Further development of the competition legislation in Kazakhstan

Aigoul Kenjebayeva and Akylbek Kussainov of Dentons in Almaty look at development of competition legislation in Kazakhstan

On 7 May 2015, amendments to certain legislative acts to improve Kazakhstan’s legislation on natural monopolies and regulated markets, competition and development of the transport infrastructure were published. The Law of the Republic of Kazakhstan “On Amendments to Certain Legislative Acts of the RK Related to Natural Monopolies and the Regulated Market” will become effective upon the expiry of 10 calendar days following the official publication thereof (the “Amendments”). It substantially amends the RK Law “On Competition” (the “Law”). Please find below our summary of the most significant amendments.

1. Economic Concentration

a. An increase in threshold values at which the consent of the antimonopoly body is required

In accordance with the Law, the acquisition by a person (group of persons) of more than twenty-five percent of voting shares (participatory interests in the charter capital, stocks) of a market participant, if, prior to such acquisition, such person (group of persons) did not manage shares (participatory interests in the charter capital, stocks) of such market participant or managed twenty-five percent or less of voting shares (participatory interests in the charter capital, stocks) of such market participant, is deemed to be economic concentration and requires the prior written consent of the antimonopoly body.

The Amendments increase the value of voting shares (participatory interests in the charter capital, stocks), the acquisition of which requires the consent of the antimonopoly body.

b. Creation of a legal entity

The Law contains an exhaustive list of transactions that are regarded as economic concentration and require the prior consent of the antimonopoly body. This list does not provide expressly for the creation of a market entity.

However, in practice, the receipt by a market participant of more than twenty-five percent interest in the established legal entity was treated by the antimonopoly body as an economic concentration, upon reaching the established threshold. The antimonopoly body asserted that a person acquired shares (participatory interest, stocks) through the creation of a legal entity.

The Amendments have clarified this issue. Pursuant to the Law, the above requirements do not apply to the founders of a legal entity being established. In other words, the creation of a legal entity is not deemed to be an economic concentration.

c. Timeframe for consideration of applications

The substantial decrease was made as to the period of consideration by the antimonopoly body of applications for obtaining consent to economic concentration. Previously, the timeframe for consideration of applications on merits was not to exceed fifty calendar days. Now it should not exceed thirty calendar days.

2. Introduction of new concepts

In the modern market conditions, many large companies agree among them the most important aspects of the market policy, especially the pricing policy, limitation of production volumes, market sharing. The most important tool of such regulation is cartel agreements. However, such agreements constitute the typical form of monopoly and contradict the basic principles of the antimonopoly legislation.

Due to the rapid development of the market relations, cartel agreements are now regulated in Kazakhstan as well. According to the Law, a cartel means “anticompetitive agreements or concerted actions between market participants who are either competitors or potential competitors at the same product market…”

Please note that investigations in respect of market participants, the actions of which show the elements of a cartel agreement, are conducted with certain specifics.

3. Broadened competence of the antimonopoly body

The competence of the antimonopoly body has been significantly broadened, in particular, with respect to the following:

The possibility to apply to the law-enforcement bodies seeking special investigation activities.

The delivery of warnings on the inadmissibility of actions which may lead to the violation of the antimonopoly legislation.

The approval of a list of goods (works, services) of the regulated market participants that are subject to the state pricing regulation.

The establishment of time periods for submission of information, explanations on the facts of committed violations (including time periods at investigation), which may not be less than five business days.

The possibility of antimonopoly officials inspecting a territory, premises (excluding dwelling), documents and items of the object of investigation.

Other rights.

4. Investigation in case of abuse of a dominant or monopoly position

In the course of investigations to reveal offenses specified in Article 13 of the Law (abuse of a dominant or monopoly position), the antimonopoly body has the right to, by analyzing product markets, determine a dominant or monopoly position of market entities against which an application (complaint) is filed.

In doing so, the measures of the antimonopoly regulation in respect of a certain market entity are now applied also for the period of its actual domination.

5. Introduction of the violation prevention institute

Now, in order to prevent violation of the antimonopoly legislation, the antimonopoly body may send a written warning to an official of a market entity on the inadmissibility of actions which may lead to the warning of the antimonopoly legislation.

The grounds for such warning may include the public statement of an official of a market entity or any State authority or local executive body on the intended conduct at the product market, if such conduct may result in the violation of the antimonopoly legislation and, at the same time, there are no grounds for investigation.

The Law also establishes the warning delivery procedure and contents.

6. Other amendments

Other substantial amendments relate to the administrative liability for the violation of the antimonopoly legislation (Article 159 of the RK Code of Administrative Offences). Previously, market entities were exempted from confiscation of their property if they assisted the antimonopoly body in revealing and investigating violations of the antimonopoly legislation (Article 76 of the Law). Now, the administrative liability of market entities assisting the antimonopoly body is also mitigated. Such entities are now exempted from the administrative liability as a whole (payment of administrative fines, confiscation of monopoly revenues).

Originally published on www.dentons.com

Aigoul Kenjebayeva
Partner
Dentons
Almaty

Akylbek Kussainov
Associate
Dentons
Almaty