Commentary on Article 221. Monopolistic Activity of the Criminal Code of the Republic of Kazakhstan

1. Establishment and (or) maintenance by market entities of monopolistically high (low) or agreed prices, establishment of restrictions on the resale of goods (works, services) purchased from a market entity holding a dominant or monopoly position, based on territorial criteria, categories of buyers, purchase conditions, quantity or price, division of commodity markets according to territorial criteria, the range of goods (works, services), the volume of their sale or purchase, or categories of sellers or buyers, as well as other acts aimed at restricting competition, if such acts have caused major damage to a citizen, an organization or the State, or are associated with the extraction of income by a market entity on a large scale, —

shall be punishable by a fine in the amount of up to one thousand monthly calculation indices, or corrective labor in the same amount, or community service for a period of up to four hundred hours, or restriction of liberty for a period of up to one year, or imprisonment for the same period.

2. The same acts, committed repeatedly or by a person using their official position, —

shall be punishable by a fine in the amount of up to three thousand monthly calculation indices, or corrective labor in the same amount, or community service for a period of up to eight hundred hours, or restriction of liberty for a period of up to three years, or imprisonment for the same period, with or without confiscation of property, with or without deprivation of the right to hold certain positions or engage in certain activities for a period of up to three years.

3. The acts provided for in Parts One and Two of this Article, committed:

1) by a criminal group;

2) through the use of violence or the threat of its use, as well as through the destruction of or damage to another person's property, or the threat of its destruction or damage, in the absence of the elements of extortion, —

shall be punishable by restriction of liberty for a period of up to six years or imprisonment for the same period, with or without confiscation of property.

Note. A person who has committed an act provided for in Part One of this Article for the first time shall be released from criminal liability in the event of voluntary compensation for the damage.

The public danger of monopolistic activity consists in violating the rules of competitive conduct ("rules of the game") that are equal for all business entities.

According to Paragraph 4 of Article 26 of the Constitution of the Republic of Kazakhstan, monopolistic activity is regulated and restricted by law, while unfair competition is prohibited.

Article 162 of the Entrepreneurial Code states: "Competition is the rivalry of market entities, in which their independent actions effectively limit the ability of each of them to unilaterally influence the general conditions of the circulation of goods in the relevant commodity market (Paragraph 1).

Competition is based on the principles of rivalry, good faith, legality and respect for consumer rights, which apply equally, to the same extent and on equal terms to all market entities, regardless of their organizational and legal form and place of registration (Paragraph 2)."

The following actions are classified as unfair competition:

unlawful use of means of individualization of goods, works and services, as well as copyright objects;

unlawful use of another manufacturer's goods;

copying the appearance of a product;

discrediting a market entity;

knowingly false, unfair and inaccurate advertising;

sale (purchase) of goods with a forced assortment;

calling for a boycott of a competing seller (supplier);

calling for discrimination against a buyer (supplier);

calling on a market entity to terminate a contract with a competitor;

bribery of an employee of a seller (supplier);

bribery of an employee of a buyer;

unlawful use of information constituting a commercial secret;

sale of goods by providing consumers with inaccurate information regarding the nature, method and place of production, consumer properties, quality and quantity of the goods and (or) their manufacturers;

incorrect comparison by a market entity of the goods it produces and (or) sells with goods produced and (or) sold by other market entities (Paragraph 2 of Article 177 of the Entrepreneurial Code).

Thus, unfair competition is an action (inaction) by a legal entity and (or) an individual, as well as state bodies and local self-government bodies, aimed at obtaining unjustified advantages in entrepreneurial activity by eliminating or restricting competition.

A situation frequently arises in which, in the course of competitive struggle, an organization, having achieved a monopoly position in the market for a particular product (work or service), begins to dictate its terms to the market, which ultimately may violate the interests of consumers and negatively affect market development.

In accordance with Article 167 of the Entrepreneurial Code of the Republic of Kazakhstan, monopolistic activity means the activity of market entities whose position enables them to control the relevant commodity market, including allowing them to exert significant influence on the general conditions of the circulation of goods in the relevant commodity market.

The following are classified as monopolistic activities restricted by the Entrepreneurial Code of the Republic of Kazakhstan:

anti-competitive agreements between market entities;

anti-competitive concerted actions of market entities;

abuse of a dominant or monopoly position.

The object of the crime under consideration is the established procedure for conducting lawful entrepreneurial activity and fair competition. Additional objects may include the property interests of citizens and legal entities, property relations and human health.

