Cartel leniency in the Russian Federation: overview
A Q&A guide to cartel leniency law in the Russian Federation.
The Q&A gives a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities. In particular, it covers the conditions to be satisfied, the method of making an application, availability of immunity from civil fines to individuals, the scope of leniency, circumstances when leniency may be withdrawn, leniency plus, confidentiality and disclosure, and proposals for reform.
To compare answers across multiple jurisdictions visit the Cartel leniency Country Q&A tool.
This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Cartel Leniency Q&As visit www.practicallaw.com/leniency-guide.
For a full list of jurisdictional Competition Q&As, which provide a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures in multiple jurisdictions, visit www.practicallaw.com/mergercontrol-guide and www.practicallaw.com/restraintsoftrade-guide.
Applicable laws and guidance
The leniency programme is available under administrative and criminal laws.
The administrative leniency programme is available to both companies and individuals that can be subject to administrative liability for anti-competitive agreements and concerted actions between companies, as well as anti-competitive agreements between companies and state authorities (or organisations performing a public function). The administrative leniency programme is governed by Article 14.32 of the Code of Administrative Offences.
The criminal leniency programme is available to individuals only, as there is no concept of corporate criminal liability in Russia, and only for anti-competitive agreements between companies that are competitors (that is, cartels). The criminal leniency programme is governed by Article 178 of the Criminal Code.
The main practical problem with these programmes is that they are not legally linked to each other. Therefore, administrative leniency granted to a company does not automatically make criminal leniency available for the individuals of that company, and vice versa. This problem is part of a larger inconsistency between the criminal and administrative laws, allowing competition and criminal law enforcement authorities to proceed separately against companies and their employees.
To date, there is no official published guidance on either programme.
The administrative leniency programme is administered by the Anti-Cartel Department of the Central Office of the Federal Anti-monopoly Service of Russia (FAS). If the leniency application is received by any of the FAS regional branches throughout Russia, that branch must immediately inform the FAS Central Office and follow its instructions
The criminal leniency programme is administered by the criminal law enforcement authorities and, ultimately, the courts. Criminal investigations under Article 178 of the Criminal Code are within the competence of the investigators of the internal affairs bodies of the Russian Federation.
Scope of application
The administrative leniency programme covers the following offences:
Anti-competitive agreements between companies.
Anti-competitive concerted actions between companies.
Anti-competitive agreements between companies and state authorities (or organisations performing a public function).
The criminal leniency programme only covers anti-competitive agreements that are deemed to be cartels, that is, agreements between competitors that lead or may lead to:
Price manipulation at tenders.
Division of markets by territory, volume, assortment or customers.
The criminal leniency programme is available to individuals who are directly implicated in anti-competitive agreements between competitors (cartels) (as there is no criminal liability for other anti-trust offences), as well as their accomplices.
According to official data of the Federal Anti-monopoly Service (FAS), there were 28 applications for leniency with respect to cartels in 2014, and all applicants were granted immunity from liability (http://fas.gov.ru/fas-in-press/fas-in-press_40275.html).
In June 2015, Post of Russia applied for administrative leniency with respect to an anti-competitive agreement with TransPack LLC. The agreement concerned the postal transportation and had been concluded without mandatory tender, which restricted competition.
At the end of 2014, the FAS initiated 16 cases regarding cartel agreements at procurement tenders (for the needs of educational and medical institutes of the Moscow Region). A number of companies applied for administrative leniency and obtained full immunity from administrative liability.
Availability of leniency
The administrative leniency programme provides for full immunity from administrative liability if all the following conditions are met:
At the time of the leniency application, the Federal Anti-monopoly Service (FAS) does not possess information regarding the offence for which leniency is sought.
The leniency applicant has not started to implement or has stopped implementing the corresponding agreement or concerted actions.
The information provided by the leniency applicant is sufficient for the FAS to establish a prima facie case for the corresponding administrative offence.
Under the current regime, administrative leniency is only available to the first applicant. Leniency applications filed by several applicants simultaneously will not be considered. However, the Code of Administrative Offences sets out several grounds to benefit from a reduction in fines:
Voluntary termination of the unlawful conduct.
Voluntary notification of the violation to the Federal Anti-monopoly Service (FAS).
Provision of assistance to the FAS in its investigation.
