Competition Development in the Russian

Federation: Challenges and Solutions

Andrey Tsarikovskiy

Stats-Secretary, Deputy Head of the FAS Russia

5th BRICS International Competition Conference, November 9th,2017, Brasilia

Federal Antimonopoly Service

FAS Russia today

The main powers of FAS Russia:

• Protection of competition and antimonopoly regulation;

• Control of public procurement;

• Control of natural monopolies;

• Control of distribution of property, resources and rights on a competitive basis;

• Control of anticompetitive actions of authorities.

2

FAS Russia - is an independent body of state power,

directly subordinate to the Government of the Russian

Federation.

FAS Russia is represented in each of the 85 constituent

entities of the Russian Federation.

3

FAS Russia - Macroregulator

Antimonopoly Regulation

Tariff Regulation

Public Procurement

Control

Public Defence Procurement

Control

Bidding Control

Control Over Foreign

Investments

Pro-competitive nature of

regulation

Optimizing expenditures

in regulated sectors

Customer orientation

Unity of approaches to

regulation

Ensuring the availability

of infrastructure on a

non-discriminatory basis

Синергия полномочий

Antitrust regulation

Tariff policy

Policy in the field of public

procurement, including public

defense procurement

4

Synergy

Synergy of powers of the antimonopoly

authority - the basis of the effectiveness of

competition policy

4th Industrial Revolution

New business models - new challenges for

BRICS Competition Authorities

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Новые вызовы

New challenges

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Actions of global transnational

corporations (TNC), operating on

new markets

Globalization Digitalization

It is necessary to increase the responsibility of TNCs on a global

scale

In the era of the new economic reality, violations spread with the speed of light and

the speed of antimonopoly response should match it!

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The structure of antimonopoly cases is changing

Modern markets - modern antitrust regulation

Digital world - "digital competition policy"

Globalization and digitalization of economy

Competition authorities of many countries are currently

investigating cases of violation of antimonopoly legislation

in the same markets against large multinational companies.

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“Global Players”

In 2015, the FAS Russia recognized Google Inc. violated the antitrust laws and

issued a warrant to Google to eliminate the violation of the abuse of the dominant

position in the market of pre-installed application stores in the OS "Android."

Google's penalty amounted to 438 million rubles.

• June 2017, the European Commission fined Google by

$ 2.42 billion.

• April 2016, the Competition Bureau of Canada

completed an investigation against Google.

• August 2016, the case against Google has been

instituted by the Competition Authority of Korea

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FAS Russia filed a case against Microsoft

on abuse of dominant position

Microsoft significantly - from 2 months to 6 calendar days - reduced the

time for adaptation of third-party antivirus software to the operating system

of Windows 10. Such actions led to unreasonable advantages for Microsoft

in the software market.

The company also blocked third-party antivirus software and activated

Windows Defender antivirus software without properly notifying users and

obtaining their explicit consent.

Microsoft Corporation has complied with the FAS Russia's warnings

in full. The case is closed.

“Global Players”

Elaboration of approaches in negotiating transactions of

economic concentration of global players

Development of new methodological approaches to the

consideration of transactions that take into account the specific

functioning of markets and their impact on global markets;

For example, the Bayer / Monsanto transaction - the subject of

control is not seed markets and plant protection products, but

markets for modern integrated technologies;

The development of interaction of antimonopoly authorities in the

process of agreeing transactions.

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“Global Players”

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Risk zones requiring special attention of the competitive

community

Pharmaceutical market

Food market

Digital market

Automotive market

Positive practices:-Solution of global

problems;

-Scientific and

technical progress;

-Dissemination of

technologies

Negative

practices:-Deepening of the

technological gap;

-Reduction of the

well-being of the

population;

-The slowdown in

economic growth

rates

Digital market challenges

1. Aggregation of data (Big Date);

2. Algorithmization of the activity of

digital cartels;

3. Network cartels;

4. Legislation reformation.

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“Uberization” of economics

In all industries, more and more platform-

aggregators collecting demand and supply

and acting as a switch.

Such platforms reduce costs, remove

intermediaries from economic relations and lead to a change in the methods of

monetization.

Example:

FAS Russia and Russian Railways have developed the concept of an

electronic platform for cargo transportation: the client is sent to any nearest car

(including another owner), the cargo transportation service is ordered and paid through

the site or application, the transportation status is monitored on-line without personal

contacts with the staff of Russian Railways. Currently, the electronic platform is working

in a test mode.

