On recognition as illegal and cancellation of the order approving the conclusion on the results of the investigation of violations of the legislation of the Agency for Protection and Development of Competition
No. 6001-24-00-6ap/245 dated January 16, 2025
Plaintiff: "Q" LLP
Defendants: Russian State Institution "Department of the Agency for Protection and Development of Competition of the Republic Kazakhstan" (hereinafter referred to as the Department), State Institution
"Agency for Protection and Development of Competition of the Republic of Kazakhstan" (hereinafter – the Agency)
The subject of the dispute: on the recognition of illegal and cancellation of Order No. 41-OD dated December 14, 2022 approving the conclusion on the results of the investigation of violations of the law
Review of the plaintiff's cassation complaints PLOT:
Based on the Department's order dated July 20, 2022, an investigation was conducted into violations of the legislation of the Republic of Kazakhstan in the field of competition protection in relation to Q LLP. The period under review is from January 1, 2020 to March 31, 2022.
Prior to the investigation by the Department, in order to identify the dominant and monopolistic position of market entities,:
analysis and assessment of the competitive environment in the billing services market for 2019-2020 and 9 months (January - September) of 2021 in the city of A. (hereinafter – Analysis 1);
analysis and assessment of the competitive environment in the billing services market for the sale of commercial gas to consumers for 2021 and 3 months (January - March) of 2022 in the region (hereinafter - Analysis 2).
According to Analysis-1, the plaintiff's share of dominance in the billing services market in the city of A. for 2019-2020 – 100% and 9 months of 2021 – 32.17% (67.82% of the share is occupied by LLP "N").
Analysis-2 established the share of the plaintiff's dominance in the billing services market when selling commercial gas to consumers in the region for 2021 and January-March 2022 – 100%.
On September 13, 2022, a draft conclusion based on the investigation results was sent to the plaintiff.
On November 1, 2022, the Agency's conciliation commission recommended finalizing the draft conclusion in terms of: determining the geographical boundaries of the commodity market, comparing prices in the relevant (or) comparable commodity market, recognizing the LLP tariff as monopolistically high due to its formation during procurement.
On December 14, 2022, the Department's order approved the conclusion based on the results of the investigation, according to which the plaintiff was charged with abusing his dominant position in the billing services market within the boundaries of the region by setting a monopolistically high price in 2020 (subparagraph 1) of Article 174 of the Business Code).
This conclusion is based on an analysis of the consumer's purchase of billing services by JSC "K", which provides gas supply services to individuals and legal entities in the region.
The conclusion states the following:
According to the electronic tender documentation, the procurement of billing services was conducted through an open tender for a reduction. The object of the investigation proposed a price of 585,338,859 tenge without subsequent reduction, at the maximum possible price stipulated by the purchase price of the services provided.
According to the results of the tender, the purchases were declared invalid due to the admission of less than two applications from potential suppliers.
During the correspondence negotiations, the plaintiff proposed an application in the amount of 585,338,859 tenge (excluding VAT), which was accepted by the organizer of the competition.
Following the results of the tender, the plaintiff concluded a contract with JSC "K" for the provision of billing services dated March 4, 2020.
From the above, the Department concluded that the LLP was independent in determining its pricing policy.
The analysis did not identify other market participants in the market under consideration (with the exception of N LLP, which began providing services in June 2021), and therefore it was not possible to compare the prices of the LLP with the price formed on equal terms in the same commodity market.
It was also not possible to compare prices on a comparable market in the Republic of Kazakhstan and abroad, since potential suppliers in other regions for other lots of purchased services
they offered different service costs. At the same time, the availability of a different number of qualified specialists has been established in the purchased lots in other regions. In foreign borders, trade turnover and prices for goods are formed taking into account the national currency, the NPA, etc., which did not allow for comparison. The above was the reason for conducting an analysis of the costs and profits of the market entity to determine the reasonable price of the product.
Based on the results of the analysis of the plaintiff's financial and economic activities, taking into account the established 10% profitability for the operation and development of the enterprise (paragraph 10 of the Methodology), the cost of services in the amount of 512,973,660,617 tenge (466,339,691.47x10% profitability level) was recognized as a reasonable price.
