Pursuant to Federal Law No.135-FZ “On protection of competition” dated 26.07.2006 (the “Competition Law”) coordination of business activity means actions of business entities concerted by a third party neither being a member of the same group as any such business entity nor performing activities on the respective commercial market. That provided, actions of business entities performed under a “vertical” agreement^[1] cannot be qualified as coordination of business activity. 

However, it should be noted that even if parties entered into a distribution agreement which formally can be qualified as a vertical agreement, the antitrust authority can establish a fact that one of the participants of such agreement concerted the actions of the other party. 

During examination of a case on violation of antitrust law in respect of a car manufacturer,^[2] the Russian Federal Antitrust Service revealed that official dealers of this car manufacturer when performing their activities used prices for servicing cars recommended by the manufacturer. The manufacturer and dealer entered into a dealer agreement which in the car manufacturer’s opinion met all the criteria of a vertical agreement. 

According to case materials, the car manufacturer set the maximum prices for post‑warranty car service by sending information letters to the dealers on the maximum price for such services, as well as by publishing this information on a specialized web site. 

In particular, the antitrust investigation revealed the following issues:

• pursuant to dealer agreements between the car manufacturer and its official dealers, the dealers were obliged to provide consumers services on repair and maintenance of cars of a certain make;
• some dealers did not have their own price list for car servicing and used prices approved by the car manufacturer;
• dealers were obligated to check prices of the car manufacturer on a daily basis and to take timely actions to duly use them;
• the car manufacturer from time to time sent dealers information letters on changes in prices on car servicing, with requests to take necessary actions to use the new prices;
• the dealer agreement provided for sanctions in form of early termination for non-compliance with directions from the information letters. 

In the course of this case, the Antitrust Service worked out a legal position which can dramatically influence the formation of practice on qualifying antitrust violations. In the final resolution on the case the antitrust authority indicated that:

• the dealer agreement is a vertical agreement as regards resale of goods;
• the dealer agreement is not a vertical agreement as regards provision of car servicing by dealers to consumers, since when performing such services the car manufacturer is neither a customer nor a contractor. 

In other words, notwithstanding the fact that the dealer agreement regulated relations between the car manufacturer and dealers regarding provision of car servicing by the dealers, the antitrust Committee qualified the dealer agreement as not meeting the criteria of a vertical agreement as regards such relations, since civil law agreements or agreements which do not provide for transfer of goods from one person to another cannot be deemed vertical agreements. 

The antitrust authority stated that under the dealer agreement only cars, original spare parts and supplementary goods were resold, as well as other goods proposed by the car manufacturer to the dealers for further resale to the end consumers. Under the dealer agreement, car servicing was not subject to resale. Therefore, the dealer agreement meets the criteria of a vertical agreement only as regards the resale of the car manufacturer’s products. 

Based on this position of the Antitrust Service, it must be noted that when examining the issue regarding the nature of agreement between contracting parties, the antitrust authority will assess not only existence of an agreement which formally meets the criteria of a vertical agreement, but also the actual relations between the parties under such agreement. If one of the parties is neither a customer nor a contractor of the second party, then such agreement cannot be deemed vertical.

Irina Akimova  Of Counsel,  Head of Antitrust Practice                              Moscow   iakimova@cls.ru   Tel.: +7 (495) 970 1090

Dmitry Gavrilenko   Associate                   Moscow    dgavrilenko@cls.ru    Tel.: +7 (495) 970 1090

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Irina Akimova or Dmitry Gavrilenko, Moscow Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.