As part of comprehensive change in the Belarusian legal sphere, a new edition of the country’s “On Contradiction of Monopolistic Activity and Development of Competition” law (the “Competition Law”) entered into force on August 3, 2018. The Competition Law sets out new rules designed to ensure conditions for fair competition and to create new markets and enable their development apply to Belarusian and foreign companies doing business in Belarus.
What are the most significant changes and opportunities companies should be aware of?
Extended Definition of Economic Concentration and Criteria for Obtaining a Permit
Earlier, Belarusian legislation stipulated a limited number of cases when the prior approval of the Ministry of Antimonopoly Regulation and Trade of the Republic of Belarus (MART) was required (primarily matters regarding share and stock transactions, mergers and acquisitions, the founding of companies in certain cases, and the registration of holding companies). This approach, however, failed to correspond to foreign practice and contradicted the regulations of many other jurisdictions.
Under the Competition Law the rules for merger clearance (where the relevant threshold criteria have been exceeded) have been amended relating to: (1) the acquisition of property located in Belarus which is related to main assets and/or intangible assets valued at more than 20 percent of the book value of all main assets and intangible assets of the company which owns them; (2) the acquisition of the right to give mandatory directions to companies and individual entrepreneurs (for instance when a trust agreement regarding majority of voting shares is concluded); (3) partnership agreements between companies or individual entrepreneurs which are competitors in Belarus; and (4) the acquisition of the right to discharge the office of an executive body of a company (for example, hiring a management company instead of appointing a director).
We focus on another change, which has the most significant impact on business: the increase in the threshold criteria for deals recognized as economic concentration. These criteria have been doubled as follows: 1) the book value of assets and 2) the volume of proceeds from sales (following the result of the preceding year), from USD 1 million and USD 2 million to USD 2 million and USD 4 million, respectively. In practice, this means a reduction in the number of corporate deals subject to prior approval from MART, as under the previous legislation relatively small companies which had a small market share were also obliged to fulfill formal requirements and meet the lower threshold criteria.
Agreements Restricting Competition and Concerted Actions
Agreements between competitors (cartels) regardless of their impact on competition is now prohibited if these agreements can result in setting, maintaining, increasing, or reducing prices, dividing the commodity market, reducing and terminating the production of goods, or one or more parties to the agreement refusing to (at its/their own discretion, not under the law) enter into contracts with certain sellers and consumers.
The legal regulations regarding vertical agreements have also changed. Currently vertical agreements which can result in the setting of resale prices (with the exception of the maximum resale price) and prohibiting buyers from selling goods of competitors (with the exception of trading under a certain means of individualization of the seller) are forbidden. This prohibition does not apply to permissible vertical agreements. Other innovations in the Competition Law include an increase in the level of permissibility to 20 percent (from 15 percent) and the right of an interested party to provide evidence of permissibility to MART if the party disagrees with the decision of the authority.
Simplifying the Fight Against Unfair Competitors
New restrictions and bans on unfair competition have been introduced, such as the use of specific comparisons to competitors and their products (including the words “best,” “first,” “most,” and “only”), which is forbidden unless those terms can be confirmed, the unlawful receipt, use, and disclosure of information which is a commercial, official, or other legally-protected secret, and the imitation of competitors’ corporate style or other elements individualizing products.
The Competition Law introduces many other progressive and significant norms, such as stricter control over procurement, the conception of the “monopsony,” the limitation period of actions for violations, new powers of MART, and so on. In general, we may state that the Competition Law conforms with international regulations and is more oriented to real business practices.
By Natalia Anoshka, Partner, Peterka & Partners Belarus
This Article was originally published in Issue 5.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.