The theory and practice of antimonopoly regulation
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Federal Government Educative Budgetary Establishment of the Higher Professional Education
«Financial University under the Government of the Russia Federation»
Faculty «International Finance»
Chair of Microeconomics
Essay on Microeconomics
«The theory and practice of antimonopoly regulation»
Made by student of the group IFF 1−3
Tutor: PhD Victor Slobodyanik
Chapter 1. Concept of antitrust regulation
1.1 The necessity of antitrust regulation
1.2 Antitrust regulation of monopolies
Chapter 2. Antitrust regulation in Russia
2.1 The formation and methods of antitrust policy in Russia
2.2 The system of state regulation and antitrust law
This work is devoted to one of the economic issues of modern times — antitrust regulation, its theory and practice. The main topic of the work is the concept of antimonopoly system, particularly considered in Russia, but also I would like to investigate monopolies and their features as the necessity of antitrust legislation is directly connected to the role of monopolies.
I would like to mark out the urgency of the problem, as the antitrust policy and antitrust regulation are 2 important areas of the government economy. Effects of market competition, free market inevitably generates a monopoly, which changes the conditions of competition, making the functioning mechanisms of the market system vulnerable. Due to the high concentration of economic resources monopoly creates opportunities to accelerate technological progress. However, these features are implemented in cases where this acceleration helps to extract monopoly profits. Joseph Schumpeter and other economists have argued that large firms have considerable power — a desirable effect in the economy, because they accelerate the technical changes, as firms have monopoly power, can spend their monopoly profits on research to protect or enhance its monopoly power. Doing research, they provide benefits both to themselves and society as a whole. But there is no convincing evidence that monopolies play a particularly important role in accelerating technical progress, because monopolies can delay the development of technical progress, if it threatens their profits. Antitrust policy is certainly a urgent topic today, as it is very important to the economy of the state. Well thought-out ways of regulating monopolies promote competition, market stabilization and improvement of the economy as a whole. The development of antitrust regulation is very important for the development of Russian economy, where the degree of monopolization of the market is higher than in states with historically established market economies. The Russian economy inherited from the Soviet economy a high level of concentration of production in many sectors of the economy. A natural monopoly has in Russia a great market power. Antitrust regulation combined with the support of the national organization of business and consumer protection is one of the essential conditions for successful economic and social development of Russia. The success of economic reforms largely depends on a weighted, balanced system of regulation by the state monopoly of processes and competitive relations V. Artamonov, S. Ivanov, Microeconomics/ Tutorial, `Piter', 2009, p. 34. In Russia the process of establishing state control to prevent unfair competition actually started from scratch, as there is still more recently in the management of the economy command-administrative system is inherently exclude the presence of free competition in business. Therefore, at this stage it is crucial to create and improve the legal framework regarding the regulation of monopoly and competition processes, understanding the need for a population of Russian economic reforms in this area. The study of monopoly markets is important for economic decision-making on various issues.
The aim of this work is analyzing the necessity of antitrust regulation; understanding the reason why we need it and how it can simplify or, on the other hand, complicate the business area, its main concept; comparing the availability of advantages and disadvantages of such regulation. Another aim is to look on the recent situation in Russia concerning this topic as well: what kind of actions our government has undertaken in last years, what impact it had on the economic life, trade, business and other areas. Also I would like to investigate the antitrust legislation in Russia, the quality and the results of its work. In other words, to look, how good theory and practice work together in Russia.
There are some figures in Russia I would like to mention. First of all, it is Igor Artemiev, who occupies the post of the head of Federal Antimonopoly Service in Russia. Other important people are A. Tsarikovsky, who is responsible for control over the placement of state orders, the fight against cartels, control of market housing, construction and natural resources; A. Golomolzin — control of the energy, information technology, transport and communications markets; A. Kashevarov — control of social services and commerce, industry and defense industry, financial markets and advertising; P. Subbotin — control over authorities and the coordination of regional offices of FAS Russia; P. Tsiganov — control over agriculture and chemical industries, control of foreign investment, international economic cooperation. There are few authors whom I would like to distinguish from other: Gryaznova A.G., Yudanov A.U., Nikiforov A.
It is important to divide 2 concepts: object of research and subject of research. Object of research is a large, relatively independent part of the object area in which the subject of study is located. Subject of research is particular part of the object. In other words, the object of study is a broader concept than the subject. Here, the object of research is the monopoly and their regulation, which results in antitrust policy of the state. The subject of research is consideration of issues of competition law and possible solutions, identifying sources of antitrust issues, the main trends of the antimonopoly legislation by analyzing existing legislation taking into account the peculiarities of the Russian economy.