The objective side of the crime under consideration is expressed in the following actions:

establishment and (or) maintenance by market entities of monopolistically high (low) or agreed prices;

establishment of restrictions on the resale of goods (works, services) purchased from a market entity holding a dominant or monopoly position, based on territorial criteria, categories of buyers, purchase conditions, quantity or price;

division of commodity markets according to territorial criteria, the range of goods (works, services), the volume of their sale or purchase, or categories of sellers or buyers;

other acts aimed at restricting competition.

In accordance with Article 174 of the Entrepreneurial Code of the Republic of Kazakhstan, actions or omissions of market entities holding a dominant or monopoly position that have resulted in or result in restricting access to the relevant commodity market, preventing, restricting or eliminating competition and (or) infringing upon the lawful rights of a market entity or an indefinite group of consumers are prohibited, including such actions as:

establishing and maintaining monopolistically high (low) or monopsonistically low prices;

applying different prices or different terms to equivalent agreements with market entities or consumers without objectively justified reasons, except in cases where the application of different prices is обусловed by different costs of production, sale and delivery of goods, or by the non-discriminatory application of a discount system that takes into account sales volumes, payment terms and contract duration;

establishing restrictions on the resale of goods purchased from the market entity, based on territorial criteria, categories of buyers, purchase conditions, as well as quantity and price;

making or imposing the conclusion of an agreement conditional upon the acceptance by a market entity or consumer of additional obligations which, by their content or in accordance with business customs, are unrelated to the subject matter of such agreements;

unjustified refusal to conclude a contract or sell goods to individual buyers when, at the time of the request, the possibility of producing or selling the relevant goods exists, or evasion expressed in failure to provide a response regarding the conclusion of such a contract within a period exceeding thirty calendar days. At the same time, a refusal or evasion shall be considered justified if, at the time of the buyer's request, the required volume of goods being produced or sold is unavailable, including due to the conclusion of contracts for the sale of the relevant goods;

making the supply of goods conditional upon the acceptance of restrictions when purchasing goods produced or sold by competitors;

unjustified reduction of production and (or) supply volumes or cessation of production and (or) supply of goods for which there is consumer or market demand or orders, where the possibility of producing or supplying such goods exists;

withdrawal of goods from circulation if such withdrawal results in an increase in the price of the goods;

imposing on a counterparty economically or technologically unjustified contractual terms unrelated to the subject matter of the contract;

creating obstacles to access to the commodity market or exit from the commodity market for other market entities, economically, technologically or otherwise unjustified establishment of different prices (tariffs) for the same goods, and creation of discriminatory conditions.

A dominant or monopoly position is recognized as the position of a market entity or several market entities in the relevant commodity market, which gives the market entity or several market entities the ability to control the relevant commodity market, including the ability to exert significant influence on the general conditions of the circulation of goods (Paragraph 1 of Article 172 of the Entrepreneurial Code).

Agreements between market entities that infringe upon the lawful rights of consumers and (or) result in or may result in the following are recognized as anti-competitive:

establishment or maintenance of prices (tariffs), discounts, surcharges (additional payments) and (or) markups;

increasing, reducing or maintaining prices at tenders, distorting the results of tenders, auctions and competitions, including through the division of lots;

division of the commodity market according to territorial criteria, the volume of sales or purchases of goods, the range of goods sold, or the composition of sellers or buyers (customers);

reduction or cessation of the production of goods;

refusal to conclude contracts with certain sellers or buyers (customers).

The concepts of monopolistically high and monopolistically low prices are provided in Article 175 of the Entrepreneurial Code of the Republic of Kazakhstan. Thus, a monopolistically high price of goods is a price established by a market entity holding a dominant or monopoly position, if:

this price exceeds the maximum high price established under competitive conditions in the same commodity market by a market entity that is not part of the same group of persons as the market entity holding a dominant position, or exceeds the price formed under competitive conditions in a comparable commodity market;

this price exceeds the sum of the expenses and profit necessary for the production and sale of such goods.

A monopsonistically (monopolistically) low price is the price at which goods are purchased by a market entity holding a monopsony position, if:

this price enables the market entity holding a monopsony position to obtain additional income by reducing production and (or) sales costs at the expense of market entities selling goods to it;

this price is lower than the sum of the expenses and profit necessary for the market entity selling the goods to produce and sell such goods (Article of the Entrepreneurial Code).

