Disputes in the field of monopolistic activity are recognized as a cartel and horizontal agreements between market entities are prohibited if such agreements lead or may lead to an increase, decrease or maintenance of prices at auctions, distortion of the results of auctions, auctions and tenders, including by dividing by lots.
Limited Liability Partnerships "G" (hereinafter referred to as "G" LLP), "A" LLP (hereinafter referred to as "A" LLP) filed a lawsuit against the republican state institution "Department of the Committee for Protection and Development of Competition of the Ministry of National Economy of the Republic of Kazakhstan for the North Kazakhstan Region" (hereinafter referred to as the Department) on the recognition of illegal and cancellation of Order No. 8-OD dated December 11, 2019. LLP "G" and LLP "A" are market entities engaged in pharmaceutical activities in the territory of the Republic of Kazakhstan, including the purchase and supply of medical equipment. LLP "A" was registered in the register of legal entities on March 21, 1996. LLP "G" has been registered in the register of legal entities since November 29, 2000. The legal address of G LLP is 95 Mayakovsky Street, Petropavlovsk, North Kazakhstan region. The actual location of G LLP is 57A Parkovaya Street, Petropavlovsk. The legal address of registration and location of LLP "A" is 107/3 S. Seifullin Avenue, Karaganda region, Karaganda city. "A" LLP has branches in the country, including: a branch in Petropavlovsk, registered on November 9, 2015, and a branch in Kostanay, registered on November 9, 2015. Location of the Petropavlovsk branch of LLP "A": Petropavlovsk, 57A Parkovaya Street. Based on the analysis of the commodity market for the supply of medical equipment within the borders of the Kostanay region for the period 2016-2017, on April 11, 2019, the Department for the Karaganda region issued Order No. 93-OD "On investigating violations of the legislation of the Republic of Kazakhstan in the field of competition protection in relation to LLP "A". Similarly, on the same grounds, on April 11, 2019, the Department for the North Kazakhstan Region issued Order No. 28-OD "On conducting an investigation into violations of the legislation of the Republic of Kazakhstan in the field of competition protection in relation to LLP "G".
Disputes in the field of monopolistic activity are recognized by the cartel and horizontal agreements between market entities are prohibited.
By Department Order No. 53-OD dated May 27, 2019, investigations into the above-mentioned partnerships have been consolidated. On December 11, 2019, the Department issued a conclusion according to which, in the actions of LLP "A" and LLP "G", signs of an anticompetitive horizontal agreement were confirmed by the results of the investigation and, in this regard, it was proposed to consider the fact of violation provided for in subparagraph 2 as established) Paragraph 1 of Article 169 of the Business Code (hereinafter referred to as the PC). On December 11, 2019, the Department issued the appealed order No. 8-OD, which approved the above-mentioned conclusion. This order instructed to initiate an administrative offense case and issue an order to terminate and eliminate violations of the legislation of the Republic of Kazakhstan in the field of competition protection in respect of these partnerships. The applicants challenged this order in court. The application was granted by the decision of the specialized interdistrict Economic Court of the North Kazakhstan region dated February 17, 2020. The Department's Order No. 8-OD dated December 11, 2019 "On approval of the conclusion on the results of the investigation of violations of the legislation of the Republic of Kazakhstan in the field of competition protection in relation to LLP "G", LLP "A" was declared illegal and canceled. By a private ruling of the specialized interdistrict Economic court of the North Kazakhstan region dated February 17, 2020, the violation was brought to the attention of the Committee for the Protection and Development of Competition of the Ministry of National Economy of the Republic of Kazakhstan in order to take appropriate measures and prevent further such violations. By the decision of the Judicial Board for Civil Cases of the North Kazakhstan Regional Court dated August 4, 2020, the court's decision remained unchanged. By the ruling of the Judicial Board for Civil Cases of the North Kazakhstan Regional Court dated August 4, 2020, the private court ruling remained unchanged. The Judicial Board for Civil Cases of the Supreme Court overturned the judicial acts of local courts and issued a new decision to dismiss the application of LLP "G", LLP "A" to the State Institution "Department of the Committee for Protection and Development of Competition of the Ministry of National Economy of the Republic of Kazakhstan for the North Kazakhstan region" on recognition as illegal and cancellation of the order dated December 11. 2019 No. 8-OD on the following grounds.