Prevention of adverse consequences.
Voluntary compensation of the damage caused.
Voluntary fulfilment of the FAS' prescription to remedy a violation.
The offender did not organise the unlawful agreement or concerted actions and/or received mandatory instructions to participate.
The offender has not started to implement the unlawful agreement.
In the absence of a leniency application, the violations covered by the administrative leniency programme may result in:
An administrative fine (for a legal entity) from 1% (but not less than RUB100,000) up to 15% of the amount of revenue the offender received from the sale of goods, or the amount of costs the offender spent for the purchase of goods, on the market in which the offence was committed, depending on any aggravating and mitigating circumstances.
Disgorgement of revenue received from a violation.
Where the revenue received by the offender from the sale of goods in the market in which the offence was committed exceeds 75% of the aggregate amount of revenue of the offender from the sale of all goods, the fine will range from 0.3% to 3%.
Administrative sanctions can also be imposed on senior managers (mainly top management) of the offender in the form of a fine of up to RUB50,000 or disqualification for a period of up to three years.
Administrative leniency is available to both companies and individuals, as administrative liability can be imposed on both companies and individuals.
Administrative leniency is available to employees that can in principle be subject to administrative liability. Such employees are the company's "officers", defined as persons who perform organisational or administrative functions. Generally, a company's officers include its senior management.
The leniency application of a company is usually signed by its CEO, who is also subject to individual administrative liability.
Administrative law does not impose a requirement for "full co-operation" on applicants. However, a company's officer is not automatically discharged if the company is granted administrative leniency. Therefore, there is a risk that, if the officer does not sign the leniency application and does not co-operate with the Federal Anti-monopoly Service to provide the information and documents that are sufficient for the purpose of establishing an administrative offence, he or she will be excluded from the leniency programme.
The criminal leniency programme is only applicable to individuals, as companies are not subject to criminal liability under Russian law.
Leniency from criminal liability will only be granted if the following conditions are met:
The offender has assisted with the criminal investigation (the mere detection of a crime may be insufficient).
The offender has compensated the damage caused or, alternatively, remitted to the federal budget the income received as a result of the commission of the offence.
The acts of the offender seeking leniency do not constitute another criminal offence.
Proceedings against employees
There is no formal mechanism for granting immunity from criminal liability to individuals where a company has been granted immunity from administrative liability for the same offence. Accordingly, even if a company notifies the Federal Anti-monopoly Service (FAS) of a cartel agreement and is granted immunity from administrative liability, there is still a risk that the company's officers will not receive leniency from criminal liability.
Since criminal leniency is only available to individuals, employees applying for leniency must decide for themselves on how to protect their interests. A practical problem may arise in a situation when a company applies for administrative leniency for itself and, after the anti-monopoly and administrative cases against the company are concluded, the file is transferred to the criminal law enforcement authorities. Given that this situation is not expressly regulated by law, the interests of the company and the implicated employees may diverge, so these employees would be well advised to monitor the company's leniency process and to intervene if necessary.
Under administrative law, there is a risk that leniency may be denied if an application is made after the Federal Anti-monopoly Service (FAS) has initiated an anti-monopoly investigation, as the existence of an ongoing investigation implies that the FAS already possesses at least prima facie evidence of an anti-monopoly offence (see Question 4). However, the Supreme Arbitrazh Court has held that a leniency application is deemed to meet this requirement (that the FAS lacks the relevant information about the offence) if it is filed before the announcement of the decision in the anti-monopoly investigation.
There is no express or implied provision suggesting that criminal leniency is not available after the criminal investigation has started. Article 178 of the Criminal Code suggests that the person who seeks leniency must help solve the crime, not detect it.
The administrative leniency application can be filed with the Federal Anti-monopoly Service (FAS) or its regional branches. A list of FAS regional branches is available (in Russian) at: www.fas.gov.ru/structure/471.shtml.
Under the Order of the FAS Head No. 369 dated 28 September 2008, the Deputy Head of the FAS and the Head of the Anti-Cartel Department are responsible for processing and supervising leniency applications. Either of them should be contacted directly.
See box, The regulatory authority.
A criminal leniency application must be filed with the particular enforcement authority investigating the case.
An application for leniency from administrative liability must be made by the person seeking leniency. In most cases, this will be the company and the application will be signed by the company's authorised signatory.
