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Gazprom Neft Submits to FAS Recommendations in Terms of Preparation

Gazprom Neft submitted to RF FAS its key suggestions related to the preparation of the “the third antimonopoly package” as part of Parliament Hearings “On application practices of antimonopoly laws in the Russian Federation and directions of its improvement” that took place on 5 April at the State Duma of the Russian Federation. “Being a business entity, Gazprom Neft considers it necessary to express its expert position in order for “the third antimonopoly package” that is being prepared now to take into account the interests of all market players”, Gazprom Neft’s Head of Division for Financial and Administrative law of the Legal Department Kurban Nepesov said in his speech during the hearings.

First of all, the company believes it a must to update the approach to the definition of “dominant market position”. To establish the fact of domination, it is important to prove “the ability to have a decisive influence on the conditions of the product circulation”. Unfortunately, the law enforcement practice shows that the company may often acknowledge with whom it “jointly dominates” only after studying the FAS decision. It turns a particular problem in the light of the fact that recently FAS has been using the so-called “joint domination” concept, whereby largest companies are considered jointly dominating the market.

Second, another notion that needs a further expert consideration is the concept of a “group of persons”. Oil companies often have to face a “double standards” approach when the idea of a “group of persons” is applied: for example, when calculating the market share the concept of a “group of persons” is used, and when classifying actions from the view point of law violation the “group of persons” is considered as one person. ‘It is suggested that “the third antimonopoly package” state that a group of persons be treated as one economic entity’, Kurban Nepesov added.

Third, it is necessary to formalize the notion of “monopolistically high price”. In essence, today it is impossible to give a fundamental definition of this concept, that is why so far it is has proven impossible to achieve transparency in application of this regulation.

Fourth, “the third antimonopoly package” should include certain regulations that are currently only reflected in, for instance, instructions for law enforcement authorities or orders. ‘Now a turnover fine that can be imposed on a company may reach 15% of the revenue, which “at the exit” expresses itself as multi-billion fines, Kurban Nepesov says. It is vital to formalize these points at the level of a legislative document.’

Fifth, the new antimonopoly package must contain guarantees that criminal proceedings against managers will not be instituted until the arbitration proceeding between FAS and the companies are over. Today, for the absence of regulatory basis, law enforcement bodies may technically institute such proceedings.

Sixth, “the third antimonopoly package” should avoid duplicating powers. For instance, in the draft law we can trace an extension of powers of FAS: for example, suspension of trading until the completion of antimonopoly proceedings or issuance of warnings. While currently effective legislation already provides for suing this instrument: public prosecutor's office is the body authorized to issue warnings, that is why it is essential to carry out a detailed expert evaluation of whether it is expedient to attach this function to another executive authority.

In conclusion, ‘Gazprom Neft, as a market entity, supports FAS initiatives directed at developing competition in the country and improving antimonopoly legislation. The company is advocating wide expert discussion of any legislative initiatives. Gazprom Neft, as a business community subject, needs to understand the clear “rules of the game” and we hope that “the third antimonopoly package” will take into consideration the interests of all market participants’, Mr. Nepesov summarized.