The system will save billions of rubles allocated for coordination of orders, will

give an incentive for SMEs to return to transportation by rail, significantly reduce the

empty run, and increase the speed of transportation.

Aggregation of data

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The “click” price

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The cost of a product or service offered by a number of

sites or aggregator programs varies depending on previous

searches and user purchases.

Yandex.Taxi service sets different prices for a trip on the same route using the same time for

different clients. The price varies up to 100 rubles (1,5 Euro) for the route.

“Now we are conducting a testing probe that in some cases can make the trip cheaper”, -

Yandex.Taxi commented.

Uber officially acknowledges that it applies artificial intelligence, which assesses the solvency of

clients and offers them the price they are able to pay.

“The comfortable travel cost for each particular phone varies. For example, a passenger with a

discharged smartphone battery is potentially ready to pay for a trip order almost 10 times more

than the owner of a charged phone”, - Keith Chen, Uber’s head of economic research.

“The algorithm, based on the technology of machine learning, assesses the solvency of clients

using a number of parameters. For example, if a person regularly calls a taxi from a wealthy

neighborhood and travels to a business district, then most likely he is willing to pay more than a

customer from a poor neighborhood”, - Daniel Graf, Uber’s head of product.

“Digital” cartels

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•The new technologies as a way to cartel collusion:

•Example 1:

•In Murmansk, the tender collusion was revealed with the help of price

robots. Violators programmed their auction robots to a minimum reduction

from the initial price. When creating auction robots, two accused companies

programmed the reduction limits in the range of 0.5% to 1% of the contract

initial price, depending on which of them should win the auction.

•Example 2:

•In the near future, the company will be prosecuted on suspicion of violating

the antimonopoly legislation by robot programs that monitor competitors'

prices and set the same prices for their company's products. The potential

cartel here occurs automatically without the direct participation of a person.

Антимонопольное регулированиеIn the era of the digital economy, when examining global

transactions and conducting an antimonopoly

investigation, we need new approaches that are fixed at the

legislative level:

• Approach to the definition of the boundaries of the

commodity market, to the perspective analysis of the market;

• Approach to methods for identifying violations and ways to

consolidate evidence;

• Approach to the correlation of competition law and

intellectual property rights (immunity from the application of

antimonopoly legislation).

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“To do” list

“To do” list

In order to effectively supervise the

digital economy, the legislation needs to

be adjusted:

• Correction of the Law on Protection of

Competition (135-FZ);

• The introduction of antitrust requirements

to pricing algorithms in digital markets.

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BRICS Global Benchmarking

Antimonopoly authorities of all countries will be able to monitor

prices on comparable markets and suppress antimonopoly

violations

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Global benchmarking is used to create

platforms for prices at the international

level

Global platforms should create carrier

platforms for social goods, where all

countries will publish the prices of their

contracts

Efficiency, openness and cooperation

of the competition authorities around

the world - the way to overcome the

challenges of the new economic

reality!

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Memorandum on Cooperation of the BRICS Competition (signed May

19, 2016 in St. Petersburg)

Сотрудничество в рамках БРИКС

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Representatives of the antimonopoly

authorities of the BRICS countries

invite to the sessions of the heads of

the largest transnational corporations

to stop unscrupulous practices and

develop best practices in the

interests of our countries.

Cooperation

The BRICS Coordination Committee for

Antimonopoly Policy was established (at the

level of deputy heads of authorities);

Working groups on pharmaceuticals, food

chains, automotive markets have been

created;

The practical interaction of the antimonopoly

bodies of the BRICS in law enforcement

activities is developing

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Cooperation

Perspective Directions

UNCTAD's Discussion Group on International

Cooperation

• The goal is to use the UNCTAD platform to address the

challenges of the new era.

• Toolkit as a methodological basis for the use of Section F of

the UN Competition Complex.

• Consideration of the best practices of international

cooperation elaborated by OECD and ICN.

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FAS Russia proposes to create a research

platform for the BRICS countries (BRICS

Center):

• collection and analysis of information from the

antimonopoly authorities of the BRICS countries,

• identification of best practices;

• preparation of recommendations and development of

approaches to competition policy, taking into account the

development interests of individual sectors and economies

in the whole BRICS countries in the context of

globalization of world economic relations.

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BRICS Center

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We cooperate, we get closer

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Thank you!

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