Criminal leniency only applies to individuals. Therefore, individuals wishing to benefit from the leniency programme must submit an application.
Neither the administrative nor criminal leniency programmes expressly provides for any informal application process.
However, on its website, the FAS invites potential leniency applicants to contact its officials for informal consultations and guarantees confidentiality. In addition, based on the author's test inquiries, the FAS appears to be willing to meet and to provide preliminary guidance on an informal basis.
The implementation of the criminal leniency programme has not been determined yet.
Form of application
There is no specific form required for submitting a leniency application. The application must be in writing and accompanied by the relevant documents in order to meet the conditions for leniency (see Questions 4 and 7).
However, according to the FAS, the application must also meet the formal requirements set out in the Administrative Regulation on Execution of State Function on Initiation and Consideration of Cases on Violation of Competition Legislation of the Russian Federation (adopted by the FAS Order No 339 dated 25 May 2012), in particular:
The application must be signed by the applicant or its authorised representative.
The application must contain information about the applicant and other parties that have committed the offence.
The application must contain a description of the offence committed and refer to the relevant legal provisions.
The application must contain the list of enclosed documents.
The documents enclosed in the application must be originals or certified copies.
The administrative law does not expressly provide for a procedure for obtaining a marker that will specify the time period for supplementing the original application. However, in practice, the application will be officially registered and given an internal reference number.
This also applies with respect to criminal leniency (see Question 7, Circumstances).
An applicant must provide all information, documents and evidence available to it regarding the reported anti-trust offence and admit the infringement at the moment of applying to the FAS.
Oral statements are acceptable during pre-application consultations, but are unlikely to be sufficient for main submission purposes.
With regards to the administrative leniency programme, following receipt of a leniency application, the Federal Anti-monopoly Service (FAS) will commence an anti-monopoly investigation against the entities and individuals concerned. The term of the anti-monopoly proceedings cannot exceed three months, but can be extended for six months in certain circumstances. In addition, the anti-monopoly investigation can be stayed for the period of another anti-monopoly investigation, an investigation of the law enforcement authorities, or judicial proceedings that are relevant to the case.
Once the anti-monopoly investigation is complete, the FAS will initiate the administrative proceedings during which the question of leniency will be formally resolved. The term of the administrative proceedings cannot exceed 15 days, but can be extended for one month if the case requires expert studies, the examination of witnesses, or the collection of evidence. Administrative proceedings can be preceded by an administrative investigation, which cannot exceed one month, but can be extended for one month in exceptional circumstances.
The procedure under the criminal leniency programme has not been determined yet.
Withdrawal of leniency
Scope of protection
The first leniency applicant will receive full immunity from administrative liability for the violation.
There are amendments pending, which are expected to provide for a fine reduction (to the statutory minimum for the respective violation) for the second and third leniency applicants, if all the following criteria are met:
The applicant pleads guilty in relation to the violation.
The applicant refused to participate or discontinued the violation.
The documents and information provided are sufficient for the Federal Anti-monopoly Service to confirm the violation.
The administrative leniency programme only provides immunity from administrative liability and does not preclude the recovery of civil damages. In addition, the decision of the Federal Anti-monopoly Service can be used as evidence of the violation. However, the amount of damages suffered by the injured party must be proven by the claimant.
One of the express requirements for the grant of criminal leniency is that the offender seeking leniency must compensate the damage caused as a result of the commission of the offence (see Question 7, Circumstances). However, this requirement does not preclude third parties from bringing damages claims against an applicant that has been granted leniency under the criminal law.
Confidentiality and disclosure
Under administrative law, there is no requirement to keep the identity of a leniency applicant confidential. However, at least at the pre-filing stage and even during the investigation, the Federal Anti-monopoly Service (FAS) usually keeps the identity of the applicant confidential.
The identity of the leniency applicant is likely to be formally disclosed when the FAS decisions in the anti-monopoly or administrative case are challenged in court. Whether the identity of the leniency applicant is disclosed before that time depends on the circumstances of each case.
Other companies participating in the investigation and administrative proceedings will usually not have access to the information and documents provided by the leniency applicant until the final decision is challenged in court.
A leniency applicant can request confidentiality of the documents and information provided.
