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Chapter XX

belarusTatiana Ignatovskaya and Yana Chirko*

* TatianaIgnatovskayaisapartnerandheadofcommercialpracticeandYanaChirkoisassociateattorneyatstepanovski,Papakul&partners.

I IntroduCtIon

i Prioritisationandresourceallocationofenforcementauthorities

belarusian antitrust law, being quite a new and poorly developed branch of law, hasstarted togain in importance,moving further fromthe timeswhenantitrustmattersweretreatedmerelyasanissueofpriceregulation.Theever-increasingenforcementandlawmakingactivityofbelarusianantitrustauthoritiesmandatesthatbusinessmust,nowmorethanever,takeantitrustlawintoaccountintheconductoftheiraffairsandwhileconsideringinvestinginbelarus.

The main legal act that regulates relationships concerning competition law inbelarus is law No. 2034-XII, �0 December �992 on Counteracting MonopolisticactivityandDevelopmentofCompetition(‘thelaw’).also,PresidentialedictNo.499onCertainMeasuresinrespectofantitrustregulationImprovementandDevelopmentofCompetition(‘theedict’),whichchangedthelaw’sprovisionsinrespectofcorporatetransactionsandwasadoptedattheendof2009.Thesetwolegalactsareconsideredasthemainframeregulationofantitrust relations inbelarus.except for these twomainlegaldocuments in the sphereof antitrust law a rangeof subordinate regulatory actswereadopted,thatdeterminecertainproceduresandmethodsinrespectoftheantitrustmatters.

TheDepartmentofPriceandantimonopolyPolicyat theMinistryofbelarus(‘the DPaP’) is the state antitrust authority in belarus, authorised to enforce stateantitrustpolicy,aswellastocontroltheactivityoflegalentitiesoperatingintheterritoryofbelarus,ifthisactivityisconnectedwithorinregardtoantitrustmatters.TheDPaPisalsovestedwiththepowertoinvestigateadministrativeoffencesinthesphereofantitrustlaw.ThedecisionsofDPaPmaybeappealedagainstinthecourt.

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TheheadquartersofDPaP,anationalstateauthority,arelocatedinMinsk.TheDPaPisheadedbythedirector,whohasarighttoassigndeputydirectorsandotherstaff inthedepartment.Todecidethemost importantquestions theDPaP’sdirectorconvokes a board, consisting of seven officials: the director, his deputies and otherofficialsoftheDPaPandtheMinistryofeconomy.Theboard’sdecisionsarevotedforby a simplemajority andare formalised inprotocols. If theboard’sdecisions requireofficialformalisation,thesedecisionsarelegalisedbytheactsoftheMinistryofeconomy.However,theactsoftheMinistryofeconomyaremostlyconcernedwiththeproceduralissuesofantitrustmatters.PresentlytheDPaPhasnosubordinatedlocalbranches.Theirfunctionsareunderthecontrolofthelocalexecutiveauthorities.

ii Enforcementagenda

accordingtotheofficialinformationoftheDPaPduringthefirstdecadeof20�0theDPaP handled �40 claims connected with antitrust regulation, 25 of them addressantitrust violations. The DPaP’s board made nine decisions in respect of unfaircompetition.Thelocalantitrustdepartmentsexamined��8antitrustclaimsandelicitedsevencasesofantitrustlawviolation.

II AntItruSt rEGuLAtIon oF ForEIGn EntItIES’ BuSInESS ACtIVItY

antitrustregulationofforeignentities’businessactivitiesonthebelarusianmarketsorabroadhas somepeculiarities incomparisonwithantitrust regulationof thenationalbusiness.accordingtothelaw,theactivitiesofforeignlegalentitieswillberegulatedbybelarusianlawonlyif:a aforeignlegalentitycarriesoutmonopolisticactivity;b thisactivityiscarriedoutonthebelarusianmarket;c themonopolisticactivityofsuchlegalentityinfluencelegalrightsofbelarusian

legalentitiesorcustomers;andd theactivityofforeignlegalentityiscarriedoutinforeigncountryandcouldleadto

limitationofcompetitioninbelarusortoanyotherunfavourableconsequences.