A commodity market is a sphere of circulation of goods (including goods of foreign production) that cannot be replaced by another product, or of interchangeable goods, within the boundaries of which (including geographical boundaries), based on economic, technical or other feasibility or expediency, a purchaser can acquire the goods, while such feasibility or expediency is absent beyond those boundaries (Paragraph 2 of Article 175 of the Entrepreneurial Code of the Republic of Kazakhstan). Commodity markets in which state price regulation has been introduced in accordance with the Entrepreneurial Code and the laws of the Republic of Kazakhstan are recognized as regulated markets.

A comparable commodity market means another commodity market that is comparable in terms of the volume of goods sold, the composition of buyers or sellers (suppliers) of goods, determined on the basis of the purposes of purchasing or selling the goods, and the conditions of access to the commodity market (Paragraph 3 of Article 175 of the Entrepreneurial Code of the Republic of Kazakhstan).

The establishment of restrictions on the resale of goods (works, services) purchased from a market entity holding a dominant or monopoly position may be expressed in the unlawful establishment of quotas or the creation of obstacles to the sale of goods. Such restrictions must be imposed on the basis of territorial criteria, categories of buyers, purchase conditions, quantity or price. This form of restricting competition is generally characteristic of officials.

The division of commodity markets according to territorial criteria, the range of goods (works, services), the volume of their sale or purchase, or the categories of sellers and buyers, as a method of restricting or eliminating competition, represents the achievement of an agreement in any form on the division of the market. This concerns contracts, transactions and concerted actions between business entities operating in the market for the same product (interchangeable goods), regardless of their aggregate market share in the market for a particular product.

Other forms of restricting competition may be expressed in the creation of various kinds of obstacles for competitors during their registration, including through the use of employees of law enforcement and other state bodies, preventing competitors from entering the market or eliminating other business entities from the market.

When competition is prevented, the offender, through their actions, makes competition in a particular area of the functioning of the commodity market impossible. As a result of the measures taken by the offender, the rivalry of business entities in this area is excluded.

All forms of acts for which liability is established under Article 221 of the Criminal Code must be aimed at restricting competition.

Forms of restricting competition include: obstructing access to the market for other entities engaged in economic activity; creating obstacles to the entry of other business entities into the commodity market; disseminating knowingly false, inaccurate or distorted information that may cause losses to a business entity or damage its business reputation; misleading market entities regarding the nature, method and place of production, consumer properties, manufacturers, quality and quantity of goods; unlawful acquisition, use or disclosure of scientific and technical information constituting commercial and official secrets.

Restriction and restraint of competition are permitted by the Law of the Republic of Kazakhstan dated December 27, 2018, "On Natural Monopolies", only within the sphere of activity of natural monopoly entities. According to Subparagraph 18) of Article 4 of the said Law, a natural monopoly is a state of the market for goods, works and services in which the creation of competitive conditions to satisfy demand for a particular type of goods, works or services is impossible or economically impractical due to the technological characteristics of the production and provision of that particular type of goods, works or services.

According to Paragraph 1 of Article 5 of the said Law, the spheres of natural monopolies in the Republic of Kazakhstan include regulated services provided for in 14 subparagraphs of this paragraph (see the Law "On Natural Monopolies").

Natural monopoly entities are subject to inclusion in the State Register of Natural Monopoly Entities, indicating their regulated services.

Expansion of the spheres of natural monopolies is carried out in accordance with international treaties ratified by the Republic of Kazakhstan.

By its construction, the elements of the crime are material. The crime shall be considered completed if it has caused major damage to a citizen, an organization or the State. In terms of the criterion of the market entity obtaining income on a large scale, the elements of the crime are formal.

Subparagraph 38) of Article 3 of the Criminal Code states that, with regard to the crime under consideration, income on a large scale means income in an amount exceeding twenty thousand monthly calculation indices, while damage caused to a citizen is considered major if it amounts to a sum two thousand times the monthly calculation index, or damage caused to an organization or the State is considered major if it amounts to a sum ten thousand times the monthly calculation index.

The subjective side of the crime is characterized by an intentional form of guilt, with both direct and indirect intent being possible. The person is aware that the establishment and (or) maintenance of monopolistically high (low) or agreed prices, the establishment of restrictions on the resale of goods (works, services) purchased from a market entity holding a dominant or monopoly position, based on territorial criteria, categories of buyers, purchase conditions, quantity or price, the division of commodity markets according to territorial criteria, the range of goods (works, services), the volume of their sale or purchase, or categories of sellers or buyers, as well as other acts, are aimed at restricting competition; the person foresees the possibility or inevitability of causing major damage to a citizen, an organization or the State as a result thereof, or obtaining income on a large scale, and desires this outcome or consciously allows it to occur.