The essay includes front page, content, introduction, main body, conclusion and bibliography. In the introduction I clearly and concisely describe the main aspects of the work. There are 2 chapters in the main body; the first chapter contains 2 paragraphs and is devoted to the theoretical part. In the chapter 1 I consider antitrust regulation, looking at it from the theoretical side of the question. Chapter 2 is devoted to the practical approach to the antitrust regulation in Russia: methods, legislation, and tendencies. In conclusion I summarize information from the whole essay and briefly explain the recent situation in Russia. Bibliography contains list of books I used in this essay, there are both textbooks and articles.
Chapter 1. Concept of antitrust regulation
1.1 The necessity of antitrust regulation
The economy cannot be effective without the active role of the state. For the state the classic features always retained such as: freedom of entrepreneurship, stimulating business activity and the fight against monopolistic tendencies. The scope of state regulation of its specific forms and methods vary considerably across countries. They reflect the history and tradition, the size of the country, and many other factors. The tasks of the state are connected not only with the creation of conditions for the functioning of the market, but also with the struggle against the monopolization of the market. Determining the direction of state regulation, we are talking about the economy being in a state of transition, which happened in a protracted crisis, largely bearing the non-classical, unconventional character Thomas DiLorenzo, The origin of antitrust: rhetoric and reality/ Economic politics, № 3, 2007, p. 6. It is associated with rupture of the deep relations of reproduction in the economy, with the development of production decline in the destruction of the economic structures. The central issue of state regulation is a problem of development of socio-economic transformation in a country with a clear definition of the ultimate goals, priorities, and milestones Artemiev I., Sushkevich A. Basis of the antimonopoly policy of the state/ Article, 2010, p. 37. The system of state regulation of the economy that has developed in all industrialized countries, as a mandatory element provides the creation of favorable conditions for the development of competitive environment in the market of goods and services. Antitrust regulation is the most important part of state economic policy in all countries with developed market economies. Antitrust regulation is a purposeful state activity carried out on the ground and to the extent permitted by applicable law, to establish and implement rules of economic activity in the commodity markets in order to protect fair competition and ensuring the effectiveness of market relations.
Monopoly involves a number of negative consequences for the economy. Underproduction, overpriced, inefficient production are only tip of the iceberg of monopolistic abuse. The same reasons make clients of firms-monopolies to put up with high prices, forcing them to agree with the poor quality of the product, its obsolescence, lack of service and other forms of neglecting of the interests of consumers. Anyway, they have no choice. The monopoly blocks the market mechanism of self-regulating, which is another danger. Poor and expensive products may appear in non-monopolized industry, but there such excesses are only a temporary episode. The competition quickly puts everything in its place. An unscrupulous manufacturer changes his attitude, or being displaced from the market by competitors. Nothing threatens the power of the monopolist due to insurmountable barrier to the industry even in the long term. The market cannot solve the problem alone. Only the state can improve the situation in these circumstances, conducting an antitrust policy. It is not accidently that in our time there is no developed country where there was no special antitrust legislation and no special authority to oversee its implementation.
The main task of antitrust authorities is to promote the formation of market relations on the basis of competition and entrepreneurship, the protection of the interests of small business Pisenko K.A. The development of antitrust law. From mechanisms to counter local monopolies to the speculative system of modern antitrust/ Publishing house of RUDN, 2010, p. 97. This problem can be viewed as constructive. Its performance is inextricably linked to the other — state control enforcement of antitrust laws. Monitoring is carried out in different directions: prevention, limitation and suppression of monopolistic activity and unfair competition, prevention of undue concentration of capital. Methods for realization of these tasks provide a basis to call them repressive.
Depending on the communication competence of the antimonopoly body to its tasks there are several groups of powers antitrust authorities:
-Powers, aimed at promoting competition and enterprise (for achieving the objectives of the creative nature);
-Power related to state control and compliance with antitrust laws;
-Authority for the application of measures and accountability for violators of legislation.
The authority to promote competition and entrepreneurship:
A. Analyzing and evaluation of the competitive environment in the commodity markets.
B. Determination of the dominant position of the entity.
C. The development of recommendations for the development of competition in the commodity markets.
D. Clarification on the application of antitrust laws.
The authority to exercise state control over compliance with antitrust laws:
A. Decision-making and issuing orders for violations of antitrust laws.
B. Anti-monopoly control of the auction.
C. Involvement of violators of antitrust laws to justice.
D. Right to antitrust authorities to claim in court.
E. The creation and maintenance of the Register of antitrust authorities Edited by by Vivek Ghosal, Johan Stennek, The Political Economy of Antitrust/ `Elsevier Science', 2007, p. 19.