In accordance with paragraph 1 of Article 162 of the Entrepreneurial Code of the Republic of Kazakhstan (hereinafter referred to as the PC), competition is the competitiveness of market entities, in which their independent actions effectively limit the ability of each of them to unilaterally influence the general conditions of circulation of goods in the relevant commodity market. By virtue of paragraphs 1, 2 of Article 167 of the PC, monopolistic activity is the activity of market entities whose position makes it possible to control the relevant commodity market, including allowing them to exert significant influence on the general conditions of circulation of goods in the relevant commodity market. Monopolistic activities limited by this Code include: 1) anticompetitive agreements of market entities; 2) anticompetitive coordinated actions of market entities. Paragraph 1 of Article 8 of the PC prohibits activities aimed at restricting or eliminating competition, infringing on the rights and legitimate interests of consumers, and unfair competition. According to subparagraph 1) of Article 4 of the Law of the Republic of Kazakhstan "On Public Procurement", one of the fundamental principles of public procurement is the optimal and efficient use of money used for public procurement. The courts of the first and appellate instances, satisfying the applicant's claims, concluded that the appealed order dated December 11, 2019 No. 8-OD was illegal, since the Department had not provided sufficient evidence confirming the presence of violations in the actions of the Partnerships provided for in subparagraph 2) paragraph 1 of Article 169 of the PC. Meanwhile, as follows from the case materials, these conclusions of the judicial authorities do not correspond to the circumstances of the case, are the result of improper application of substantive and procedural law and the basis for the cancellation of the contested judicial acts by virtue of paragraphs 3 and 4 of part 1 of Article 427 of the CPC. So, the representative of the third party of LLP "A" explained to the court that, indeed, LLP "G" and the Petropavlovsk branch of LLP "A" rent offices from them on the same floor of the building at 157A Parkovaya St., and storage facilities. They acquired this building in 2013, and at the time of the acquisition, G LLP was already a tenant. The director of the LLP is P., who is a participant in LLP "A" with a 7% stake. According to the above conclusion, according to the results of the analysis of the objects of investigation of LLP "G" and LLP "A" with their joint participation in public procurement of medical equipment in all cases, the customers of which are medical organizations of the city of Nur-Sultan, Kostanay, North Kazakhstan and Karaganda regions, and the conditions of the purchases, it was found that In 2016, a scheme was applied according to which LLP "A" carried out "false" participation in procurement without reducing the price as an "alternative" supplier and below the price of a competitor, thus giving, LLP "G" (the potential winner) has the opportunity to win in purchases, with a minimal reduction in the price of the last one from the initial price of the customer or without it. This indicates that there is no competitive struggle (competition) in their actions to win the procurement.
Disputes in the field of monopolistic activity are recognized by the cartel and horizontal agreements between market entities are prohibited.
In other words, LLP "A" offers an uncompetitive price, putting itself in a losing position. However, in cases where other suppliers participated in the procurement together with G LLP, there was a real decrease in the price from the price allocated for the purchase, and in some cases the price decreased to 44%. That is, it can be seen that as a result of competition with other suppliers, G LLP significantly reduced prices. In the case of joint participation with "A" LLP, there was no such price reduction. These conclusions are supported by relevant evidence indicating a close, continuous financial and economic relationship for a long time, confirming the trusting relationship between the applicants. Electronic correspondence with various addressees, including with the branch of LLP "A", was conducted from one computer of the office manager of LLP "G". It follows from the survey of employees of LLP "G" that the working relationship with LLP "A" has been established since 2013: the purchase of medical equipment, medical equipment, and the provision of transport services. Office manager K., who has been working in this position since 2013 at both LLP "A" and LLP "G", explained that she is engaged in registration of incoming correspondence from both of these partnerships. In the period from 2016-2017, LLP "G" was recognized as the winner in 23 public procurements for the purchase of medical equipment for the needs of medical organizations in Kostanay and other regions in the amount of 58,542,257 tenge, of which 18 procurements were jointly attended by LLP "A". According to the information available in the case file, 57,778,723 tenge was allocated from the budget for the purchase of medical equipment. According to the results of public procurement, where G LLP was recognized as the winner, the savings amounted to only 11%. Based on subitems 2) of paragraph 1 and paragraph 4 of Article 169, the PC is recognized as a cartel and horizontal agreements between market entities are prohibited if such agreements lead or may lead to an increase, decrease or maintenance of prices at auctions, distortion of the results of auctions, auctions and tenders, including by dividing by lots. Anticompetitive agreements may be concluded (reached) in writing and/or orally. The courts of the first and appellate instances violated this rule of substantive law and applied it incorrectly. At the same time, they mistakenly proceeded from the method established by the legislation on public procurement by requesting price offers, allegedly excluding the possibility of restricting access to it by participants. It was believed that LLP "G" and LLP "A" could not know in advance who else would be declared as a supplier, so it made no sense for LLP "A" to set a high price, and LLP "G" - a little lower. This position of the courts is an assumption that is not confirmed and refuted by the case materials, which cannot be used as the basis of a judicial act. Compliance with the content of the legislation governing these legal relations is based on the good faith of their participants, which, however, does not exclude the possibility of the opposite and the commission of a violation.