Nonetheless,itshouldbeobservedthatapplicationoftheantitrustlawinrespectofaforeignentity(especiallyimposingsanctions)ispossibleonlyifthereisanappropriateinternational agreementbetweenbelarus and the countrywhere the foreign entity isincorporated.asofthebeginningof20��thereareonlytwointernationalagreements(mutualcooperationtreaties)towhichbelarusispartytoandwhichregulateantitrustpolitics:a the CIs agreement on Harmonisation of antitrust Policy of �2 March �993;

andb theintergovernmentalCIsagreementontheConductofHarmonisedantitrust

Policyof25January2000.

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III CArtELS

Thelawforbidsandconsidersasanoffenceestablishingorparticipatinginanyintegrationorconclusionofexplicitorimpliedagreements,iftheseactionsoragreementsmayresultin the restrictionof competition.a formal orwritten agreement among competitorsisnotnecessarytoconstituteanoffence–aninformalagreement,evenwithminimalcommunicationbetweencompetitors,maysuffice.Thelawprovidesalistofactionsandagreements,bothverticalandhorizontal,thatmayconstituteanantitrustoffence.Theseactions andagreements relate to allocationofmarketsor supply sourcesonprincipleofterritory,theassortmentofproducts,volumeoftheirsaleorpurchaseoracircleofcustomers;excessivepricesorprice-relatedadvantages,bidrigging,artificiallimitationofgoods’production,establishingofcontroloverthegoodssellinginthetrademarketandotherconsequencesthatmayleadtocompetitionlimitation.Non-competeclausesthatare frequentlyused indistributionagreementsarealsoconsideredasabreachofantitrustlaw.

The DPaP and the local antitrust authorities consider that the evidence of anegativeeffectoncompetitionisnotnecessaryiftheobjectofanagreementisaimedtorestrictthecompetition.Thisprinciplecouldbeinferredfromthelaw.

The above-mentioned parties’ arrangements require prior consideration andapprovaloftheDPaPinordertoavoidanapplicationofmeasuresofliabilityfortheviolationofantitrustlaw.

ThemainpenaltiesforbreachoftheprohibitioncontainedintheadministrativeOffenceCodeofbelarusarefinesofupto50baserates.Criminalliabilityforantitrustinfringementisalsoprovided,howeverthereisnocourtpracticeofbringingacriminalcaseforabreachofantitrustlawinbelarus.

IV MErGErS And ACQuISItIonS

Oneofthemostvisibleareaswherebelarusianantitrustlawseekstoensurecompetitivemarketsisthroughthemergerreviewprocess.anti-competitivemergersandacquisitionsareusuallypaidmoreattentionbothbylegalentitiesandthestateauthoritiesasawhole,thananyotherkindofantitrustlawinfringement.ThetransactionvalueofmostM&atransactionsinbelarusisuptous$33million,withthemajorityintheus$6.5tous$25millionrange.Thelawprovidesthenecessarycontrolovermergersandacquisitions,iftheireffectmaybetogainortomaintainadominantpositioninthemarket.Ontheassumption of this provision the law obliges the merger’s participants to obtain theDPaP’spreliminarypermissiontomakeacorporatedeal.In2009theDPaPagreedfourmergerdealsandsixdealsestablishingassociations.ThispermissionistosomeextenttheguaranteeoftheM&avalidityandlegality,andtheabsenceoftheDPaP’spermissionmayleadtotherecognitionoftheM&aasineffectiveundertheDPaP’sclaim.

Thelawdeterminesthreekindsofmergers:a amergerbetweendirectcompetitors(horizontalmergers);b amergeroffirmsthatoperateatdifferentlevelsinthesupplychain;andc amergeroffirmsthatoperateindifferentindustriesentirely.