The improvement of federal law plays a special role in shaping the legal framework of competitive market relations. In this connection it is necessary to accelerate the development and adoption of federal laws and other regulations on registration of legal entities, licensing, protection of competition in the financial markets, the competitive procedure for the distribution of orders for the supply of goods for state needs. A clear legal regulation of these matters at the federal level would significantly limit the violations of law and abuses of power, and will enable manufacturers to effectively defend their rights and interests.
1. 2 Antitrust regulation of monopolies
The high efficiency of natural monopolies makes their crushing absolutely unacceptable. This does not mean that the government may refrain from regulation of natural monopolies, because their uncontrolled activity may harm the economy. These structures are trying to solve their problems by raising tariffs and prices. The implications for the country’s economy are the most destructive. Production costs in other areas increases, defaults grow, interregional connections ties are paralyzed. The natural character of a monopoly position creates an opportunity for effective work, but does not guarantee that these opportunities will be realized in practice N.I. Belousova, The practice of reforms and theoretical models of state regulation of natural monopolies/ `Librokom', 2008, p. 45. Basic way to tackle the negative aspects of natural monopolies is the state control after pricing in natural monopoly and after the volume of the production. Price regulation of natural monopolies requires mandatory binding maximum value prices for the products of a monopolist. In this case the consequences of this regulatory action are directly dependent on the particular level at which prices are fixed. Another difficult problem related to natural monopoly refers to their status: whether or not these companies should be public or private? The origins of this problem are connected to the fact that natural monopolies are very specific subject of the economy, which has never operated on a purely market principles. If the natural monopoly excludes competition, if the consumer is absolutely devoid of choice, though many other mechanisms of functioning of the market are broken, is not it better to manage the natural monopolies, not as private but as state-owned enterprises? Traditional arguments in favor of nationalization are connected to the fact that for the state enterprise it is easier to carry out government policies on prices, tariffs, production volumes. Public ownership eliminates monopolistic abuse in order to enrich the owners. Arguments against nationalization fears are associated with lowering the efficiency of natural monopoly. With no need to focus on commercial success, the director of the firm becomes a public official. He is willing to carry out any instructions just to satisfy the wishes of his superiors. The risk of corruption increases. There are strong arguments on both sides. Countries with a statist mentality prefer nationalization of natural monopolies. Countries with a strong individualistic tradition vice versa are leaning toward private property.
Unlike natural monopolies, artificial monopoly is formed in those industries where a single producer does not have high efficiency compared to several competing firms Dominik Armentano, Antitrust and Monopoly/ IRISEN, 2008, p. 22. The establishment of monopoly type of market is not inevitable for this industry, although in practice it may occur if the monopolist can eliminate future competitors. The main goal of antitrust policy is to prevent monopolistic abuses Libby Rittenberg, Timothy Tregarthen, Principles of Microeconomics/ Flat World Knowledge, 2009, p. 29. Considering natural monopolies these goals are achieved through direct government intervention in the activities, in particular, forced by setting prices. In the case of artificial monopoly regulation is the main focus of opposition to the formation of monopolies, and sometimes the destruction of those already formed. To do this, the state uses a wide range of sanctions: preventive measures, fines for improper behavior on the market, the direct de-monopolization. The basis for the activation of antitrust policy is the existence of any of the two main signs of monopolization of the market: the concentration of a very large market shares in the hands of one company, or interweaving of a leading company with its competitors ABA, Antitrust Law and Economics of Product Distribution/ 2007, p. 17. Determination of the degree of concentration in the industry is focused on the 3 factors' rate of major companies: the size of turnover, number of employees and amount of capital. Share of turnover of the company shows what part of the total supply of goods the firm concentrates.
The implementation of antitrust action by the state in the tactical plan is possible in two ways. First, the anti-monopoly measures should be preceded by a significant part of the transition to market relations. You must first create a system of measures to counter monopolies (the creation of antitrust laws, the dismantling of major groups, primary de-monopolization). But there are disadvantages in this option. They are related to the fact that instead of one monopolistic firm other arise, that does not lead to the development of competition. Second, the anti-monopoly action shall be taken simultaneously with the transition to market relations in the framework of these relations. Synchronicity of these processes contributes more to de-monopolization of the economy, the development of competition. In this regard, the entire set of measures for economic reform should be given anti-monopoly orientation, which requires examination of antitrust decisions. Antitrust policy is modifying over time. At a certain stage of development some areas of antitrust policy takes priority, but with the change of the situation the emphasis also changes. However, some form of monopoly modern economics and the law is still considering normal and therefore do not pursue. First of all, that firm is not subject to punishment that has managed to grab significant market share due to:
-Creation of a unique product;
-Designing and developing new technology will significantly reduce costs and on this basis, to sell goods at lower prices without losing revenue Michael Spraul, Antimonopoly practice and prices/ 2009, p. 11.
