Large-scale changes in the legislation on the protection of competition

On October 30, 2015 the President of the Republic of Kazakhstan N.A. Nazarbayev signed the draft Entrepreneurial Code of Kazakhstan. With the adoption of the Code, the Law "On Competition" will become invalid and the provisions of the aforementioned Law will be included in the section "Economic Competition" of the new Code.

Within the walls of the Parliament of the Republic of Kazakhstan after intensive discussions with the active participation of the National Chamber of Entrepreneurs of  Kazakhstan "Atameken" (hereinafter – NCE RK "Atameken") to discuss a number of novels in the draft Entrepreneurial Code, aimed at improving legislation in the field of protection of competition, in particular, changes in the criteria for determining a dominant provisions of subjects of the market, the gradual abolition of keeping the register of market entities having dominant or monopolistic position and reporting, the introduction of the notification institution, a conciliation commission, bringing the concept of "cartel" in the Model Law on Competition, the transformation activities of the anti-monopoly authority.

1. Changes in the criteria for determining the dominant position of market entities

The fact of occupation of dominant position on a particular product market was recognized only on the basis of controls a small fraction of the product market (35% in the one-sided dominance and 15% for collective dominance) by a market entity without mandatory consideration of a number of important quality criteria.

Under the new amendments, based on the proposals of NCE RK "Atameken", unilateral dominance admits:

- If the share of the market is 35 percent or more, and when all of the following circumstances are observed:

1) the possibility of market entity to unilaterally determine the level of prices of goods, and have a decisive influence on the general conditions of sale of goods in the market;

2) the existence of economic, technological, administrative or other restrictions for access to the commodity market;

3) the duration of the existence of the possibility for a market entity to have a decisive influence on the general conditions of commodity circulation in the commodity market.

- If the share of the market entity is 50 percent or more. In this case, it is sufficient for a market entity to go over the threshold value without additional criteria.

Under the new amendments the collective dominance would be recognized if the total share of no more than three market entities, which own the largest share of the relevant product market, is fifty percent or more, or the aggregate share of not more than four market entities, which own the largest share of the relevant product market, is seventy percent or more, and when all of the following circumstances are observed:

1) for a prolonged period (a period of not less than one year or, if such period is less than one year, over the life of the relevant product market) the relative size of the market share of the subjects is left unchanged or insignificant changes have occurred;

2) sold or purchased goods by a market entity can’t be replaced by another item in the consumption (including consumption for production purposes);

3) information about price and (or) on the conditions of implementation of this product in the relevant product market is open to the public.

Aggregate application of a row and a share of important criteria allow objectively establish the position of an entity in the commodity market.

2. Phase by phase cancelation of  the register of market entities having dominant or monopolistic position, and their reporting

Since 2016 the competition authority will only keep a register of regulated markets, and in 2017, this registry will be canceled completely and accordingly will be canceled periodic reporting to anti-monopoly body by the entities, having dominant position. The proposal to abolish the registry was repeatedly made by NCE RK "Atameken" during the discussion of the matter with the competition authority.

Currently, the Registry includes 900 market entities, including SMEs. Cancelation of a mandatory periodic reporting to the competition authority will allow them to save labor, financial costs, and focus on production issues.

3. The introduction of a notification

For the first time, at the suggestion of  NCE RK "Atameken", an antitrust law introduced the concept of "Institute of the notification" – it is when in the actions of a person, who has a dominant position, there signs of abuse in particular:

Imposing restrictions on the resale of goods purchased from him on a territorial basis, the circle of buyers, purchasing conditions, as well as quantity, price;

unjustified refusal to conclude a contract, or refusal to sell goods to individual customers if production or sale of the relevant goods is possible or evasion, expressed in response to the failure to conclude such an agreement within a period exceeding thirty days;

unjustified reduction in the production and (or) supply or the cease of production and (or) supply of goods for which there is a demand or customer orders and availability of production or supply, an investigation is not conducted without issuing a notification.

If a market entity fulfills the terms of the notification, no investigation is carried out and the person is not subject to administrative responsibility.

4. The introduction of the institute of a conciliation commission

The institute of "conciliation commission" is introduced during the conduction of an investigation by the antimonopoly authority, which in addition to the employees of the antimonopoly authority will include independent experts. The Conciliation Commission will consider a draft conclusion on the results of the investigation on the completeness and quality of the evidence in it.

5. Bringing the concept of "cartel" in the Model Law on Competition

The term "cartel" was introduced to the Law "On Competition" (hereinafter - the Law), in May 2015 by the Law "On amendments and additions to some legislative acts on Natural Monopolies and Protection of Competition". This law also gives the right to antimonopoly authority not to notify a market entity on a start of an investigation("dawn raids"), which is included in the inspection list by cartel criteria, to initiate an investigation. However, the term "cartel" was introduced in the broad sense, where the term also encompasses concerted anti-competitive actions that, in fact, do not require proof of an agreement (agreement) between the parties. This expanded definition of "cartel" gives the right to antimonopoly authority not to notify a market entity on initiation of an investigation, in the actions of which were seen signs of anticompetitive concerted actions.

NCE RK "Atameken" disagreed with this approach of the antimonopoly authority, it proposed to narrow the term "cartel", limiting to the anti-competitive agreements and, stating that a decision to conduct an investigation in respect of the entrepreneur does not mean that he is guilty, and offered to inform entrepreneurs about the beginning of an investigation at the time of investigation.

The offer of NCE RK "Atameken" was approved by deputies in the new edition of the Code, the term "cartel" was narrowed and brought in line with the Model Law on Competition, which establishes the duty of the competition authority to hand over a copy of the inspection order to a market entity, the actions of which are suspected in cartel involvement.

6. Transformation of the activities of the antimonopoly authority.

The activities of the antimonopoly authority during investigations are aimed primarily at identifying the facts of infringement of the rights of consumers, rather than the facts of restriction of competition at the commodity market. Thus, the competition authority did not contribute to the development and protection of competition and did not serve as a measure to support the business, but rather, as the body to deal with the business to meet the consumers' rights.

In accordance with the new Code, the competition authority would not carry out investigations related to the infringement of the rights of consumers in the anticompetitive concerted actions and unfair competition.