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ThelawrelatesnotonlytodomesticM&a,butalsotocross-bordercorporatedeals.becausehorizontalmergersmayinfluencecompetitivemattersmorethanothermergers,itiswiththesetypesofmergersthatbelarusianantitrustlawismostconcerned.However,not every transaction is consideredashorizontal.There are somepoints that serve ascriteriatodetermineifthedealneedstobeapproved,relatedto:a theacquisitionofmorethan25percentofotherlegalentity’sstocksorshares,as

wellasexecutingothertransactions,which,consequently,givesthepurchaseranopportunitytoinfluencethedecision-makingprocessoftheotherentity,whichachievesdominanceinthemarket;

b theacquisitionofthelegalentity’sstocksorsharesbyacompetitorwhohasmorethan30percentofthemarketshare;and

c acquisitionofanyrights thatgiveone legalentityanopportunity to influenceconditionsofbusinessactivityofotherlegalentity.

regardingverticalorconglomerateM&as,thenewlyadoptededictsubstantiallyalteredtheprovisionsofthelawconcerningsuchdeals.accordingtotheedict,theDPaPhasarighttoapprovebyissuingpreliminarypermissionsforverticalorconglomeratedeals,connectedonlywithacquiringbyanyperson,entityorevenstateof20percentofsharesofthebelarusianlegalentity,thatmeetsthefollowingrequirements:a thebalance-sheetassetvalueshouldexceedapproximatelyus$�.25million;orb valueofreceiptsshouldexceedus$2.5million.

Nevertheless,theeffortofmakinglegalprovisionsconcerningverticalandconglomeratedeals clearer was not very successful. The edict does not clearly set out the requiredcontentofmergernotifications.Inpractice,thegapsinthelawareforcingtheDPaPandlocalantitrustauthoritiestointerprettheedict’sprovisionsinaverysubjectiveway.

V HoLdInGS

beforetheendofthe2009,thelegalinstituteofholdingsdidnothaveanyrelevantlegalregulationandthecompanies,formallyregardedasholdings,operatedasanumberofaffiliatedentities. InDecember,2009 theedictof thePresidentNo.660onMattersofestablishingandOperatingHoldings(‘edictNo.660’)wasadopted,andadjustedthecorporateproceduresconcerning theholding formations.according toedictNo.660,aholding is thecorporate formationthat includesa legalentity thathas25percentormorestocksor sharesofother legalentitiesconstitutinga formationorownsthepropertyof theunitary enterprise, and is able to influence thedecisionsof theselegalentities.undertheprovisionsofedictNo.660,onlybelarusianorforeignlimitedliability companies, joint-stockcompanies,unitary enterprises andadditional liabilitycompaniescanbethemembersoftheholding,althoughforeigncompanies,incorporatedincountriesthatdonothavebilateralagreementswithbelarusconcerningtheexchangeoftaxinformationaredeprivedoftherighttojointheholding.asalegalapprovaloftheholding’sestablishment,theholding’sregistrationattheMinistryofeconomyincludingentryintothestateregisterofholdingsisrequired.

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Nevertheless,theMinistryofeconomydoesnotdemandtheDPaP’spermissionforM&asasanessentialpartofthedataapplied.WithouttheDPaP’spermissiontheestablishment of the holding may be considered as invalid under the common rulesconcerningM&adealsandtheholding’smemberscouldbesubjecttoadministrativepenaltiesforthebreachoftheantitrustlaw.

The important point is that holdings are not automatically considered as thedominantmarketplayers.Thisnotwithstanding,holdingsarelargeformations,andtoberecognisedashavingdominantpositiontheyneedtomeetthecriteriadeterminedinthelaw.However,theapplicationofantitrustlawtoholdings’activitiesmaybereconsideredin the future as the instituteofholdings in thebelarusian legal system is thenewestsuchchangeandthereisnoestablishedpracticeorguidelinesonhowtodealwiththeholdings’business.

VI unFAIr CoMPEtItIon

unfair competition is probably one of the most applicable branches of the antitrustlaw, as it relates to themost essential for goods and services producers spheres, suchastheintellectualpropertyrights(includingmeansof individualisation)infringementorunfairadvertisement.as theclaimsconcerningotherbranchesofantitrust lawareusuallysubmittedbythestateauthorities,thereforetheyarenotveryfrequent,litigationsinthefieldofunfaircompetitionareinitiatedbyawiderangeofcompaniesdealinginthebelarus trademarkets.according toarticle�4-2of thelaw, the formsofunfaircompetitionarerelatedtoreversepassingoff,falseadvertising,makingthresholdsforthebusiness communication of competitors, disorganisation of competitors business andsomesimilaroffences.