We can say that antitrust policy and antitrust law are not intended to prohibit or eliminate monopolistic entities. The society had the understanding that the monopoly profits as a growth factor cannot be destroyed. So the real task of antitrust policy is to put up the monopoly of state control, to exclude the possibility of abuse of monopoly power. Karl Marx in the middle of last century came to the conclusion that the emergence of monopolies requires government intervention. The main objective of this intervention is to protect and preserve free competition, which threaten the monopolistic tendencies. Specifically, we can formulate such goals: limiting monopolies, support and promote small business, consumer protection. There are two main forms of struggle against monopolies:
-Preventing the creation of monopolies;
-The restriction of the use of monopoly power.
Demonopolization is carried out by market liberalization. This is achieved by flexible maneuvering customs treatment (reduction of customs duties, the abolition of quotas, the elimination of other barriers to entry to the domestic market for foreign products), improving the investment climate for foreign investors, supporting small businesses, etc Einer R. Elhauge (Author), Damien Geradin (Author), Global Antitrust Law and Economics/ 2007, p. 66. The state control is important in the process of concentration of capital, financial penalties for violations of antitrust laws. As one of the tools used by antitrust policy is used a prior approval of antitrust authorities in the establishment, reorganization, liquidation, merger of companies, the acquisition of shares (stakes) in the share capital, for operations in the banking market. Prior consent is regarded as an important element of the policy of creating a competitive environment.
Chapter 2. Antitrust regulation in Russia
2. 1 The formation of antitrust policy in Russia
Antitrust policy has several key areas:
1. Stimulating entrepreneurship
2. The development of competition began
3. Organizational and legal support for antitrust policy
There are two methods of antitrust regulation: direct and indirect. The direct method of regulation includes measures eliminating or warning the monopoly position of individual actors in the market. And measures of indirect regulation include mainly financial and lending practices to prevent and overcome the monopoly in the economy Knyazeva I.V. Antitrust policy in Russia/ Tutorial, Moscow: `Omega-L', 2008, p. 102. Thus the essence of nearly any antitrust policy is to use the benefits of large-scale economic and neutralize its adverse effects associated with the weakening of competition in commodity and other markets. The specifics of Russian monopolies affected the characteristics of the legislative regulation of their activities. In capitalist countries, the monopoly came when there were already market relations, and the state in order to prevent the strangulation of competition introduced restrictive regulations. The Russian competition legislation was developed with strong monopolies and a developing market relations. Therefore, for our country, it is important not only to limit the monopoly and abuse of dominant position, to enforce the competition rules, to punish their violation, but also create a competitive environment, showing the political will. The first law relating to antitrust economics has appeared in Russia in 1991 — the law «On competition and restriction of monopolistic activity on commodity markets,» from March 22, 1991. From 1991 to 1999 a large number of objectively necessary laws was introduced, forming the organizational framework for the regulation of monopolies. For example, the law «On Privatization of State and Municipal Enterprises in the Russian Federation» of July 3, 1991, «The supply of products for federal state needs» from December 13, 1994, «On the financial-industrial groups» of 30 November 1995 ., «On natural monopolies» on August 17, 1995, «On Joint Stock Companies» dated December 26, 1995, «On Noncommercial Organizations» on January 12, 1996, «On Advertising» on July 18, 1996, «Measures to protect the economic interests of the Russian Federation in Foreign Trade «on April 14, 1998 and others, as well as legal acts of the President and the government. But in 1999, eight years after the reforms, antitrust legislation was desperately in need of improvement, mainly on the basis of generalization of enforcement. There was a need to upgrade the entire framework to make it possible to reliably prevent the abuse of market power, infringing the interests of economic entities to apply penalties to businesses and individuals, including officials of the federal and regional executive authorities and local self-government, it is better to regulate the safety and quality of goods and services. As a result of this need, the Russian government in 1999 established the Ministry for Antimonopoly Policy and Entrepreneurship (MAP). It was created on the basis of already existing at the time of the State Committee on Antimonopoly Policy, which failed to achieve tangible progress in establishing a full-fledged competitive environment.
