Antitrust Penalties Could Rise To 10 Years

The Federal Anti-Monopoly Service said Thursday it would soon propose amendments to the Criminal Code that would introduce criminal liability for company executives responsible for price collusion and monopolistic activities in key sectors of the economy.

The proposal, which would make violation of anti-monopoly rules punishable by up to 10 years in jail, was backed by Prime Minister Vladimir Putin at a Wednesday meeting with anti-monopoly service chief Igor Artemyev.

"You must do what you must to protect the consumer, as well as to promote economic development because cartel collusion can lead to stagnation," Putin said, Interfax reported.

The proposal is part of an effort to curb rampant price collusion and combat the formation of cartels, Yelena Nagaichuk, a spokeswoman for the service, said Thursday.

It comes just days after Putin attacked the country's biggest coking coal producer, Mechel, calling for law enforcement agencies to investigate the firm over purported illegal price-fixing and transfer pricing. Putin's comments and subsequent probes into Mechel caused its stock price to fall by nearly half in less than a week.

On Wednesday, the anti-monopoly service opened probes into two more coal producers, Evraz and Raspadskaya.

The amendments, which would regulate competitive practices especially in energy, metals and construction, would be presented to the Cabinet within three weeks, after which it would be sent to the State Duma for consideration, Nagaichuk said.

Nagaichuk said Putin's support for the bill would guarantee its passage through the State Duma.

Artemyev said the amendments, to Article 178 of the Criminal Code, would make it easier to gather evidence against violators of anti-competition laws.

Existing price-fixing law provides for a penalty of up to 15 percent of a company's turnover. The law also specifies a jail term of up to five years' imprisonment, but as it only refers to legal entities, this is unenforceable.

He explained that the proposed amendments to the Criminal Code would change all that, adding that if passed, the executives of companies found guilty of formation of cartels could face up to 10 years in prison.

"The flaw in the existing law is that it only covers legal entities as a whole while violations committed by individual company executives cannot be prosecuted," said Alexander Partin, a lawyer with Pepeliaev, Goltsblat & Partners.

"With the amendments, senior executives would be more conscious of their responsibilities, knowing fully that it is not only the company's money at stake."

Sergei Voitishkin, a corporate and M&A partner at Baker & McKenzie, said the existing anti-competition law contained sufficient penalties.

"The new rules appear to be part of the ongoing government effort to clamp down on companies with a dominant position in the market to keep prices in check," Voitishkin said. "However, the provision for 10 years' imprisonment for an economic crime such as forming a cartel may be way too tough."

Voitishkin said the country also needed to address the issue of laws "being applied selectively," especially in cases where they could be abused by overzealous state officials.