Limitation of competition and ways to overcome it

Competition is the rivalry of economic entities. The actions of any enterprise creating obstacles for the participation of other companies in the turnover are not allowed on the market. Previously, the general order of conduct on the market was established by the relevant regulatory act No. 948-I "On competition and the restriction of monopolistic activity"from 1991. However, due to the changing economic situation, it was canceled. Instead, another law on competition and restriction of monopolistic activity (No. 135 dated 2016). Consider the features of the application of its provisions.

Restriction of competition

Signs of this phenomenon are provided for in normative act No. 135. As characterized restriction of competition? Article 4 specified normative act contains the following features:

1. Reducing the number of economic entities not belonging to the same group of persons.
2. The decrease or increase in the value of the goods, not caused by changes in the conditions of circulation of products on the market.
3. Refusal of economic entities not belonging to one group from independent actions.
4. Determination of the general rules of commodity circulation in the market by agreement between participants or on the basis of instructions from one person, or when the enterprises coordinate their actions.

In the process of activity of economic entities, other factors may arise that create the possibility for a company or several firms to influence the terms of commodity circulation unilaterally. For example, relevant circumstances may arise during a municipal or state purchases. Restriction of competition in such cases, it is expressed in the establishment by local or state authorities of requirements for economic entities or goods that are not provided for in regulatory enactments.

Bans

According to normative act about competition and the restriction of monopolistic activity, agreements or concerted actions of enterprises on the market are not allowed if they can result or caused:

1. Maintenance / setting of tariffs / cost, allowances, discounts.
2. Decrease, increase, preservation of prices at the auction.
3. Market division by sales volume, territorial characteristic, product range, composition of customers / buyers or sellers.
4. Technologically or economically unreasonable refusal to complete transactions, if it is not directly established by regulatory enactments.
5. Imposing on the counterparty conditions that are unfavorable or unrelated to the subject of the contract.
6. Technologically, economically or in any other way, unjustified setting of different prices for one product.
7. Cessation / reduction of production of products for which there is demand or for the supply of which orders are placed with the possibility of cost-effective production.
8. Creating obstacles for access to the market or exit from it for other firms.
9. Establishment of conditions for participation / membership in professional or other associations, if this leads or may cause inadmissibility, elimination, restriction of competition, establishing unreasonable criteria for membership, which impede participation in payment or other systems, without which entities competing with each other are not able to provide the required financial services.

Methods

Restriction of competition can be done in many ways. The most common methods include:

1. Abuse of dominant position.
2. Execution of agreements or coordination of actions by enterprises in order to influence the state of the market.

In the first case restriction of competition expressed in:

1. Establishing / maintaining high / low cost products.
2. Withdrawal of goods from circulation, as a result of which its price increased.
3. Imposing unfavorable terms of the transaction to the counterparty.
4. Unreasonable reduction / termination of production in the presence of demand for it.
5. Setting unreasonably high prices for the financial services provided.
6. Creating a discriminatory market environment.
7. The formation of obstacles to access to or exit from other enterprises.
8. Violation of pricing fixed by the rules.

Agreed Actions

Competition and Monopoly Restriction Act sphere establishes a ban on creating such a situation on the market in which competing firms, without drawing up agreements on the formation of a cartel, act together. Moreover, the results of such behavior correspond to the interests of each enterprise, if they inform each other about the decisions made. It should be noted that actions that are caused by identical circumstances for firms do not act as a restriction on competition. For example, changes in the value of products on the world market, regulated taxes / tariffs, and demand for goods.

Illegal Agreements

As them normative act about competition and the restriction of monopolistic examines the contract, in accordance with which:

1. Market participants set certain prices for the purchase or sale of products.
2. The volume of sales and purchases of products is regulated to influence its value.

Thus, as an object of agreements can be:

1. Terms of sale.
2. Pricing.
3. Use of patents.
4. Spheres of influence.
5. Volume control.
6. Harmonization of the rules for the sale of goods.
7. Hiring workers.

Exceptions

In some cases, the rules allow a reasonable restriction of competition. To 223 normative act (dated July 18, 2011), it is permitted if determined by the real needs of the customer. Moreover, the actions of economic entities should not contradict the Regulation on the acquisition of services, works, products by individual legal entities.

Difficulties

Thus, the main condition for allowing competition to be limited is validity. Not a single legal act in force in the country discloses this concept. Meanwhile, this issue is very important. Its relevance is determined by the fact that any requirement established by the customer will always limit competition, excluding offers that do not correspond to it. Without any particular difficulties, the issue will be resolved if the specifics of the market are such that there are requirements arising from the provisions of the law. For example, they may be associated with the obligation of licensing, the availability of technical regulations for products and so on. Problems arise when there are no prescriptions in regulatory enactments.

