Amendments to the antimonopoly legislation on digital markets: content, timeline and consequences

December 20, 2018

Over the last 1.5 years, the Federal Antimonopoly Service (the FAS) works on the so-called “fifth antimonopoly package” - amendments to the Competition Law governing digital markets. The package is to expand the powers of the FAS to regulate digital markets and adapt the antimonopoly legislation to specifics of digital economy. 

The package consists of two draft laws: 

  • amendments to the Competition law
  • “satellite” amendments to the Code on Administrative Offenses.

The package is based on foreign experience, particularly the recent changes in competition legislation in Germany. It is to restrict the ability of global tech companies to define rules of the game on various markets, using their “network effects”. 

The new antimonopoly regulation is targeted on digital platforms, first of all on e-commerce, online travel, car-hailing and etc. Digital distribution platforms and social media are also among the targets. 

While being focused on digital markets, the package will have broader implications for competition policy. The changes in M&A clearance procedures, restriction of “immunities” on antimonopoly regulation of IP-related issues and expansion of the FAS’ enforcement powers will have effects on all economic sectors and change the overall competition policy landscape in Russia. 

Key highlights of the new regulation 

Regulation of digital platforms

  • The amendments suggest supplementing the Competition Law with new terminology related to digital economy - “digital platforms” and “network effects”. 
  • Initially, the amendments also included the concept of “price algorithms”. Later, it was removed from the draft legislation. However, the FAS will consider the use of “price algorithms” as a matter of aggravation when analyzing violations of antimonopoly law by digital platforms.

Market domination criteria for digital platforms 

  • The amendments introduce special market domination criteria for digital platforms. The FAS will consider the “network effects” when analyzing competitive environment in digital economy. The FAS, however, retained 35% market share target for a platform to be qualified as dominant market player.
  • The new domination criteria mean that companies such as Booking.com, AliExpress, Yandex.Market, as well as digital distribution platforms such as Google Play may get the status of “companies with dominating position on the market”.  

Amendments to the M&A competition clearance procedure 

  • The package provides for major changes to M&A competition clearance procedures. These amendments will grant the FAS with additional powers to investigate transactions, involve a broad range of other stakeholders in the competition clearance and extend the approval process for the most significant “cross-border” M&A for actually unlimited period. 
  • These changes will apply to all economic sectors. The FAS will be able to eventually block or indefinitely delay the consideration of any major M&A transaction. The FAS already tested some of the new approaches when analyzing a number of global M&A, most importantly Bayer - Monsanto. 

Expanding enforcement powers of the FAS 

  • The amendments entitle the FAS to impose tough sanctions for non-compliance with its remedies. On the basis of a court decision, the FAS will be able to authorize the use of IP rights of foreign companies in Russia or ban the circulation of goods manufactured and sold by these companies. Both options, however, are considered as “extreme measures”. 
  • The amendments to the Administrative Code also grant the FAS with the powers to initiate the blocking of online platforms in case of repeated non-compliance with prescriptions of the regulator. 

Perspectives of adoption and enforcement  

Over the last months, the FAS tried to get approval of the package from other executive authorities (Ministry of Economic Development and Ministry of Digital Development). Earlier, the package met their resistance as entitling the FAS with overly significant powers. 

By the end of November, the FAS managed to complete the interagency approval (although some disagreements were not resolved) and submitted the package for the final legal expertise to the Ministry of Justice. 

According to our expectations, the package may be submitted to the Government early in 2019. The submission to the State Duma may be expected 2-3 months later. 

The package may pass rather long discussion and further review in the State Duma. As a result of this, we do not expect the legislation to be adopted earlier than in late 2019 and takes the effect in Q2-Q3 2020 at the earliest.