The price offered for procurement in 2020 - 585,338,859 tenge (excluding VAT) is recognized as monopolistically high.
Based on this, the monopoly income was calculated in the amount of 72,365 198,383 tenge (income of the plaintiff 585 338 859 – 512 973 660,617 ).
Disagreeing with the order, the LLP filed a lawsuit in court.
Judicial acts:
1st instance: the claim was denied.
Appeal: the decision of the court of first instance remains unchanged.
Cassation: judicial acts are annulled, with a new decision on the satisfaction of the claim. The order dated December 14, 2022 approving the conclusion on the results of the investigation of violations of antimonopoly legislation was declared illegal and canceled.
Conclusions: when resolving the dispute and rejecting the claim, the local courts proceeded from the fact that the contested conclusion was made within the competence of the Agency; prior to the investigation, two analyses of the state of competition in the market were conducted, which confirmed the monopoly position of the plaintiff; monopoly income and profitability were determined in accordance with the requirements of Article 225 of the PC. The investigation was based on materials received from government agencies indicating a violation of the legislation of the Republic of Kazakhstan in the field of competition protection or its signs, in particular, the idea of eliminating violations of the legality of the prosecutor's office dated July 18, 2022.
The Board did not agree with the above conclusions of the local courts on the following grounds.
According to subparagraph 1) of Article 174 of the PC, actions (inaction) of market entities occupying a dominant or monopolistic position are prohibited, which have led or lead to restriction of access to the relevant commodity market, prevention, restriction and elimination of competition and (or) infringe on the legitimate rights of a market entity or an indefinite circle of consumers, including such actions as:
establishing and maintaining monopolistically high prices.
By virtue of the requirements of subparagraph 2) of paragraph 2 of Article 218 of the Criminal Code, the antimonopoly authority, in the presence of signs provided for in Article 174 of this Code, before conducting an investigation, analyzes the state of competition in commodity markets in order to identify the dominant or monopolistic position of the market entity.
At the same time, antimonopoly response measures against this market entity are applied during the period of its actual dominance.
In accordance with paragraphs 1-4 of Article 196 of the PC, the analysis of the state of competition in commodity markets is carried out in order to determine the level of competition, identify market entities occupying a dominant or monopolistic position, develop a set of measures aimed at protecting and developing competition, preventing, restricting and suppressing monopolistic activities, including in the following cases::
determining the share of dominance of a market entity when considering signs of abuse of a dominant or monopolistic position.
The analysis of the state of competition in commodity markets is carried out in accordance with the methods approved by the antimonopoly authority for analyzing the state of competition in commodity markets.
The analysis of the state of competition in the commodity markets includes the following stages:
defining criteria for the interchangeability of goods;
defining the boundaries of the commodity market;
determining the time interval for product market research;
determination of the composition of market entities operating in the commodity market;
calculation of the volume of the commodity market and the shares of market entities;
assessment of the competitive environment in the commodity market;
identification of circumstances or signs indicating the presence of obstacles, difficulties or other restrictions on the activities of market entities that affect the development of competition, including the identification of barriers to entry into the commodity market;
conclusions based on the results of the analysis of the state of competition in the commodity market, which are reflected in the conclusion.
The boundaries of the commodity market define the territory where consumers purchase a product or an interchangeable product, if its purchase is impractical outside this territory for economic, technological and other reasons.
According to paragraph 8 of Article 196 of the PC, the share of a market entity in the relevant commodity market is defined as the ratio of the volume of sales by a market entity of goods or interchangeable goods within the geographical boundaries of the market to the total volume of the relevant commodity market.
In accordance with paragraph 2 of Article 175 of the PC, a commodity market is the sphere of circulation of goods (including goods of foreign manufacture) that cannot be replaced by other goods, or interchangeable goods, within the boundaries of which (including geographical), based on economic, technical or other possibilities or expediency, the buyer can purchase goods and for beyond which there is no such possibility or expediency.