However,theclaimantsseldomchoosetheantitrustadministrativeproceduretoprotecttheirrightforfaircompetition,asthisprocedureisburdensomeandrequiresalotoftime,thustheclaimantisnotabletogetanurgentresolutionoftheproblem.

accordingtoarticle�ofthelaw‘unfaircompetition’isanyactionsoflegalentitiesthataimatobtainingbusinessadvantagesandareforbiddenbythelaworcontradictstheprinciplesofhonestyandreasonablenessormaycausedamagestocompetitorsordefametheirbusiness.

FollowingthistermtheDPaPregardstheactionasthecaseofunfaircompetitiononlyifthereisthewholesetoffourcriteria:a actionsareaimedatobtainingbusinessadvantages;b actionscontradictthelawortheprinciplesofhonestyandreasonableness;c actionscouldcausedamagestocompetitorsordefametheirbusiness;andd the claimant and the respondent are competitors, dealing on the same trade

market.

all these circumstances, mentioned above, should be confirmed by written proof, ifnot, theDPaPwillprobably refuse tohandle the case. It is remarkable, thatneitherthelaw,norotherlegalactsdetermineparticularproof,thatareconsideredasproperand sufficient for the DPaP to start the procedure, therefore there are a lot of caseswhentheDPaPrejectedtheclaimastheproofseemedimproper.Theofficialstatistics

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confirms this suggestion. In 2009 the DPaP registered 36 claims concerning unfaircompetition;however,onlyfiveof themwerehandledand investigatedandonlytwoclaimswereconsideredasprovedandtheDPaPimposedadministrativemeasuresupontheoffenders.

Therefore,entitieswhoserightsareinfringedbyunfaircompetitionprefertore-qualifythecasebynarrowingittoanintellectualpropertyrightsviolationoraviolationof the advertising legislation to force the case by applying to other state authorities.For example, the Ministry ofTrade is empowered to handle cases concerning unfairadvertising, if the case does not refer to unfair competition. also, the Ministry ofTrade,unliketheDPaP,hasgreatexperienceinthelegalinvestigationofsuchcasesandadjudicatesthecasesinashorttime.

VII ABuSE oF doMInAnCE

according to the law, dominance in the market should be regarded as an exclusivepositionofthecompanyinthemarketofgoods,whensuchgoodshavenosubstitutesorinterchangeablegoods.Thisexclusivepositiongivesapossibilitytoinfluencestronglythecommoncirculationofcommoditiesinthemarketortocomplicatemarketentryforothersuppliersofsuchgoods.acompanywillbeconsideredasachievingdominanceifthiscompanymeetsanyofthefollowingrequirements:a the share of company’s goods on the market exceeds that determined by the

legislation,inthatparticularmarketofgoods;b theshareofcompany’sgoodsinthemarketisstableincomparisonwithsharesof

itsbusinessrivalsonthismarket;c thecompanycomplicatesmarketaccessforitsbusinessrivals,whenthiscomplexity

iscausedbythemarkingpolicyofthecompany;ord thecompanyhasbeenincludedinthestateregisterofcommerciallegalentities

thathaveachievedmarketdominance.

The market of goods according to the antitrust law of belarus is defined under thefollowing criteria: territory and kind of goods. according to the territorial criteriongoodsmarketsaredividedintotwogroups–nationalmarketandlocalmarket.Goodsaredeterminedinaccordancewithastandardlist,adoptedbythegovernmentofbelarus,therefore thekindsof goods are considered as a class andarenotnarroweddown tospecifickindsofgoodsofthesameclass.

althoughtheantitrustlawofbelarusstillcontainsdefiniteprovisionsrelatedtothemarketshare,theDPaP’srecentdecisionsshowthatthecriterionofmarketshareisnolongerconsideredassubstantiallyimportantforrecognisingdominanceinthemarket.Tomakeacertaindecisioninrespectofthecompany’smarketpowertheDPaPtakesallcircumstancesandfactsintoconsideration.somegoodsmarketsinbelarusinvolvealotoflegalentitiesthatseparatelymaynothavemorethan�or2percentofthemarketshare,therefore�0or�2percentofsuchamarketisconsideredbytheDPaPasamarketsharethatgrantsthepossibilityofinfluencingthecommoncirculationofcommoditiesintheparticularmarket.TheotherchangeoftheDPaP’spolicyconcerningdominancein the market applies to the market players. until 2009 only producers of goods or

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servicescouldbetreatedasdominant;however,theDPaPchangeditspointofviewandnowimporterscanalsoberegardedashavingadominantpositioninthemarket.