MAP consists of several bodies — it includes the Russian Federal Service for Regulation of Natural Monopolies on Transport (FSEMT), Russian Federal Service for Regulation of Natural Monopolies in the field of communication (FSEMS), the State Committee for the Support and Development of Small Entrepreneurship (GEM), and possibly will be included Federal Energy Regulatory Commission (FEC). But despite all these measures, the level of competition in our country is clearly insufficient. Experts call the reasons for the low level of competition in the RF:
Privatization has not led, as expected, to the emergence of effective owners, who would have cared about the development of the enterprise;
Forced reorganization (restructuring) of enterprises has not been used properly, although could facilitate the mass production of new competitive businesses;
Small business has not received proper development Petrov D.A. Antitrust legislation. Theory and Practice/ `Nestor-History', 2012, p. 40.
In many countries a small business is a natural basis for the formation of a competitive environment, a testing ground for technological and economic venture projects. It has more options to maneuver money by switching from one activity to another, lower operating costs for workers above the feeling of belonging to the affairs of the company and interest in its success. Even in high-risk small businesses willing to take on the innovations that they can then pass on the reproduction of the industrial giants. As international experience shows, the higher the proportion of small enterprises in the total number of businesses and employment, the lower unemployment and higher competition. Today, however, growth in the number of these companies have slowed down, they are mainly engaged in trading and brokering.
For small businesses need affordable loans and tax benefits, the creation of leasing companies, information, consulting and training business centers, as well as the involvement of small businesses in new fields of business, international cooperation programs. While all this is wishful thinking because of the scarcity of budget, lack of political will among the authorities, opposition officials, opposed to market reforms.
Perhaps the most important of all measures of antitrust policy in Russia proved to be restrictive measures. They are prescribed by law «On Competition» and the competition authority applied to business entities that violate the antitrust laws. It bans monopolistic activity and unfair competition, the actions of government authorities, which may adversely affect the development of competition. Prohibitions on monopolistic activities are divided into prohibitions against agreements restricting competition and prohibition of abuse of the undertakings of a dominant position. Such abuses are most common (60%) violation of antitrust laws. Quite often such violations as imposing unfavorable contract conditions to the counterparty, failure to order the pricing of the companies agreed to limit competition. Monitoring the prices of more than 200 showed that over a third of companies with dominant market position, inflate the prices of goods and services. The same law prohibits set monopolistically high or monopolistically low prices, to confiscate goods from circulation in order to create or maintain a deficit or raise the price, the counterparty to impose contract terms unfavorable to him or not related to the subject of the contract, to include in the agreement discriminates against the conditions which contractor put in an unequal position compared with other enterprises, to prevent the entry of (or withdrawal from it) to other businesses, to encourage contractor refuse to sign contracts with individual buyers (customers), despite the fact that it is possible to produce or deliver the right product Alan Grinspen, Antitrust regulation/ Economic politics, № 3, 2007, p. 24. Monopolistically high price is a price set by the dominant market of the product by an economic entity (the manufacturer) to compensate for unreasonable costs due to not making full use of production capacity, and (or) make additional profits by reducing product quality. Monopolistically low price is the price of purchased goods, established by a dominant market of the product buyer in order to earn extra income, and to compensate for his account of the seller unreasonable costs. That is the price, deliberately established a dominant market of the product by the seller at a level that brings the losses from the sale in order to drive competitors from the market. The ban on the establishment of monopoly prices acts fairly stable, although there are many problems. In particular, the «Provisional guidelines on the identification of monopoly prices» on April 21, 1994 offers simultaneous use of the concept of limiting profits and market the concept of comparison. Application of the first concept is complicated by the fact that production costs should be set taking into account the fact that production capacity could be exhausted. But for a general decline in production in Russia it is impossible. It is also impossible to determine the actual cost, revenue and profitability of the enterprise under the rule of barter and unrecorded cash. Therefore, the preferred concept is the comparison of markets in which the antitrust agency does not need to check the production performance enterprise-monopolist, it is enough, based on external factors to identify monopolistically high or low prices. Now in Russia high monopoly prices are in a wide practice, and in countries with developed competition — monopolistic low, sometimes dumping. The Russian monopoly exerts its anti-competitive behavior mainly in its relations with customers or suppliers, rather than with competitors. But as the competition increases the likelihood of monopoly low prices also increases: powerful multi-company through cross-subsidization at the expense of the profitability of some sectors may understate the price of other products and thus to block competitors. In this part, it is especially necessary to monitor the financial and industrial groups. The same Russian antimonopoly legislation seeks to prohibit agreements that restrict competition, which include:
1. Agreements that prevent the entrance of other companies on the market;
2. Refusals to sign contracts with certain sellers or buyers;
3. Agreement on the division of the market on a territorial basis, or range of products sold;
4. The price agreement.
Along with restrictions on competition harmful to the conclusion of agreements and the abuse of dominant position to deal with the restriction of competition it is used for the control of economic concentration. It is the result of the creation, reorganization or merger of enterprises and associations, or when there is an opportunity for a group of organizations to conduct a coherent policy on the market. According to the law «On competition and restriction of monopolistic activity on commodity markets,» if the company reaches a certain threshold in terms of operations, it must obtain the consent of the antimonopoly authority for their actions (pre-control) or to inform him about them (follow-up).
