On January 30, 2015, the State Duma approved in the second reading draft law No.260190-6 “On introducing amendments to Article 178 of the Criminal Code of the Russian Federation (as regards criteria of liability for non-admission, restriction or elimination of competition)” that amends the elements of the crime (corpus delicti) under the said Article.

Please find below an overview of the changes that the draft law introduces to Article 178 of the Criminal Code of the Russian Federation (the “Criminal Code”).

Title of Article changed

Article 178 of the Criminal Code in its current wording is titled “Non-admission, restriction or elimination of competition.” The draft law changes the title to “Restriction of competition.”

Elements of the crime under Article 178 of the Criminal Code changed

Article 178 in its current wording imposes liability on competing business entities for non-admission, restriction or elimination of competition by entering into agreements that restrict competition (cartels) or by abusing repeatedly their dominant positions in form of fixing and/or maintenance of monopolistic high or monopolistic low prices for goods, unreasonable refusal to conclude or avoidance of concluding an agreement and restriction for entering a market, provided such actions cause major damage to individuals, companies or the state or involve high profits.

The proposed wording of the draft law defines the crime as restriction of competition by competing business entities entering into an agreement that restricts competition (a cartel) and is prohibited under the Russian antitrust legislation, provided such action causes major damage to individuals, companies or the state or involves high profits.

It should be noted that the above definition has become much narrower and no longer includes repeated abuse of a dominant position, unreasonable refusal to conclude or avoidance of concluding an agreement and restriction for entering a market.

In addition, the draft law also excludes from Article 178 note 4 which defines repeated abuse of a dominant position as abuse of an entity’s dominant position more than twice within three years, for which the entity was held liable for an administrative offence.

Furthermore, the said changes could also be considered technicalities and are intended to prevent interpretation of Article 178 as imposing liability not for a cartel agreement per se, but for non-admission, restriction or elimination of competition in form of collusion or abuse.

Changes in the amount of income derived and damage caused

Notes 1 and 2 to Article 178 change the definition of high profits, raising the amount from 5 million to 50 million Rubles and the amount of particularly high profits from 25 million to 250 million Rubles. It is also proposed to change the amount of major damage from 1 million to 10 million Rubles and the amount of particularly major damage from 3 million to 30 million Rubles.

Entity being the first to inform of a crime to be released from liability

A novelty of the Article in question is that an entity that not only contributed to resolving the crime, compensated damage or otherwise mitigated damage, but also was the first among the accomplices to inform, on its own initiative, of the crime, is released from liability.

At present, in Russia there is a program of mitigating liability for an administrative offence in form of participation in a cartel agreement as provided by note 1 to Article 14.32 of the Code of Administrative Offences (Conclusion of an agreement restricting competition, taking concerted actions restricting competition, coordination of economic activities).

However, release of a company from administrative liability for an offence in form of participation in a cartel agreement does not automatically release its officials from criminal liability.

This conflict adversely affects the cartel detection rate in Russia. Companies and their heads facing criminal liability, even provided they will be released from administrative liability, are not motivated to inform antitrust authorities of a cartel.

The amendments proposed by the draft law will settle this issue.

All amendments to the criminal law are aimed at reducing pressure both on small businesses and major market players and appear to be part of the liberalization of antitrust laws by Russia’s Federal Antitrust Service.

The draft law introducing the amendments described above will be examined by the State Duma in its third reading and, if approved, will be forwarded to the Federation Council and then to the President of Russia for signing and publishing.

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.