Inaddition,thelawcontainsadistinguishingprovisionconcerningthecontroloverthedominantmarketplayers.alegalentity,achievingdominanceinthemarket,may be excluded from the state register of commercial legal entities, which achievedominanceinthemarketsandloseitsdominantstatusundertheagreementwiththeDPaP,thatdeterminecertainobligatoryconditionsofthelegalentity’sbusinessactivity,thatpreventthelatterfrompursuingmonopolisticpolicy.

accordingtothelawandtheedicttheDPaPcontrolslegalentitiesthatachievedominanceinthemarketandappliesspecialpriceregulationandspecialrequirementstothemergersoracquisitionsofsuchentities(asmentionedsupra).undertheedicttheDPaPconcludesantitrustagreementswithlegalentitiesthatachievedominanceinthemarket,whichdenythelegalentitiestheopportunitytorunmonopolisticactivityanddeterminepriceranges.

VIII nAturAL MonoPoLIES

Thebelarusianconceptof‘naturalmonopoly’issimilartothatofmostotherpost-sovietcountriesandconcernsstateapprovalofproductionofsomeexclusivegoodsandservicesbycertain legal entities,when theproperprovisionof suchgoodsand services seemstobemoreeffectiveifthereisnocompetitioninaparticularmarket.Historically,thisconceptofnaturalmonopolieshasbeenaccompaniedbyasovietideaofviewinglargefirmsasnationalmainmarketplayerstobeprotectedfromunbridledmarketforcesandcompetitionpolicy.lawNo.�62-ZontheNaturalMonopolies,dated�6December2002,definesthefollowingeconomicsectorsasthespheresofnaturalmonopolyactivity:gasandoiltransportationthroughtrunkoilpipelines;electricitydistribution;centralisedwatersupplyandwastedisposal;electricalandpostalservicesforcommonuse;railwayshipping services; shipping terminals and airport services; and maintaining lines offlight and the management of air traffic. as far as the natural monopoly sectors aremajorcontributorstothestatebudget,themajorityownershipofthecompaniesinthenaturalmonopolysectorgenerallybelongstothestateministriesandauthorities.ruebeltelecomiscontrolledbytheMinistryofCommunications,ruebelarusianrailwayismainlyownedbytheMinistryofTransportandCommunications.

However, in 2009 after the belarusian government focused on the state’seconomicproblems,andthenaturalmonopolysector,thecommonstatepolicychangeditsdirectiontowardsthedevelopmentoftheprivatisationofstate-ownedenterprisesandincreasingcompetition.

Telecomscase

Pursuanttoaletterdated25January,2006fromtheMinistryofCommunicationsandInformationTechnology, rue beltelecom was recognised as being the nation’s onlynaturalmonopolist in the telecoms sector.beltelecom is thenation’s soleprovideroflocal and long-distance telephone service.underbelarusian telecoms law,beltelecomhasamonopolyonconnectingothernetworks,thatis,wirelesscarriersandIsPscanonlyinterconnect via beltelecom (however, the latter sphere of communications networks

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isnotdetermined in thelawon thenaturalmonopolies as anaturalmonopoly). Inpractice,beltelecomhasexclusiverights inthefixed linesectorandthestatealsohassignificant levelsofownership in themobile sector, limitingthepossibilities fornon-discriminatoryaccesstonetworkelements.