These activities are pre-controlled:
The creation, merger and acquisition of commercial organizations, associations, unions and associations, if their assets exceed one hundred thousand minimum wage;
Elimination and separation (selection) of state and municipal unitary enterprises whose assets are more than 50 thousand minimum wages, if it leads to the company, whose share in the commodity market exceeds 35% (except in cases where the company is liquidated by a court) A. Gryaznova, A. Udanov. Microeconomics: theory and Russian practice/ `KnoRus', 2008, p. 131.
In addition, prior approval is required when:
A) The person (group of persons) acquires shares with voting rights in the charter capital of a business entity if it gets the right to dispose of more than 20% of such shares. This requirement does not apply to the founders of the economic society at its formation;
B) One enterprise (group of persons) acquires the ownership or use of the basic production funds or other intangible assets of the enterprise and the carrying value of property is the subject of the transaction exceeds 10% of book value of these funds and assets of the enterprise alienating the property;
C) A person (group of persons) acquires the rights, allowing to determine the conditions of doing business venture or as its executive body.
In these three cases, prior approval must, if the aggregate book value of assets of persons involved in transactions exceeding 100 thousand minimum wages, or one of them is the company entered in the register of economic entities, which share a particular product on the market exceeds 35%, or acquirer is a group of persons that controls the activity of the enterprise.
When creating a new entity exempt from the founders of the preliminary review, however, they must notify the competition authority to establish the company within 15 days after registration. If the creation of new firms leads to a restriction of competition, the MAP may require the founders to restore the original conditions. If they fear the negative consequences of competition for their actions, they may apply to the MAP to register and get an opinion. The Russian anti-monopoly law does not allow the action or transaction which may result in the establishment or expansion of market power by a commercial organization, if the negative effects on competition are not compensated by increasing its competitiveness in domestic and international markets. Therefore, the control does not prevent the integration of Russian businesses to compete with foreign firms.
But at the same time, often creating, consolidation, merger or liquidation of business entities and acquisition of shares often are held in violation of the antitrust laws. In general, we can say that control of the activities of the antimonopoly authority is not effective yet. It does not draw the line ministries for the competition policy in industries that do not have investigative powers (unlike, for example, the Japanese Fair Trade Commission), it is difficult to obtain the required information. The agreement between the SSC and the State Tax Service to share information and help each other is hardly satisfied. The courts do not apply the article of the Criminal Code, under which the offender is able to establish monopolistic restrictions on competition may be deprived of liberty for a term of 2 to 7 years. The article also does not work because employers are not willing to file complaints and work with law enforcement and anti-monopoly agency has no activity in filing claims for such violations. The prohibition of unfair competition is also important for competition policy. This act is aimed at the acquisition of the benefits that are contrary to law, business traditions, requirements of fairness, reasonableness and fairness, and that caused (can cause) damage to competitors or damaged their business reputation. It is about the dissemination of false, inaccurate or distorted information that could cause loss or damage, consumers are not misled about the nature, method, place of manufacture, consumer characteristics and product quality as well as the incorrect comparison of its own product with similar products of competitors. Unfair competition also includes the receipt, use, disclosure of scientific, technical, industrial, commercial information or trade secrets without the consent of the owner.
Also, of course, there is growing interest of entrepreneurs to the protection of business reputation of the enterprise and the legal protection of trademarks by their illegal use. In the anti-monopoly policy prohibitions on anticompetitive actions of governing bodies are widely used. The development of market relations presupposes the elimination of the direct intervention of public authorities in the activities of enterprises. The law prohibits enact legislation and to take actions that limit the autonomy of enterprises, it creates discriminatory or favorable conditions for some over others and thereby restrict competition, affect the interests of businesses or citizens John E., Jr. Kwoka (Editor), Lawrence J. White (Editor), The Antitrust Revolution: Economics, Competition, and Policy/ 2008, p. 74. However, the authorities of the Federation and local authorities admit the numerous violations, including unreasonable provide incentives to restrict the creation of enterprises, introducing restrictions on their activities, the sale or purchase of goods to indicate the priority of certain treaties, arbitrarily set the size of the registration fee, prevent the entry of goods and services «nonresident» of enterprises, and so on.
