On recognition as illegal and cancellation of the order of the Agency for Protection and Development of Competition

No. 6001-23-00-6ap/1829 dated 11/23/2023

The plaintiff: State Institution "Public Procurement Department" (hereinafter referred to as the Department)

Respondent: Russian State Institution "Department of the Agency for Protection and Development of Competition of the Republic of Kazakhstan" (hereinafter – the Department)

Interested party: JSC "E" (hereinafter – the Company)

The subject of the dispute: on the recognition as illegal and cancellation of Order No. 59-nk dated October 7, 2022

Review of the cassation appeal of the person concerned

PLOT: On October 7, 2022, the Department issued Order No. 59-NK on conducting an investigation into violations of the legislation of the Republic of Kazakhstan in the field of competition protection (hereinafter referred to as the Order) in relation to Management.

The reason for issuing the Order was a complaint received from the Company about the illegal suspension of purchases during the application period due to the dismissal of one of the employees or the replacement of members of the commission. Based on the arguments indicated in the Company's appeal, an unscheduled internal electronic audit was conducted for the Departments, during which it was established that the Department repeatedly suspended the acceptance of applications from potential suppliers during 2021 on the basis of orders from the management of the Department.

Such orders were attached to the web portal of public procurement in the "court decision" or "decision of the authorized body" tab. At the same time, the "Decision of the internal state audit authority" was established as the basis for the suspension.

However, in fact, the order of the management of the Department "On amendments to the composition of the competition commission" is posted on the web portal. The Department, grossly violating the legislation in the field of public procurement, illegally suspended the acceptance of applications from potential suppliers.

Judicial acts:

1st instance: the claim was denied.

Appeal: the court's decision is overturned. A new decision on the satisfaction of the claim has been made in the case. It was decided to declare illegal and cancel the Department's order No. 59-nk dated October 7, 2022 on conducting an investigation into violations of legislation in the field of competition protection.

Cassation: the decision of the appellate instance is overturned, the decision of the court of first instance is upheld.

Conclusions: The Court of first instance, rejecting the claim, motivated its conclusions by the fact that the Department, in carrying out its activities, having found signs of violation of legislation in the field of competition protection in the actions of the Department, lawfully issued the disputed order. The court of appeal motivated the cancellation of the SMAS decision and the satisfaction of the claim by the fact that the grounds for the appointment of an investigation were signs of an offense that took place in 2021, that is, the relations that arose before the amendments to paragraph 3 of Article 199 of the Criminal Code, according to which state and local executive bodies were classified as market entities from March 2022 (introduced the changes came into effect on March 6, 2022).

However, one cannot agree with the conclusions of the court of appeal. In accordance with article 216 of the Criminal Code, the antimonopoly authority, within the limits of its powers, investigates violations of the legislation of the Republic of Kazakhstan in the field of competition protection and makes a decision based on the results of the investigation.

Investigation means the activities of the antimonopoly authority aimed at collecting factual data confirming or refuting the commission of violations of the legislation of the Republic of Kazakhstan in the field of competition protection, in accordance with the procedure provided for by this Code.

The basis for launching an investigation is the receipt by the antimonopoly authority of information on violations of the legislation of the Republic of Kazakhstan in the field of competition protection, which are:

1) materials received from government agencies indicating a violation of the legislation of the Republic of Kazakhstan in the field of protection of competition or its signs;

2) the appeal of an individual and (or) a legal entity indicating signs of violation of the legislation of the Republic of Kazakhstan in the field of protection of competition;

3) detection by the antimonopoly authority, in carrying out its activities, of signs of violation of the legislation of the Republic of Kazakhstan in the field of competition protection in the actions of a market entity, state bodies, and local executive bodies;

4) mass media reports on the presence of signs of violations of the legislation of the Republic of Kazakhstan in the field of competition protection received by the antimonopoly authority;

5) failure by a market entity, a state body, a local executive body, or an organization endowed by the state with the functions of regulating the activities of market entities to notify the antimonopoly authority of the presence in the actions (inaction) of a market entity, state, local executive bodies, or an organization endowed by the state with the functions of regulating the activities of market entities of signs of violation of the legislation of the Republic of Kazakhstan in the field of protection competition within the prescribed period.

The beginning of an investigation is formalized by an order to conduct an investigation. A copy of the investigation order shall be sent to the applicant and the object of the investigation no later than three working days from the date of its signing, with the exception of the objects of the investigation whose actions show signs of a cartel. A copy of the investigation order is given to the objects of investigation whose actions show signs of a cartel at the time of the investigation.

In this case, the fact that, within one calendar year after the notification was made, signs of a violation in the field of competition protection were detected in the actions of the Department, regardless of the time of the occurrence of events (commission of offenses), was the basis for making a decision to conduct an investigation.

The investigation is conducted in order to establish or refute these facts. For its part, the Management has the right to prove to the authorized body that there is no violation of the law in its actions.

Thus, the SMAS correctly refused to satisfy the Management's claim, and the conclusions of the court of appeal are erroneous in terms of the application of substantive law, which is the basis for the cancellation of the contested judicial act while upholding the decision of the court of first instance. 

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