Domestic submissions and domestic discovery
Documents and data submitted to the Federal Anti-monopoly Service (FAS) can be made subject to discovery in the domestic courts.
Domestic submissions and foreign discovery
Documents and data submitted to the FAS during the leniency application may be subject to discovery in foreign courts, depending on the applicable foreign laws.
Foreign submissions and domestic discovery
Domestic courts can make limited requests for the collection of evidence in civil and criminal proceedings. Availability of the information submitted in a foreign jurisdiction depends on whether there is an international agreement in place with the relevant country.
The Russian Federation and the Federal Anti-monopoly Service have concluded a considerable number of international agreements with other jurisdictions and competition authorities, which provide for co-operation and the exchange of information. The extent of such co-operation is not expressly provided for under Russian legislation. Therefore, the possibility to share information provided by a leniency applicant with other authorities cannot be unequivocally confirmed or denied.
Special rules on co-operation between competition authorities apply within the Eurasian Economic Union.
Proposals for reform
The key proposals for reform are to:
Provide for a fine reduction to the second and third administrative leniency applicants (in addition to the first applicant receiving a full administrative immunity).
Make the initiation of a criminal case conditional on the Federal Anti-monopoly service findings in its anti-monopoly decision.
Limit the ability of the respondents in the anti-monopoly case to have access to the administrative leniency application and to request confidentiality of the information they submit in their defence.
Federal Anti-monopoly Service (FAS)
Description. This is the official website of the FAS, which provides access to applicable legislation, case law and news.
The regulatory authority
Federal Anti-monopoly Service (FAS)
Responsibilities. The FAS is responsible for a wide variety of business areas and has extensive authority to ensure compliance of market players with the applicable laws. The FAS is responsible for enforcement of the competition, advertising, procurement, retail, natural monopolies and tariffs and foreign investment laws.
Person/department to apply to. Deputy Head of the FAS (Mr Tsarikovskiy) and Head of the Anti-Cartel Department (Mr Kinev).
Procedure for obtaining application documents. Not applicable.
Anton Subbot, Partner
Baker & McKenzie - CIS, Limited
Professional qualifications. Russia, Lawyer
Areas of practice. Contentious competition; procurement; anti-bribery; corporate compliance and internal investigations.
Non-professional qualifications. Law Degree, Moscow State Law Academy, 2007; JD, Loyola Law School, Los Angeles, 2002; MBA, California State University, 1998
Represented a global healthcare company in court proceedings concerning the client's corporate liability for its employee's attempt to bribe a state official for increasing procurement purchases of the client's products, which was established in a prior criminal conviction of the state official.
Represented a global crop protection company in court proceedings concerning the client's corporate liability in connection with a prior criminal conviction of a state official for receiving remuneration for expediting issuance of certain market authorisations for the client's goods.
Represented a global engineering company in an anti-monopoly case concerning alleged bid-rigging of a government tender, which ran in parallel with a criminal investigation against state officials responsible for organising the tender.
Represented a global automotive company in an anti-monopoly case concerning alleged market allocation due to the client's prohibiting its dealers from participating in government tenders as a remedial measure following an anti-bribery investigation in another jurisdiction.
Represented a global healthcare company in settlement negotiations with Russia's anti-trust regulator to reduce a fine and lift an injunction prohibiting the client from conducting due diligence on prospective partners, which were imposed as a result of a prior anti-monopoly case.
Represented a global engineering company before the Russian anti-trust regulator in an anti-monopoly investigation into abuse of market dominance alleged by several business partners, who were denied supplies intended for government tenders on anti-bribery grounds.
Represented a Russian federal authority responsible for sanitary and phytosanitary controls of imported agricultural products in court proceedings to set aside a prior decision of the Russian anti-trust regulator which charged the authority with facilitating a cartel among certain importers.
Languages. Russian (native), English
Association of European Businesses.
Non-Profit Partnership for Competition Support.
Non-Profit Partnership for Competition Support in CIS countries.
Russia's Catch 22, Global Investigations Review, 21-04-2014 (A Subbot, P Melling).
Class actions and multiple losses in the Russian law, The Law, 28-10-2013 (A Subbot).
Competition vs corruption: the relationship between the requirements of the law, Competition and Law, 18-10-2012 (A Subbot, E Bekeschenko).