Such actions by the authorities have economic motives, the desire to please «their» companies, or those who promise financial support for election. Meanwhile, many laws prohibits officials of state power and administration, such as:
1. To engage in entrepreneurial activities, to own the company;
2. Individually or through their representatives to vote their shares at general meetings of shareholders;
3. To combine the functions of executive bodies and local self-government functions of economic entities, as well as to provide them with the functions and powers of these bodies. Also it is not allowed to create ministries, state committees, etc. to monopolize the production or sale of goods, as well as to empower existing agencies the authority, able to limit competition. Therefore, the decision of the executive power and local self-government on the establishment, reorganization and liquidation of enterprises and provision of benefits should be consistent with the antitrust authority. Besides the already mentioned actions in the policy of Russia the registry is widely used as a tool of antitrust control. As a result of the analysis of the commodity market and the proportion of businesses on it (more or less than 35%) are included or excluded from the state registry. MAP does this when it comes to the Russian market as a whole, or its territorial control in the case of regional markets. Registry is made to have the information base on the largest subjects of the market and monitor the implementation of antitrust laws. The registry must enter the enterprise, which is the only manufacturers in Russia, certain types of products. It includes, for example, Bryansk Machine Building Plant (wagons isothermal), «Kalugaputmash» (rail welding machines, cranes laying) and so on. Number of entries in the register of enterprises depends on the boundaries of the commodity market, which is determined by their share. The more details the range of products, the more businesses can be included in the registry. Antitrust authorities identify companies with a significant share in the production of the most important for the economy and social structure-relevant products. But the introduction of the company in the register is not to say that it is a monopoly and should be applied restrictive measures — say, at a price, because the very presence of large enterprises does not mean that they are abusing their dominant position. Moreover, their monopolistic activity is impossible if the market has limited purchasing power or resources for further development.
2. 2 The system of state regulation and antitrust law
antitrust policy monopoly legal
Russia has not escaped the negative impact of industries — natural monopoly in the market. In the Russian industry at the moment there are four thousand enterprises-monopolists and their products account for 7% of the total Christopher L. Sagers, Examples & Explanations: Antitrust/ 2011, p. 48. Of these there are 500 natural monopolies. Examples of natural monopolies in Russia are first of all, RAO «UES of Russia», «Gazprom» and the Ministry of Railways. Their fate is very sharp and of the critical discussion.
With the general decline of production in Russia, the demand for products and services industries — natural monopoly, except for the communications industry, is constantly decreasing. These industries are extremely capital intensive, a large portion of their costs is ongoing. As a result the proportion of fixed costs in the price per unit of output is growing. In addition, until recently, natural monopolies were financed by investments largely from domestic sources (investment and stabilization funds generated through cost and profit), which determined an excessive burden on the rates. In 1993−1996 years sectoral prices of Russian natural monopolies have grown more rapidly than in other sectors of the economy. They approached the level of the world, and in some cases (e.g., international phone rates) have surpassed them. Consumers began to exert pressure on the government making the request until the price freeze. Rapid and significant price increase in electricity, gas, communications industries and railway transport has led to the need for raising the question of reasonableness of costs (the costs of salaries, social benefits, investment banking) and the line quality products and services offered by the price level. In all branches that contain the natural monopoly segments, wages higher than the average for the economy and their employees enjoy greater social benefits than other industries. But for all the obvious problem of the criticality of the situation the need for state regulation of natural monopolies has been realized only in 1994, when prices for their products has had a significant impact on undermining the economy. At the same reformist wing of the government began to pay more attention to the problems of regulation of natural monopolies is not so much by the need to halt the rise in prices in the relevant field or provide opportunities to use the price mechanism for macroeconomic policy, but primarily trying to limit the range of regulated prices. The first draft of the Law «On natural monopolies» was prepared by staff of the Russian Center for the privatization of the Russian Federation on behalf of GKAP at the beginning of 1994 after this project had been crafted by Russian and foreign experts, and consistent with the sectoral ministries and companies (Ministry of Communications, Ministry of Railways, Ministry of Transport, Ministry of Atomic Energy, Minnats, RAO «Gazprom», RAO «UES of Russia», etc.). Many of the sectoral ministries were against the project, the Ministry of Economy and GKAP but managed to overcome their resistance. Already in August, the government sent agreed by all concerned ministries draft law in the State Duma. Only in April, the State Duma adopted the law, and it was sent to the President. In May, President, citing the presence of a conflict with the law, vetoed the law in the new version and returned it to the State Duma. In June and July working the conciliation commission of the State Duma and the presidential administration. After that, the State Duma adopted almost without debate in the new edition of Law and 17 August the President signed the Act. This is made possible by the wide summer campaign, which launched the media against abuses permitted by natural monopolies. Particular attention was paid to the financial performance of the gas industry, the ability to improve the state budget by increasing taxes RAO «Gazprom» and the abolition of privileges on the formation of extra-budgetary funds, etc. According to the Law «On natural monopolies», the scope of regulation includes the transportation of crude oil and petroleum products through pipelines, transporting gas through pipelines, transmission services of electricity and thermal energy, rail transport, services, transportation terminals, ports and airports, public services and postal services. The main methods of control were:
— Price regulation, that is the direct determination of prices (tariffs), or the appointment of their maximum level;
— Definition of compulsory service for consumers and / or setting a minimum level of security A. Gryaznova, A. Udanov, Microeconomics. Practical approach/ `KnoRus', 2011, p. 82.