If we consider the question in theoretical terms, the answer to it can be found in Art. 2. In accordance with it, when purchasing services, products, works, customers are guided by constitutional principles, Civil Code, and other regulatory acts. The latter, in particular, include the Regulation governing the execution of transactions. It acts as a document regulating procurement requirements, rules for organizing and conducting procedures, execution and execution of contracts, and other conditions.

Controversial moment

When considering the validity of competition restrictions, it is necessary to take into account the provisions of regulatory act No. 135. In Art. 17, part 1 a number of prohibitions are established. In particular, during the bidding process, request for quotations, offers, it is not allowed:

1. Coordination by the organizers / customers of the activities of participants.
2. Creation of preferential conditions for someone, including by providing access to information, unless otherwise provided by regulatory documents.
3. Violation of the procedure for identifying the winner.
4. Participation of organizers, customers, their employees in the request for quotations, offers or in tenders.

With a literal interpretation of the above prescriptions, it becomes clear that it is impossible to establish any requirements for products, participants, and terms of agreements, since any of them will limit competition.

The solution of the issue in practice

As the analysis of arbitration cases shows, the courts do not use a literal interpretation of the provisions. Moreover, the establishment of requirements that do not comply with the Regulation leads to the loss of disputes on complaints. For example, this document stipulates that certain conditions are provided only in the case of purchases in excess of any amount. Filing qualifications below it will be illegal. In cases considered FAS, restriction of competition used in conjunction with the concept of rationality. If the requirement that the customer establishes does not follow from the subject of the transaction or the draft contract, if there is a complaint from the counterparty, his actions will most likely be regarded as a violation.

Recommendations

When establishing any requirement, the customer must remain within the scope of the Regulation. He must ensure that no norm is formally violated. If the organization has such local acts as technical policy, and requirements, including quality, follow from it, then it will be easier to prove the validity of the conditions. Experts also recommend coordination with the competent authorities. These may be the procurement commission or expert group.

When defining requirements, one should not forget about their "measurability". There is no unambiguous definition of this concept. However, practice shows that requirements that are either numerical or confirmed by documents not provided by the customer will be considered measurable. The latter include access, license and so on.

Restriction of competition under 44-FZ

Art. 8 of this normative act establishes the principle of competition. The norm guarantees any interested parties the opportunity to participate in procurement. In paragraph 2 of Art. 8 refers to pricing. The provisions establish the principle of competitive value, non-price competition in order to identify the best purchasing conditions. In case of violation of the rules, as well as when making unreasonable demands on the participants, the commission of actions by customers that are contrary to federal legal acts, liability is provided.

Cartels

They are considered one of the most dangerous violations of antitrust laws. Cartel conspiracy is an economic crime. It causes damage to consumers, enterprises, and the entire national economic complex of the country as a whole. Cartels:

1. They lead to market capture by certain actors.
2. Limit competition.
3. They entail the establishment of one obligatory cost of production for the parties to the agreement.
4. Suppress external competition (do not allow companies not participating in the agreement to enter the market).
5. They attract the extraction of higher than average income at the expense of consumers.

Prohibitions for power structures

Current legislation does not allow the adoption of acts, the commission of inaction / actions by the competent authorities, providing:

1. Introduction of qualifying requirements for the establishment of enterprises.
2. The establishment of prohibitions or restrictions on the conduct of certain types of activities or the release of certain types of products.
3. Creating unreasonable obstacles to the work of firms.
4. The establishment of prohibitions or restrictions on the free movement of products across the territory of the Russian Federation, their acquisition, sale, exchange.
5. Instructions to economic entities on priority deliveries for certain categories of consumers / customers or on signing contracts in priority order.
6. Establishing restrictions on the choice of enterprises for buyers.

Criminal liability

The punishment for restricting competition is established if it entailed major damage to organizations, citizens, the state or allowed the violator of norms to extract large-scale income. Sanctions for the specified action are established by Art. 178 of the Criminal Code. The corpus delicti is considered material. The act will be considered completed if the consequence of the restriction of competition is major damage.

The purpose of the crime is to minimize or completely eliminate the competitiveness of economic entities. Methods to limit competition can be used very different. As a rule, real obstacles are created for other economic entities to enter the market or conditions are created under which their participation in the commodity circulation becomes minimal.