The subject of the crime is general: any sane individual who has reached the age of sixteen. However, within the meaning of criminal law, the subject may also be the head of a legal entity or a senior-level manager in such an organization.

The commission of this crime by individuals acting as individual entrepreneurs or officials is also not excluded.

If the offender, by threatening violence or damage to property, demands the transfer of any property or rights thereto (the re-registration or sale of shares at a low price), or the performance of actions of a property-related nature, they shall be subject to criminal liability under the cumulative provisions of Articles 221 and 194 of the Criminal Code, "Extortion".

Part 2 of Article 221 of the Criminal Code provides for criminal liability for committing the crime repeatedly or by a person using their official position.

An especially aggravated form of the offence is provided for in Part 3 of Article 221 of the Criminal Code. It establishes liability for committing the crimes provided for in Parts 1 and 2 of Article 221 of the Criminal Code: 1) by a criminal group; 2) through the use of violence or the threat of its use, as well as through the destruction of or damage to another person's property, or the threat of its destruction or damage, in the absence of the elements of extortion (see the commentary to Articles 214–220 of the Criminal Code).

The use of violence should be understood as the infliction of beatings and the causing of minor or moderate harm to health. If grievous bodily harm is caused as a result of the use of violence, the act should be qualified under the cumulative provisions of Paragraph 2) of Part 3 of Article 221 of the Criminal Code and Part 1 of Article 106 of the Criminal Code. The threat of the use of violence should be understood as a threat to cause minor, moderate or grievous harm to health. The threat may consist of a threat to cause death. At the same time, the threat must be real.

Depending on the method of committing the crime, representatives of state bodies of the Republic of Kazakhstan (officials) may also be the subjects of the crime, where their actions were aimed at restricting the independence of business entities or created discriminatory conditions for the activities of certain business entities, etc. In such cases, cumulative liability under Articles 221 and 365 of the Criminal Code, "Obstruction of Lawful Entrepreneurial Activity", is not excluded.

Destruction of property means such an impact on an item as a result of which it ceases to exist or becomes unsuitable for its intended purpose.

Damage to another person's property means such an impact on an item as a result of which its condition deteriorates and it temporarily cannot be used for its intended purpose.

Intentional destruction of or damage to another person's property (Part 1 of Article 202 of the Criminal Code), as well as a threat of the use of violence (Article 115 of the Criminal Code), are fully covered by Part 3 of Article 221 of the Criminal Code and do not require additional qualification.

If intentional destruction of or damage to another person's property is committed under aggravating and especially aggravating circumstances (Parts 2 and 3 of Article 202 of the Criminal Code), the offender's actions should be qualified under the cumulative provisions of Part 3 of Article 221 and Part 2 or 3 of Article 202 of the Criminal Code.

When committing an act containing the elements specified in Paragraph 2) of Part 3 of the Article under consideration, the elements of extortion must be absent.

If the actions specified in the disposition of Article 221 of the Criminal Code do not cause major damage or are not associated with the extraction of income on a large scale, liability arises under Article 159 of the Code of Administrative Offences.

The act provided for in Part 1 of Article 221 of the Criminal Code is classified as a minor offence.

The act provided for in Part 2 of Article 221 of the Criminal Code is classified as an offence of medium gravity.

The act provided for in Part 3 of Article 221 of the Criminal Code is classified as a serious offence.

According to the Note to the Article under consideration, a person who has committed an act provided for in Part 1 for the first time shall be released from criminal liability in the event of voluntary compensation for the damage.

Commentary of 2021 to the Criminal Code of the Republic of Kazakhstan by Isidor Shamilovich Borchashvili, Honored Figure of Kazakhstan, Doctor of Law, Professor, Academician of the Kazakhstan National Academy of Natural Sciences, Member of the Scientific Advisory Councils under the Constitutional Council of the Republic of Kazakhstan and the Supreme Court of the Republic of Kazakhstan, Member of the Working Group on the Reform of the Law Enforcement System under the Security Council of the Republic of Kazakhstan, Honored Employee of the Ministry of Internal Affairs of the Republic of Kazakhstan.

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