The Analysis page -1 indicates that billing is a software and hardware complex designed to automatically perform the operation of accounting for services provided to subscribers, as well as their billing and billing (in accordance with subparagraph 14) of paragraph 3 of Chapter 1 of the Order of the Minister of Investment and Development of the Republic of Kazakhstan dated February 24, 2015 No. 171 "On approval of the rules for the provision of communication services").
According to the conclusion, the plaintiff is accused of abusing his dominant position in the billing services market by setting and maintaining monopolistically high prices in 2020 within the boundaries of the region (pages 1, 2, 16, 17).
Thus, the commodity market defines the billing services market as a whole, the boundaries of the commodity market are the region, the LLP as an entity with a 100% share of dominance, and the period for establishing a monopoly price is 2020.
In accordance with the approved Methodology for analyzing and assessing the state of the competitive environment in the commodity market dated November 30, 2015 No. 741 (hereinafter referred to as the Methodology), prior to the investigation, the defendant conducted two analyses of the state of competition in the commodity markets.
At the same time, Analysis -1 could not be used as the basis for the conclusion, since the study was conducted within the boundaries of the city of A., and not the entire region.
The -2 Analysis does not calculate the share of market participants' dominance in the billing services market within the geographical boundaries of the region for 2020 (page 3). In addition, this analysis has significantly narrowed the commodity market for "billing services for the sale of commercial gas to consumers," while such services are provided in various other areas.
Thus, in the conducted analyses, the defendant did not determine the share of the plaintiff's dominance in the billing services market within the boundaries of the region in 2020, which was not denied by the defendant's representatives at the cassation instance meeting.
And as a result, not establishing the share of the LLP's dominance in the billing services market in 2020 within the geographical boundaries of the region does not allow it to be objectively imputed to establish a monopolistically high price for this product in this region during the specified period, as it is one of the fundamental features established by subparagraph 1) of Article 174 and paragraph 1 of Article 175. PC (this is the price set by a market entity that holds a dominant or monopolistic position in the relevant commodity market).
According to paragraph 3 of the Methodology for identifying monopolistically high (low) prices, approved by the Order of the Minister of National Economy of the Republic of Kazakhstan dated May 4, 2018. No. 173 (hereinafter referred to as Methodology No. 173), in accordance with paragraph 1 of Article 175 of the Code, a monopolistically high price of a product is understood to be the price set by a market entity in a dominant or monopolistic position if this price exceeds the amount of costs and profits necessary for the production and sale of such goods and the price that has been formed in a competitive market the relevant or comparable product market, including the established:
by increasing the previously set price of the product, if the following conditions are fulfilled in combination:
the costs necessary for the production and sale of the goods remained unchanged or their change is disproportionate to the change in the price of the goods;
the composition of sellers or buyers of the product has remained unchanged, or the change in the composition of sellers or buyers of the product is insignificant;
the conditions of circulation of goods on the commodity market, including those caused by government regulatory measures, including taxation, customs tariff, tariff and non-tariff regulation, have remained unchanged or their change is disproportionate to the change in the price of the goods;
by not reducing the previously set price of the product, if the following conditions are fulfilled in combination:
the costs necessary for the production and sale of goods have decreased significantly;
the composition of sellers or buyers of a product makes it possible for the price of a product to decrease;
the conditions of circulation of goods on the commodity market, including those caused by government regulatory measures, including taxation, customs tariff, tariff and non-tariff regulation, provide the possibility of changing the price of goods in the downward direction.
The antimonopoly authority or the territorial subdivision of the antimonopoly authority in order to identify data indicating the presence of signs of violations provided for in subparagraph 1) of the article
174 of the Code, expressed in the establishment of a market entity occupying a dominant or monopolistic position, monopolistically
high prices for goods, analyzes the dynamics of prices and volumes of production (sales) of goods on the commodity market (paragraph 6 of the Methodology).
9. In order to identify a monopolistically high price, the antimonopoly authority compares the price set by a market entity in a dominant or monopolistic position with the price of goods in the same commodity market.
