Anti-Competitive Agreements of Market Entities
In this category of cases, it has been established that the most common disputes relate to the increase, reduction, or maintenance of prices in bidding processes, as well as the distortion of the results of tenders, auctions, and competitions, including through the division into lots (Subparagraph 2) of Paragraph 1 of Article 169 of the Entrepreneurial Code).
The analysis has shown that the practice of proving cartel agreements by the antimonopoly authority, especially in the course of public procurement procedures, is often limited to the presence of indirect evidence indicating signs of violations restricting competition.
As indirect evidence, the antimonopoly authority often refers to similar behavioral patterns of participants in public procurement (such as the use of identical IP addresses and the timing of submitting bids to the public procurement portal).
Illustrative cases include the following disputes based on claims filed by LLPs and other entities: LLP vs. LLP (No. 6001-23-00-6ap/20(2)), RSE and LLP (No. 6001-23-00-6ap/173), in which the courts satisfied the claims in part by recognizing the order approving the initiation of the investigation as unlawful and annulling it.
During the consideration of these claims, the courts raised issues regarding the necessity of proving certain circumstances when conducting investigations into cartel agreements provided for by Subparagraph 2) of Paragraph 1 of Article 169 of the Entrepreneurial Code. In particular, it is necessary to prove:
the fact that market entities reached (concluded) an agreement;
the existence of consequences in the form of distortion of bidding results;
a causal relationship between the specific actions of the participants in the agreement and the negative consequences for competition.
At the same time, in the case brought by LLP and LLP (No. 6001-23-00-6ap/1441), the Judicial Panel for Administrative Cases of the Supreme Court upheld the decision of the appellate court to refuse satisfaction of the claim seeking recognition as unlawful and annulment of the order approving the conclusion based on the results of the investigation of violations of competition protection legislation.
Pursuant to Subparagraph 3) of Article 218 of the Entrepreneurial Code, the period subject to inspection is determined independently by the antimonopoly authority and is specified in the order initiating the investigation.
The only legislative requirement concerning the specification of the inspected period is the obligation of the antimonopoly authority to comply with the five-year statute of limitations, calculated from the date of the violation as established by Subparagraph 4) of Article 223 of the Entrepreneurial Code and Part Two of Article 62 of the Code of Administrative Offenses of the Republic of Kazakhstan.
At the time the orders initiating the investigations were issued, the aforementioned limitation period had not expired.
The argument regarding the necessity of conducting a separate analysis of competition in the commodity market in order to establish violations under Paragraph 1 of Article 169 of the Entrepreneurial Code does not comply with the norms of substantive law, since the provisions of the Code do not contain such a mandatory requirement.
Indeed, Paragraph 11 of Article 196 of the Entrepreneurial Code provides that, in order to identify signs of anti-competitive agreements, an analysis of the state of competition in commodity markets is carried out, which does not include the stages provided for in Subparagraphs 6) and 7) of Paragraph 3 of Article 196 of the Code.
At the same time, in accordance with Subparagraph 8) of Paragraph 3 of Article 196 of the Entrepreneurial Code, the conclusions based on the results of the analysis of competition in the commodity market are reflected in the conclusion.
The Entrepreneurial Code does not contain any requirement to approve a separate document titled “Conclusion on the Analysis of the State of Competition in the Commodity Market.” Accordingly, the conclusions of such an analysis may be reflected directly in the investigation report.
Within the framework of this case, the Judicial Panel for Administrative Cases of the Supreme Court indicated that when establishing the existence of a cartel agreement, it is necessary to determine:
the boundaries of the relevant commodity market;
whether the participants in the cartel agreement are competitors or potential competitors in that market;
the presence of economic evidence, such as benefits or advantages obtained by the participants in implementing such an agreement.
The specific feature of a cartel agreement is that it is absolutely prohibited, since it is presumed that such an agreement is inherently dangerous for the state of competition. Therefore, it is sufficient for the antimonopoly authority to prove the very fact that an anti-competitive agreement was reached between the entities; the presence or absence of consequences of such a violation has no legal significance.
Allegations regarding violations of the procedure for suspension and resumption of the investigation, as well as the duration of the investigation, were also not confirmed.
According to Paragraph 4 of Article 218 of the Entrepreneurial Code, investigations into violations of the legislation of the Republic of Kazakhstan in the field of competition protection must be conducted within a period not exceeding three months from the date of issuance of the order initiating the investigation. This period may be extended by the antimonopoly authority for no more than two months. An order is issued to extend the period, and copies of the order are sent to the applicant and the investigated entity within three working days from the date of issuance.
Taking into account the order issued by the antimonopoly authority extending the investigation period and the ruling suspending the investigation, the actual duration of the investigation did not exceed four months.
The grounds for suspending the investigation were provided by Subparagraph 1) of Paragraph 1 of Article 222 of the Entrepreneurial Code, namely the consideration by a court of another case relevant to the investigation.
It should also be noted that Paragraph 2 of Article 156 of the Entrepreneurial Code establishes a list of gross violations of the requirements of the Code that entail the recognition of an inspection as invalid. The absence of the signatures of all officials in interim acts that are not sent to the investigated entities is not included among such gross violations.
With regard to the incorrect determination by the antimonopoly authority of monopoly income for the inspected period, this does not constitute grounds for annulment of the decision, since the amount of monopoly income is relevant only for determining the amount of the fine within the framework of administrative offense proceedings. Consequently, the verification of its correct determination falls within the competence of the authority (or court) authorized to consider such a case.
For these reasons, the Judicial Panel for Administrative Cases of the Supreme Court did not find legal grounds for annulling or amending the decision.
A similar case was considered based on the claim of an LLP (No. 6001-22-00-6ap/1160), in which the Judicial Panel for Administrative Cases of the Supreme Court upheld the decisions of the lower courts, reasonably concluding that from November 27, 2020 to June 7, 2021, the antimonopoly authority conducted an investigation into violations of competition protection legislation in relation to two LLPs.
During the investigation, it was established that the claimants had concluded agreements for the sale of pharmaceutical products between them, that they employed the same staff members, that actions to obtain bank guarantees were performed on the same day, and that their warehouse premises were located at the same address.
These circumstances indicate the existence of horizontal agreements between the claimants aimed at price formation, which constitutes unfair competition.
REGULATORY SOURCES AND ABBREVIATIONS
The main regulatory legal acts that courts should be guided by when considering cases related to the application of antimonopoly legislation are:
The Constitution of the Republic of Kazakhstan dated August 30, 1995;
The Entrepreneurial Code of the Republic of Kazakhstan dated October 29, 2015 (EC);
The Administrative Procedural and Procedural Code of the Republic of Kazakhstan dated June 29, 2020 No. 350-VI (APPC);
The Code of the Republic of Kazakhstan on Administrative Offenses dated July 5, 2014 No. 235-V (CAO);
The Law of the Republic of Kazakhstan “On Natural Monopolies” dated December 27, 2018 No. 204-VI;
The Judicial Panel for Administrative Cases of the Supreme Court of the Republic of Kazakhstan;
The Agency for Protection and Development of Competition of the Republic of Kazakhstan and its territorial bodies (antimonopoly authority);
The Committee for Regulation of Natural Monopolies of the Ministry of National Economy of the Republic of Kazakhstan and its territorial bodies (authorized body for regulation of natural monopolies).
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