On the Presence of Signs of Violations of Competition Protection Legislation in Actions (Inaction)
Pursuant to paragraph 1 of Article 199 of the Entrepreneurial Code, where there are signs of unfair competition, abuse of a dominant or monopoly position, except for the signs specified in subparagraph 1) of Article 174 of the Code, anti-competitive concerted actions of market entities, anti-competitive vertical agreements of market entities specified in paragraph 2 of Article 169 of the Code, as well as signs of anti-competitive actions (inaction) and agreements of state and local executive bodies, and organizations vested by the state with functions of regulating the activities of market entities, the antimonopoly authority shall, without conducting an investigation, send to the market entity, state or local executive body, or organization vested by the state with functions of regulating the activities of market entities, a notice of the presence of signs of a violation of the legislation of the Republic of Kazakhstan in the field of competition protection in their actions (inaction).
At the same time, paragraph 2 of Article 199 of the Entrepreneurial Code provides that the antimonopoly authority shall issue a decision to conduct an investigation if the organization vested by the state with the function of regulating the activities of market entities, the state or local executive body, or the market entity fails to cease the actions (inaction) specified in the notice within the time limits established by paragraph 2-1 of this Article.
A judicial analysis of this category of cases has shown that, at the initial stage of the development of administrative justice, local courts followed divergent approaches: in some regions, notices were annulled and declared unlawful, whereas in other regions, similar claims were dismissed.
For example, in three court disputes with the antimonopoly authority concerning claims brought by JSC (No. 6001-23-00-6ап/227), LLP (No. 6001-22-00-6ап/2342(2)), and JSC (No. 6001-23-00-6ап/227), the courts granted the claims insofar as they sought annulment and declaration of unlawfulness of the notice. In turn, the Administrative Chamber of the Supreme Court of the Republic of Kazakhstan (“СКАД ВС”) overturned the above judgments.
A case involving a claim brought by a JSC is particularly illustrative. In that case, the courts of first instance and appeal, in granting the claim, held that the notice could not be addressed to the Company because it was not a subject of such violations.
In overturning the judgments of the lower courts, the СКАД ВС reasonably concluded that the claim should have been returned, as it was not subject to consideration under the administrative court proceedings, for the following reasons.
Pursuant to part two of Article 102 of the Administrative Procedural and Process-Related Code (“АППК”), disputes arising from public-law relations provided for by the Code fall within the jurisdiction of courts under administrative court proceedings. The АППК establishes clear definitions of an “administrative act” and an “administrative claim” (part 1 of Article 4).
An administrative act constitutes the principal external form of the administrative activities of administrative bodies and officials. It is adopted by an administrative body in public-law relations, has an authoritative nature, and constitutes a unilateral decision of an administrative body vested with authoritative powers, which is binding and enforceable through state coercion and is primarily aimed at exercising subjective public rights and obligations, and is addressed to a specific person or an individually determined group of persons.
It follows from this definition that an administrative act must possess a number of characteristics:
- it must constitute an authoritative measure, i.e. a conscious expression of will in the form of a decision, action (inaction), through which the public authority of an administrative body is exercised;
- it must emanate from an administrative body (within the meaning of subparagraph 7) of part one of Article 4 of the АППК);
- it must have a regulatory effect, i.e. constitute a measure aimed at establishing, terminating, or modifying a legal relationship;
- it must be individually determined and have a specific addressee to whom the administrative act is directed;
- it must be adopted in the sphere of public law. This is due to the fact that a body or organization may act not only as an administrative body but also as an economic entity. Only acts adopted in the sphere of public law and possessing a public-law nature may constitute administrative acts;
- it must have an external effect, i.e. the legal effect of the act must be directed externally, where the addressee is a person outside the administrative body.
Having analyzed the circumstances of the case, the СКАД ВС concluded that the notice (the challenged document), by its legal nature, is not an act subject to mandatory compliance, has no external effect, does not affect the interests of the claimant, does not entail legal consequences, and is not binding and, consequently, cannot constitute an independent subject of judicial challenge.
Despite the applicable legal provisions, the courts, referring to the fact that, pursuant to Article 199 of the Entrepreneurial Code, an investigation may be conducted by the antimonopoly authority if the notice remains unfulfilled, failed to take into account the discretionary nature and legal nature of the institution regulated by Article 216 of the Entrepreneurial Code, as well as the grounds and triggers enumerated therein.
Thus, even where an unfulfilled notice exists, an antimonopoly investigation may, within the meaning of Article 216 of the Entrepreneurial Code, not be initiated. This is due to the need for the administrative body to have a certain degree of confidence, at the time of deciding whether to initiate an investigation, that the actions of the entities concerned disclose signs of a violation of the legislation. This demonstrates the existence of administrative discretion on the part of the authority in this matter.
For a contested act to be classified as an administrative act, it must have an authoritative and regulatory effect, be binding, and be enforceable under the threat of liability for non-compliance.
However, the challenged notice is not authoritative in nature, is not backed by state coercion, and is not directly aimed at exercising the claimant's public rights and obligations. Accordingly, there is no need in this situation to protect or restore any violated or disputed rights, freedoms, or legitimate interests. The court may assess the notice as an administrative action within the framework of a completed administrative procedure or as administrative evidence in the case.
REGULATORY SOURCES AND ABBREVIATIONS
The principal regulatory legal acts that courts should be guided by when considering cases involving the application of antimonopoly legislation are:
- Constitution of the Republic of Kazakhstan dated 30 August 1995;
- Entrepreneurial Code of the Republic of Kazakhstan dated 29 October 2015 (ПК);
- Administrative Procedural and Process-Related Code of the Republic of Kazakhstan dated 29 June 2020 No. 350-VI (АППК);
- Code of the Republic of Kazakhstan on Administrative Offenses dated 5 July 2014 No. 235-V ZRK (КоАП);
- Law of the Republic of Kazakhstan “On Natural Monopolies” dated 27 December 2018 No. 204-VІ ZRK (Law);
- Administrative Chamber of the Supreme Court of the Republic of Kazakhstan (СКАД ВС);
- Agency for Protection and Development of Competition of the Republic of Kazakhstan and its territorial bodies (antimonopoly authority);
- 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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