If it is impossible to compare the price in the same commodity market, the comparison is made with the price of the product in a comparable commodity market, including outside the Republic of Kazakhstan.
If it is impossible to determine the price prevailing in a competitive environment in a comparable commodity market, or a comparable commodity market, including outside the Republic of Kazakhstan, an analysis of the costs and profits of the market entity is carried out and a reasonable price of the goods is determined.
Thus, an analysis of the above-mentioned provisions allows us to conclude that in order to establish a monopolistically high price, the Department should have determined the price for billing services previously set by the plaintiff, including before participating in the purchase (in 2018-2019), as well as analyze price dynamics. However, such data is not provided in the conclusion.
The contested conclusion is based only on the results of one tender held by JSC "K" in 2020, in which the plaintiff, being one of the potential suppliers, offered a price of 585,338,859 tenge, subsequently concluding a contract for the provision of billing services (based on the results of negotiations).
The Department's conclusions about the impossibility of determining the price prevailing in competitive conditions in comparable commodity markets in the Republic of Kazakhstan and beyond are based on the specificity of the characteristics of this commodity market. At the same time, it is not specified what the specificity of the billing services market is in the field of selling commercial gas to consumers (the characteristics are not disclosed).
In addition, the plaintiff's arguments that the markets of billing services in the field of electricity, water supply, and heat supply may also be comparable commodity markets, are noteworthy, since billing services are not tied to a specific area, to which the defendant has not submitted any reasonable objections.
Conclusions the conclusions regarding the establishment of the LLP of the maximum possible price in the competition is not a confirmation of a monopolistically high price. In addition, the legislation of the Republic of Kazakhstan does not contain the obligation of the supplier to reduce the price when purchasing from a single source.
Thus, the conclusion as a whole does not comply with the requirements of the PC and the Methods and does not allow us to reliably establish the fact that the plaintiff violated the requirements of the antimonopoly legislation.
The Board also noted that the purchase of goods (works, services) from a single source cannot in itself limit competition in any way, since the determination of the properties and characteristics of the purchased goods, the purchase price and the choice of a potential supplier is carried out by the customer independently.
This is also evidenced by the provisions of article 13 of the Law "On Public Procurement", which explicitly states that all methods of public procurement are recognized as competitive, with the exception of the method from a single source.
In this regard, building a conclusion solely on the analysis of the purchase of billing services conducted by JSC "K" is flawed, since this approach will allow any price offer of a market entity to be considered monopolistically high when participating in a tender and subsequent purchase from a single source.
In order to identify violations of antimonopoly legislation, which resulted in setting monopolistically high prices in the billing services market, the Department should have investigated this market as a whole and the behavior of suppliers in this market, determined the cost of this service per subscriber, and analyzed price dynamics by year, region, and consumer.
The courts' references to past judicial acts in civil cases were found to be inconsistent and unrelated to the subject matter of the dispute.
No. 6001-25-00-6ap/306 dated June 10, 2025
Plaintiff: LLP "B" (hereinafter referred to as the Partnership)
The defendants: KSU "Department of Urban Planning Control" (hereinafter referred to as the Department).
The subject of the dispute: on the recognition as illegal and repeal of Regulation No. 1104/571 of November 10, 2023
Review of the defendant's cassation complaint
PLOT:
On November 2, 2023, based on an appeal from the NGO "Z. A." regarding the legality of construction and installation works, the Management of the Partnership ordered an inspection of the facility located at the address: city, district, PK named after K., site No. 183, "Housing and communal services with facilities for the population, city, district" (hereinafter referred to as the facility).
Based on the results of the inspection, an order was issued to eliminate violations No. 1104/571 dated November 10, 2023, according to which the Partnership was ordered to eliminate the violations by January 10, 2024, by removing imported soil from land plots with cadastral numbers: No. 20-317-107-265, 20-317-104-427 located along the river. Suspend construction and installation work.
Judicial acts:
1st instance: the claim is satisfied.
The Department's order was declared illegal and cancelled.
