On challenging actions related to the analysis of the commodity market and the order
No. 6001-23-00-6ap/120 dated 07/27/2023
Plaintiff: Cement LLP Defendant: Russian State University "Department of the Agency for Protection and Development of Competition of the Republic of Kazakhstan in the region"
The subject of the dispute: on challenging actions to conduct an analysis of the commodity market and Order No. 14-OD dated April 14, 2022 "On approval of the conclusion based on the results of the investigation"
Review of the defendant's cassation complaint
PLOT: On December 27, 2017, the Partnership and the Russian State Institution "Committee on Investments of the Ministry of Investment and Development of the Republic of Kazakhstan" signed an investment contract No. 1124-12-2017 for the implementation of an investment priority project, providing for investments and the provision of investment preferences.
Pursuant to the order of the republican state institution "Agency for the Protection and Development of Competition of the Republic of Kazakhstan" dated June 1, 2021, the Department conducted an analysis of the commodity market for the production and sale of cement in the Kyzylorda region for the period 2020 and January-May 2021.
Based on the results of the Analysis, the Department concluded that during the specified period the Partnership occupied a dominant position in the relevant market and violated subparagraph 2) of Article 174 of the Entrepreneurial Code of the Republic of Kazakhstan dated October 29, 2015 No. 375-V (hereinafter – PC).
On July 14, 2021, the Department sent notification No. 04-10/670 to the Partnership about the presence of signs of violation of the legislation of the Republic of Kazakhstan in the field of competition protection. Due to the Partnership's failure to comply with the notification, the Department decided to conduct an investigation into the Partnership for violations of the legislation of the Republic of Kazakhstan in the field of competition protection (Order No. 9-nk dated August 31, 2021). Based on the results of the investigation, on December 13, 2021, the Department sent a draft opinion to the Partnership.
In response, on December 29, 2021, the Partnership informed the Department of its disagreement with the draft opinion and asked it to submit it to the conciliation commission for consideration. On December 30, 2021, by the decision of the head of the Department, E.S. Orynbaev, the investigation period was suspended until the comments and recommendations were made by the conciliation commission. On March 15, 2022, a meeting of the Agency's conciliation commission was held, following which it was decided to support the draft conclusion of the Department (Protocol No. 4).
On March 31, 2022, the protocol of the conciliation commission was sent to the Department. On April 4, 2022, by the decision of the head of the Department, the investigation period was resumed from April 5, 2022. On April 14, 2022, Department Order No. 14-OD approved the conclusion based on the results of the investigation and decided to institute an administrative offense case and issue an injunction against the Partnership.
The partnership, disagreeing with the order, appealed to the court with this claim.
Judicial acts:
1st instance: the claim is satisfied. Appeal: the decision remains unchanged.
Cassation: judicial acts are cancelled.
A new decision has been made in the case: the claim has been dismissed.
Conclusions: In January 2020, the Partnership carried out wholesale (primary) sales of cement for 3 types of brands at different prices for no justified reason.
According to the letters of reply from the Partnership, it was reported that the selling prices for cement are formed based on an analysis of the sales history, as a result of which the goods are sold to new customers at higher prices compared to buyers who are long-time customers of the Partnership.
In addition, the Partnership also reported that the use of different prices for goods depends on the distance of the cement supply route (from the separation of buyers), that is, the further away the region of supply, the lower the purchase price.
At the same time, the Partnership informed in writing that in the period from January 1, 2020 to May 31, 2021, no benefits were provided for the sale of cement to consumers (market participants). The possession by a market entity of a dominant or monopolistic position in the market is not prohibited and does not constitute a violation of the law.
But for such market participants, such legal capacity entails certain legal consequences.
In accordance with paragraph 5 of Article 8 of the Civil Code, actions of citizens and legal entities aimed at harming another person, abusing the right in other forms, as well as exercising the right in contradiction with its purpose are prohibited.
According to paragraph 2 of Article 11 of the Civil Code, monopolistic and any other activities aimed at limiting or eliminating legitimate competition, obtaining unjustified advantages, and infringing on the rights and legitimate interests of consumers are prohibited.