The developments since the start of the liberalisation of the telecoms marketshaveshowntheefficiencygainsof introducingcompetition.Furthermore,technologychanges have undermined the natural monopoly argument. Where formerly, at thehighpointofthemonopolyperiod,therewouldbeanimplicitunderstandingamongmosteconomiststhattelecommunicationswasacaseofnaturalmonopoly,technologydevelopmentshavecontributedtochangingthis,asdifferentnetworkscancarrysimilarservicesandasverticaldisintegrationbecomeseasier,allowingoperatorstoofferservicesonotheroperators’networks.TwoyearsagobelarusianeconomistsweresurethatthenewTelecommunicationsactwould abolishbeltelecom’smonopolyon long-distanceservice and interconnection of telecomsnetworks andwireless carriers andwouldbereorganised as a public company. However, it did not happen. at the end of 20�0the revolutionaryPresidentialedictonMeasuresofbelarusianDataCommunicationNetworkDevelopmentwasadopted,whichinitiallyappliedtheterm‘competition’tothetelecomsservices.Theedictprovidesfortheestablishmentofintegratedsystemsfordatatransferthatwillincludealldatatransferpathsbothofnationalandlocalauthorities,andofcommercialentities.TechnicalcontrolovertheintegratedsystemofdatatransferpathswillbeunderthejurisdictionoftherueNationalCentreofTrafficexchange.Therefore,theedicteliminatesbeltelecom’semergencypowersconcerningcontroloverthedatatransferpathsinbelarus.althoughtheedictdoesnotprovidefullliberalisationofthetelecomssector,itisthefirstimportantsteptowardscompetitiondevelopmentinthissphere.

IX ConCLuSIon

Today,allthenecessaryprerequisitesforanewphaseinthedevelopmentofantimonopolylegislation and applicationhavebeen created inbelarus.Moreover,belarus is on thethresholdofstateantimonopolyauthorityreformationaimedatensuringthefunctioningofafree,independent,verticallysubordinateauthority,whichguaranteesthedevelopmentofcompetitionandoppositiontomonopolisticactivity.suchprerequisitesaresecuredinDirectiveNo.4ontheDevelopmentofentrepreneurshipInitiativeandstimulatingbusinessactivityinbelarus,enforcedbythePresidentofbelarus.DirectiveNo.4wasadopted inorder topursue thedevelopmentofopencompetitionandantimonopolypolicy, aimedatpreventionofmonopolistic activity andunfair competition, and theachievementofeffectivefunctioningofgoodsmarketsinbelarus.Furthermore,intheframeworkof theagreementonunifiedPrinciples andrulesofCompetition in theCustoms union of belarus, russia and Kazakhstan, belarus undertook to create anindependentantitrustauthority.Thisfactgiveshopethatbelarusianantitrustlawwillsuccessfullydevelopinthecomingyears.

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Tatiana Ignatovskaya, partner, head of commercial practice, board-member of non-commercialpartnership“CIsCompetitionsupportassociation”,YanaChirko,associateincommercialpractice

StEPAnoVSkI, PAPAkuL & PArtnErS

�6,Kuibyshevstreet,4thFloor,220029,Minsk,belarusTel:+3�5��2094483Fax:+3�5��20486�2info@spplaw.bywww.spplaw.by

IGnAtoVSkAYA tAtIAnA

Stepanovski, Papakul & partnersTatiana is a Partner and Head of Commercial practice at stepanovski, Papakul&partners.shespecializesinintellectualproperty,consumergoods(FMCG),advertisinglaw,competitionandantitrustlaw,energyandnaturalresources.sheismentionedinreferenceguidesofleadinglawyersoftheworldChambersGlobal;Chamberseurope;PlCWhichlawyer,Internationallawyers,legal500.

Tatianasupportsgovernmentalauthoritiesindevelopmentoflocallegalactsorofficialpresentationsinrespectofcompetitionandantitrustlawdevelopmentinbelarus.CurrentlysheisamemberofCIsCompetitionsupportassociation.

YAnA CHIrko

Stepanovski, Papakul & partnersYana is an associate attorney at stepanovski, Papakul& partners and specializes inintellectual property law, telecommunications, competition and antitrust law. Yanahas broad experience of consulting on the matters concerning distribution of goods,services,rights,includingpreparationofthesoftware’sresellagreements,consultingonthe antitrust issues, which could appear during the distribution process. she activelyparticipateinlocalIPlegalconferencesandevents,alsoadvisesofficialauthoritiesonthemattersrelatedtointroducingofIPinternationallawregulations’intolocallegislation.

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