Appeal: the decision of the court of first instance remained unchanged.
Cassation: the decision of the court of first instance and the decision of the appeal are annulled.
In the case, a new decision was made to dismiss the claim of LLP "B" to the Management for recognition as illegal and cancellation of the order.
Conclusions: satisfying the claim and canceling the appealed order, the local courts proceeded from the fact that the services for excavation and removal of soil from the facility were provided for the plaintiff by LLP "K" on the basis of a lease agreement with related services No. 05/08/23 dated August 5, 2023.
In this regard, the injunction was unlawfully issued against the plaintiff, who transferred the earthworks to the contractor.
The Judicial Board considered such conclusions of the courts to be erroneous on the following grounds.
In this regard, the injunction was unlawfully issued against the plaintiff, who transferred the earthworks to the contractor.
The Judicial Board considered such conclusions of the courts to be erroneous on the following grounds.
According to paragraphs 3, 4 of Article 31-3 of the Law of the Republic of Kazakhstan "On Architectural, Urban Planning and Construction Activities", state architectural and construction control and supervision is carried out, inter alia, for: compliance of completed (performed) construction and installation works, applied building materials, products, structures and equipment with approved design decisions and state (interstate) standards; organization and implementation by the contractor (general contractor) of all types and forms of its own production control and supervision of construction quality.
Upon detection of violations of state standards and (or) deviations from approved projects (design decisions), the state architectural and construction control and supervision bodies make decisions (issue instructions) on the elimination of violations by the customer (developer) and (or) the contractor construction and installation organization (enterprise) within the established time limits; on the suspension of construction and constructioninstallation work.
In accordance with paragraph 2 of article 34-3 of the Law, the contractor (general contractor) is obliged to: 1) carry out construction and installation work in accordance with the approved design (design estimate) documentation submitted by the customer, the requirements of the legislation of the Republic of Kazakhstan and regulatory and technical documents; 2) carry out all types and forms of its own production quality control of construction (entrance, operational, intermediate, acceptance, laboratory, geodetic and others); 3) ensure proper and timely maintenance of executive technical documentation; 4) promptly eliminate the deficiencies (defects and imperfections) identified during the construction process; 5) carry out laboratory quality control of the construction and installation works performed (performed) and the construction materials, products and structures used at the request of the state architectural and construction control and supervision authorities; 6) ensure access to the facility of officials of the state architectural and construction-construction control and supervision of technical supervision activities; 7) to comply with the instructions of the state architectural and construction control and supervision bodies, instructions of persons carrying out technical and design supervision; 8) to prevent obstacles and interference in the work of the state architectural and construction control and supervision bodies; 9) to carry out other duties provided for by the laws of the Republic of Kazakhstan.
According to the notice of commencement of construction and installation works dated August 4, 2023, the plaintiff is the general contractor carrying out the contract work at the facility.
The inspection established that it is the plaintiff who is the responsible person at the facility when carrying out construction and installation work in accordance with the approved design (design estimate) documentation submitted by the customer.
Improper fulfillment of obligations on the part of "K" LLP does not release the plaintiff from fulfilling his obligations as the general contractor responsible for the construction of the facility and monitoring the performance of work.
The judicial board finds the references of the courts to the judicial acts that have taken place in civil cases to be inconsistent and unrelated to the subject of the dispute.
These judicial acts relate to the legal relationship between the plaintiff and K LLP in the performance of contractual obligations and cannot serve as a legal basis for the cancellation of the contested order issued by the defendant in compliance with the requirements of legality and competence in relation to the relevant entity.
In these circumstances, the judicial board concludes that the courts have given an incorrect legal assessment of the circumstances of the dispute, misinterpreted and applied the norms of substantive law, which, by virtue of subparagraphs 3), 4) of the first part of Article 427 of the CPC, is the basis for the cancellation of the contested judicial acts.
Considering that the case does not require the collection and additional verification of evidence, the judicial board considered it necessary to cancel the decision of the court of first instance and the decision of the court of appeal and make a new decision to dismiss the claim.
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