Since it follows from the analysis of the information provided that LLP "A", having repeatedly participated in public procurement during the specified period together with LLP "G", regularly indicated the prices of the goods offered above the latter, thereby systematically offering an uncompetitive price, the Department's conclusions about the participation of LLP "A" in public procurement as an "alternative suppliers" have been confirmed, since the above-mentioned acts can lead to an increase or maintenance of prices at auctions, distortion of the results of auctions, auctions and tenders during public procurement. The totality of the above circumstances, established in the conclusion of the state body, allows us to conclude the legality and validity of its statement about the existence in this case of an anticompetitive agreement of market participants. Evidence of non-proliferation of prohibitions on these anticompetitive agreements on the part of both partnerships has not been provided. The conclusions of the previous judicial instances are unfounded and illegal. The arguments of the lower courts about the lack of evidence of the conclusions of the conclusion also, in the opinion of the cassation board, do not correspond to the circumstances of the case. Based on Article 219 of the Criminal Code, evidence of violations of the legislation of the Republic of Kazakhstan in the field of competition protection may be any factual data relevant to the proper conduct of the investigation, including: 1) explanations of the applicant, the object of the investigation, interested persons and witnesses; 2) expert opinions; 3) material evidence; 4) other documents (including materials containing computer information, photo and film recordings, sound, audio and video recordings). The collection of evidence is carried out by an official of the antimonopoly authority. Persons involved in the investigation of violations of the legislation of the Republic of Kazakhstan in the field of protection of competition have the right to provide factual data and prove their reliability. All the facts of violations of the legislation of the Republic of Kazakhstan in the field of competition protection against LLP "A" and LLP "G" collected during the investigation fully comply with this norm, as well as the requirements of Chapter 7 of the Civil Procedure Code of the Republic of Kazakhstan. The conclusion of the appellate instance on the failure to provide direct evidence of the implementation of monopolistic activities prohibited by law by LLP "A" and LLP "G" by concluding an anticompetitive agreement is not based on the current anticompetitive legislation, and is a misinterpretation of the above-mentioned substantive and procedural law norms.
Moreover, the actions of the employees of G LLP to refuse to provide access during the investigation to the workplace and Information System of the employee conducting the public procurement procedure (failure to provide a login and password), as indicated by the relevant Act dated April 12, 2019, indicates the applicant's attempts to conceal evidence of the true legal relationship. This allows the board to recognize the existence of signs of an anticompetitive agreement, for which an investigation was ordered, established. The arguments about the Department's failure to prove that LLP "A" has a real opportunity to set a price lower than its stated price, the failure to analyze its pricing, as well as its behavior in similar purchases with other participants are not included in the evidence in this case, since it has not been presented with such a claim. The statements of the court of first instance and the court of appeal on the unjustified motivation by the Department of the existence of anti-competitive agreements in the actions of applicants in 2016 by the tender documentation of the participation of LLP "G" in public procurement with other subjects of the commodity market for 2017, as well as documents for the period after 2016, are unlawful. Firstly, there is sufficient evidence in the materials of the case and the antimonopoly investigation dating back to 2016. Secondly, the reference to the 2017-2019 documents is an additional confirmation of the conclusions of the conclusion. Similarly, the fact of participation in public procurement of LLP "A" or its branch in the city of Petropavlovsk has no legal significance for this dispute, as well as the inability of LLP "G" to conclude a lease agreement for storage facilities corresponding to the stipulated parameters for storing medical equipment with other lessors. In such circumstances, in the opinion of the cassation instance, the application of the Partnerships was unlawfully satisfied.
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