of challenging the regulator’s decisions in courts.
The goal of the research is to explain the scope and forms of specific instruments application to prevent the violations of antitrust legislation in Russia, taking into account specific features of antitrust system and current institutional environment.
Methodology. To fulfill this goal the research was made with the following methods of analysis:
1) to analyze the effects of individual characteristics of the collusion participants (the most dangerous violation for social welfare) on the incentives to take part in leniency programs, taking into account the institutional characteristics of the program.
2) courts decisions database was analyzed, about the challenging in arbitration court the decisions and orders of FAS, litigations with companies, accused in violation of Articles 11 and 11.1 of the Russian completion law (collusion and concerted actions). Key markets and types of agreements were outlined to analyze standards of proof in relation to different types of agreements.
3) major causes of type 1 errors were identified, in cases when companies were able to cancel the FAS decisions in court. The main reasons for cancellations of FAS decisions and the role of economic analysis in the process were shown.
4) to analyze the use of alternative methods of preventing violations - prescriptions, trade regulations, antitrust investigations and fines – for one of the most important Russian industries – ferrous metallurgy.
5) for ferrous metallurgy was also provided a quantitative analysis of effects of these methods. For the first time in Russian researches was conducted an empirical assessment of the influence of mergers (accompanied and not accompanied by price prescriptions), protectionist measures, import duties and non-tariff barriers, antitrust investigations on the expected firms profits, their rivals and customers, as well as on the prices of products. Moreover, actually for the first time in such researches two alternative methods of assessment of effects of antitrust intervention were used.
6) to analyze the results of tariff regulation changes, including market participants reaction on characteristics of tariff regulation (the choice between short-term and long-term maximum prices, as well as the establishment of fixed prices and compensation rate in current expenditures).
Empirical base of research:
1) conclusions and recommendations of economic researches, in particular in the field of collusion and optimal design of leniency programs;
2) courts decisions database (400 cases), official information of Arbitrazh courts decisions, including cases started in 2008 -2012 in the field of competition restriction agreements and concerted actions (Articles 11 and 11.1 of the competition act).
3) statistical data on development of ferrous metallurgy in Russia, main mergers and key antitrust decisions were described and analyzed. The effects of the compensatory measures of competition policy on financial results of companies were estimated.
4) concession agreements in the field of heating, tender documentation and the results of tenders. A database (586 cases) of concession agreements since the beginning of 2014 until the end of 2015, as well as part of earlier cases. Data on the development of the heating industry, investments etc. was also collected.
Results of research:
- the research has offered the theoretical model of strategic interaction between cartel members and the competition authority, taking into account the information asymmetry. It was shown that the regulator should use the attitude towards risk of cartel participants and keep in secret policy features (the probability of successful investigations) to increase the effectiveness of leniency programs.
- in Russia we can stipulate several markets, priority for antitrust control - gasoline market, the banking sector, etc. However, despite the recommendations of economic theory, differentiated approaches to horizontal and vertical agreements in Russia haven’t developed; this situation may increase type 1 errors.
- Russian antitrust enforcement on the one hand can be characterized by a significant number of investigations and accusations. On the other hand we can note quite low standards of proof, a significant number of cancellations of the FAS decisions in courts. In the database of 400 cases the FAS lost 174. Four main causes of type 1 errors were identified – problems in the use of the ROR principle, accusations of concerted actions with weak evidence, the problem of defining market boundaries (product and geographic), failure to comply with formal procedure. It was shown that economic analysis played inadequate role, sometimes purely legal approach was used, which in some way reduced the validity of the decisions.
- were shown trends in the development of ferrous metallurgy, taking into account alternative instruments of competition policy, starting from the beginning of market reforms. The increase of concentration in the industry contributed to the competitiveness of main enterprises in the world market, but has created significant risks for domestic consumers, including the problem of 3 type price discrimination.
- effects of antitrust policy in ferrous metallurgy were evaluated by 2 methods: financial event study and difference-in-differences method. Antitrust prescriptions, trade regulations, non-discriminatory access rules, etc. partly solved consumer protection problems, prices were lower as a result of the FAS activities, but the effectiveness of these instruments is limited. More appropriate way of policy may be connected with trade liberalization, the reduction of import barriers.
- antitrust prohibitions are more and more similar with tariff regulation in natural monopolies. In heating industry were shown main factors, which determine the investor's incentives to participate in the concession, the role of long-term stability of the control parameters was shown.
Level of implementation, recommendations on implementation or outcomes of the implementation of Results . In this study the ways to improve the efficiency of combination of different instruments of antitrust policy were suggested, taking into account significant risks of type 1 errors and a significant number of cancellations of the FAS decisions in courts. We propose to extend the use of the ROR principle and compensation measures for highly concentrated markets.
Field of implementation . The results of this study can be used in the improvement of competition legislation and procedural rules of administrative enforcement.