Enactment of the New Antimonopoly Enactment of the New Antimonopoly Law in Russia (2006): Law in Russia (2006): Firms- - Legislator Strategic I nteraction? Legislator Strategic I nteraction? Firms Svetlana Avdasheva, Higher School of Svetlana Avdasheva, Higher School of Economics, Economics, Andrei Shastitko, Moscow State Univeristy Andrei Shastitko, Moscow State Univeristy ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
New law “On protection of New law “On protection of competition” in Russia (2006) competition” in Russia (2006) � Previously in force: Previously in force: � – Law “On competition and restriction of Law “On competition and restriction of – monopolistic activities in commodity markets” monopolistic activities in commodity markets” (1991) (1991) – Law “On protection of competition in the Law “On protection of competition in the – markets for financial services” (1999) markets for financial services” (1999) � Were criticized as a sources of relatively low Were criticized as a sources of relatively low � efficiency of Russian antitrust policy efficiency of Russian antitrust policy � Now are replaced by the law “On protection Now are replaced by the law “On protection � of competition” of competition” ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
Objective (s) of the paper Objective (s) of the paper � To explain the specificity of firms To explain the specificity of firms- -legislator legislator � strategic interactions within the weak strategic interactions within the weak institutional environment on the example of institutional environment on the example of the new Russian law “On protection of the new Russian law “On protection of competition” enactment competition” enactment � To discover the main source of threats for To discover the main source of threats for � the future development of antitrust law in the future development of antitrust law in Russia: is that big business or legislator? Russia: is that big business or legislator? � To assess the results of firms To assess the results of firms- -legislator legislator � strategic interaction in the specific context strategic interaction in the specific context ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
Plan of the paper Plan of the paper Antitrust legislation in Russia: main points of criticism Antitrust legislation in Russia: main points of criticism 1. 1. Context of the enactment of the new antimonopoly Context of the enactment of the new antimonopoly 2. 2. law law Changes in the legal rules: role of strategic interaction Changes in the legal rules: role of strategic interaction 3. 3. and threats for future antitrust policy on the example and threats for future antitrust policy on the example of of � � General features of legal rules in the new law General features of legal rules in the new law � � Rules on collusion, concerted practice and Rules on collusion, concerted practice and collective dominance collective dominance � � Rules on dominance Rules on dominance � � Rules on economic concentration control Rules on economic concentration control � � Rules on sanctions and penalties Rules on sanctions and penalties Conclusions Conclusions 4. 4. ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
Antitrust legislation in Russia: main Antitrust legislation in Russia: main points of criticism points of criticism � It is impossible to impose penalties It is impossible to impose penalties � sufficient to make illegal behavior sufficient to make illegal behavior unprofitable unprofitable � The reasons to defend restrictions of The reasons to defend restrictions of � competition are too broad (positive- -socio socio- - competition are too broad (positive economic effect) economic effect) � There is excessive ex There is excessive ex- -ante control of ante control of � mergers mergers � The activity of antitrust authority is shifted The activity of antitrust authority is shifted � towards ex- -ante control of mergers ante control of mergers towards ex ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
Political environment of the new Political environment of the new law enactment law enactment � On the one hand: On the one hand: � – Criticism towards legal base of antitrust Criticism towards legal base of antitrust – regulation in Russia during last decade regulation in Russia during last decade – New Russian antitrust authority Federal New Russian antitrust authority Federal – Antimonopoly Service Antimonopoly Service – Increasing efforts to improve the reputation of Increasing efforts to improve the reputation of – antitrust policy antitrust policy � On the other hand: On the other hand: � – Growing skepticism towards competition and the Growing skepticism towards competition and the – role of antitrust in Russia (actual and potential) role of antitrust in Russia (actual and potential) ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
I nstitutional environment of the I nstitutional environment of the new law enactment new law enactment � Passive role of courts and excessive requirements Passive role of courts and excessive requirements to antitrust legislation: to antitrust legislation: – To prove illegal actions it is necessary to have the precise – To prove illegal actions it is necessary to have the precise description in the law description in the law – Empirical evidence is hardly acceptable (if it is acceptable – Empirical evidence is hardly acceptable (if it is acceptable at all) at all) � Many norms presented in the law are not applicable Many norms presented in the law are not applicable at all: at all: – Norms on criminal penalties on violator of antitrust rules – Norms on criminal penalties on violator of antitrust rules – Norms on civil suits on violator of antitrust rules – Norms on civil suits on violator of antitrust rules � Extensive discussions on the content of the new Extensive discussions on the content of the new law. Legislator and antitrust authorities tried to law. Legislator and antitrust authorities tried to react strategically on the strategic behavior of react strategically on the strategic behavior of business… but with what success? business… but with what success? ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
Strategic interaction of legislator Strategic interaction of legislator and antitrust authority: general and antitrust authority: general design of antitrust rules design of antitrust rules � Legislator: attempts to transplant rules from European Legislator: attempts to transplant rules from European (EC and German) antitrust legislation (EC and German) antitrust legislation � Business: requirement to precise rules (motivation: in Business: requirement to precise rules (motivation: in order to exclude discretion of antitrust authority); order to exclude discretion of antitrust authority); attempts to exclude network industries from the attempts to exclude network industries from the authority of antitrust legislation authority of antitrust legislation � Outcome: Outcome: – Tendency to give “complete description” of the evidence of the Tendency to give “complete description” of the evidence of the – infringements infringements – Eventually gives the way to type I and type II errors in Eventually gives the way to type I and type II errors in – antitrust legislation enforcement antitrust legislation enforcement – There is no – There is no sectoral sectoral exemptions in the law, but special exemptions in the law, but special exemptions are possible due to special Decrees of Russian exemptions are possible due to special Decrees of Russian Government Government – Institutional environment to enforce antitrust rules is still we Institutional environment to enforce antitrust rules is still weak ak – ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
Strategic interaction of legislator and Strategic interaction of legislator and antitrust authority: rules on collusion, antitrust authority: rules on collusion, concerted practice and collective concerted practice and collective dominance dominance Legislator: Legislator: � Concerted practice is not a collusion Concerted practice is not a collusion � Introduction of a doctrine on collective dominance Introduction of a doctrine on collective dominance � Prohibition of coordination Prohibition of coordination Firms: Firms: � Very negative reaction but there is no alternative Very negative reaction but there is no alternative suggestions suggestions Outcome: rules on concerted practice, collusion and Outcome: rules on concerted practice, collusion and collective dominance remain almost the same collective dominance remain almost the same during the process of discussions during the process of discussions ACLE Strategic Firm-Authority Interaction March ACLE Strategic Firm Authority Interaction March 16, 2007 16, 2007
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