In accordance with subparagraph 2) of Article 174 of the PC, actions (inaction) of market entities occupying a dominant or monopolistic position are prohibited, which have led or lead to restriction of access to the relevant commodity market, prevention, restriction and elimination of competition and (or) infringe on the legitimate rights of a market entity or an indefinite circle of consumers, including such actions Like – the application of different prices or different conditions to equivalent agreements with market participants or consumers without objectively justified reasons, except in cases where the application of different prices is due to different costs of production, sale and delivery of goods, non-discriminatory application of a discount system that takes into account sales volumes, payment terms, and the duration of the contract.
Thus, a market entity that occupies a dominant or monopolistic position when applying different prices should simultaneously be accompanied by a restriction of competition or infringement of the legitimate rights of market entities or an indefinite circle of consumers and the absence of objective reasons.
The partnership, as a market entity occupying a dominant position, has only the right to sell manufactured goods at the same prices, without prejudice to the legitimate interests of buyers, without limiting competition in the commodity market.
In accordance with Article 172 of the PC, a dominant or monopolistic 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 opportunity to control the relevant commodity market, including having a significant impact on the general conditions of circulation of goods, as well as unilaterally determine the price level of goods.
According to subparagraph 11) of Article 174 of the PC, actions (inaction) of market entities occupying a dominant or monopolistic position are prohibited, which have led or lead to restriction of access to the relevant commodity market, prevention, restriction and elimination of competition and (or) infringe on the legitimate rights of a market entity or an indefinite circle of consumers, including such actions as – economically, technologically, or otherwise unjustifiably setting different prices (tariffs) for the same product, creating discriminatory conditions.
Thus, the Partnership had to apply a uniform pricing policy equally and in equal conditions to all market participants (buyers), regardless of the organizational and legal forms of market participants and the places of delivery (transportation) of goods.
However, the Partnership, carrying out the wholesale (primary) sale of cement at different prices, committed acts that infringe on the legitimate rights of market participants (buyers who purchased goods at a high price) and an indefinite circle of consumers (consumers of the Kyzylorda region), thereby receiving unjustified profits from these actions at the expense of such buyers.
The analysis was carried out by the Department in accordance with the Methodology in force at the time of the dispute on the analysis and assessment of the competitive environment in the commodity market, approved by the Order of the Minister of National Economy of the Republic of Kazakhstan dated November 30, 2015 No. 741 (hereinafter referred to as the Methodology).
Paragraph 5 of the Methodology stipulates that conducting an analysis and assessment of the competitive environment in the commodity market includes the following stages: determining criteria for the interchangeability of goods; defining the boundaries of the commodity market; determining the time interval for researching the commodity market; determining the composition of market participants operating in the commodity market; calculating the volume of the commodity market and market shares; assessing the competitive environment in the commodity market; identification of barriers to entry into the commodity market; conclusions on market analysis.
The Department's analysis covers the sequence specified in paragraph 5 of the Methodology and provides conclusions on all the above-mentioned stages of the Methodology.
According to paragraph 12 of Article 196 of the PC, the analysis of the state of competition in commodity markets is carried out on the basis of information provided by the authorized body in the field of state statistics, government agencies, market entities and their associations, as well as information provided in accordance with paragraph 9 of this article.
In this case, the analysis of the state of competition in the cement production and sale market was carried out on the basis of the information provided and materials from market participants, including the Partnership.
According to subparagraph 2) of paragraph 1 of Article 196 of the PC, the analysis of the state of competition in commodity markets is carried out in order to determine the level of competition, identify market entities occupying a dominant or monopolistic position, develop a set of measures aimed at protecting and developing competition, preventing, restricting and suppressing monopolistic activities, including in cases of determining the share of dominance of the subject. when considering signs of abuse of a dominant or monopolistic position.
Thus, during the analysis of cement production and sales, the Department identified signs of abuse of a dominant position in relation to the Partnership in terms of applying different prices to equivalent agreements with market participants or consumers without objectively justified reasons.
Thus, during the investigation, the Department requested the Partnership to provide information on which system of discounts (benefits) was created for the sale of cement products. As the Partnership reported in its letter, in the period from January 1, 2020 to May 31, 2021, consumers (market participants) were not provided with any discounts (benefits) when selling cement.
According to the rules of part four of Article 155 of the CPC, the court refuses to satisfy the claim if, upon its consideration, it finds that the contested action (inaction) has been committed, the decision has been made in accordance with the competence and legislation of the Republic of Kazakhstan.
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