Regulators also charged with the duty to monitor the various activities of natural monopolies, including the acquisition of property rights, large investment projects, selling and renting property. Foreign regulatory experience shows that the main thing in this business is the maximum independence of regulatory bodies such as other government and from business entities controlled by them, as well as coordination of interests and areas of regulatory agencies that will provide them the opportunity to take politically unpopular decisions. In the original draft law it was suggested that regulators will have a high degree of independence: members of their boards, appointed for an extended period of time could not be fired for any reason, except by court order, provided for a ban on the combination of board members, the ownership of shares controlled companies, etc. However, in the final version many progressive provisions, taken from long-term management practices in foreign countries, were either relaxed or removed, which calls into question the ability of decision-making, are sufficiently protected from the influence of various political forces. By 1995, only one was formed by a system of regulatory bodies, which operated outside of the line ministries. This is a federal and regional energy commission, created in 1992 to regulate the tariffs for electricity and heat energy. Control of other natural monopolies was done by the relevant ministries (Ministry of Economy, Ministry of Energy, Ministry of Railways, Ministry of Communications). Nevertheless, even in power area until 1995 were not recorded legal basis for regulation. State control over economic activities of natural monopolies has been significantly weakened due to the conversion of many enterprises into joint stock companies, which were dominated by sectoral interests K.A. Pisenko, I.A. Tsindeliani, B. G. Badmaev, Legal regulation of competition and monopoly in the Russian Federation/ `Statut', 2010, p. 56. At the same time the federal government, keeping majority stakes in their hands, not actively involved in the mechanism of corporate and corporate governance. By January 1996 three presidential decree on the establishment of public services on regulation of natural monopolies in the energy industry, communications and transport were adopted. In March and April government decree on the establishment of regulatory bodies were issued, in particular, was determined by the size of their staff. However, at the end of May head of only one service was appointed — the Federal Energy Regulatory Commission. Appointment to the post of Deputy Minister of Fuel and Energy is a compromise with the government-controlled entities. In the first half of 1996 in the sectors — natural monopolies (electricity, gas industry, pipeline transport, railway transport and communications sector), the rise in prices has slowed somewhat compared to previous years of reform.
This was largely due to the populist policies of the presidential election, as evidenced by a growing problem of non-payment in connection with the adoption of the government decree prohibiting the disconnection of consumers of energy to the middle of May 1996 addition, under pressure from the IMF Government decision on March 21, 1996 were eliminated off-budget funds in the fields of Energy and from April 1 — a stabilization fund of RAO «Gazprom», thus «Gazprom» was deprived of the basic tax relief. However, after the election has taken some tough measures were taken in order to limit the rise in prices of natural monopolies. Since the Presidential Decree of 17 October 1996 the price of electricity, supplied to the wholesale market have been reduced by 10% by Government on April 3, 1997 from the cost of energy were excluded trust funds. Already it was clear that the formation of regulatory authorities would not only long but also painful.
Ministry does not want to give the appropriate authority. There is an acute problem of funding, it is difficult to attract qualified employees as salaries of civil servants is much lower wages in the same level in regulated companies.
Many of the best industry specialists who could perform such work, hold high positions in organizations that need to be regulated. Therefore, by far the most acute problems of staffing, development of specific management techniques, improving the information base that allows informed decisions. Thus, in the area of legislative and institutional framework for regulation of natural monopolies there have been some important and necessary steps, but much remains to be done both in terms of building an effective system of regulation and the terms of the restructuring of industries, thus allowing a more compact and manageable scope regulation.
As for the direction of antitrust policy in Russia in the coming years, in December 2001 at a meeting of the Russian Federation Government approved the concept of medium-term government program for 2002−2007. «Structural Change and Economic Growth.» It contains a special section on antitrust policy. Antitrust policy in the medium term will be implemented in the following areas:Показать Свернуть