GILS Antitrust law: Russia

RUSSIA

1. Is the mandatory merger control regime in force in Russia?

Yes. State control over economic concentration, official anti-monopoly guarantees, is one of the forms of state control over the economic sphere of business entities.

2. Which authority is responsible for the merger control regime in Russia?

State anti monopoly control over economic concentration in the Russian Federation is carried out by a specially authorised federal executive body - the Federal Antimonopoly Service (FAS).

3. What is the definition of concentration?

Market (economic) concentration is understood as the concentration of economically significant features or characteristics in the hands of a certain number of economic entities (units or information carriers). 

It can be defined as a characteristic of the state of the product market or an indicator of the state of the market.

4. Is pre-merger filing or post-merger filing required?

FAS consent to economic concentration must be obtained before taking actions on economic concentration.

There is also an option when it can be done with a suspensive condition, which will be obtaining the consent of the antimonopoly authority. For example, if we are talking about the acquisition of shares in a Russian company, the parties may enter into a purchase and sale agreement subject to the approval of the transaction by the FAS. And only upon receipt of such consent will the parties be able to transfer ownership of the shares from the seller to the acquirer.

5. Examples of key concentration types caught by merger control rules in Russia.

In the list of transactions subject to approval, the Federal Law "On Protection of Competition" established the following:

1. Creation and reorganisation of commercial organisations.

Except for cases when payment for the authorised capital is made in money (clause 1.1 of the FAS clarification No. 19 dated 11.06.2021 "On peculiarities of state antimonopoly control over economic concentration").

2. Conclusion of joint activity agreements.

Such agreements are characterised by the following features: the parties pool resources or make mutual investments; the parties bear joint risks in their activities; information about joint activities is public, for example, the parties often issue press releases about it.

3. Transactions with shares, stakes and property of commercial organisations.

А. If transactions involving the acquisition of shares or stakes in commercial organisations exceed the following thresholds: more than 25, 50 or 75% of voting shares in a joint stock company; more than 1/3, 50% or 2/3 of shares in a limited liability company.

That is, it is more important not how many shares or stakes are acquired, but how many shares or stakes the acquirer will dispose of after the transaction. For example, a shareholder with 49% of shares buys an additional 2% of shares in the company and at the same time receives rights to dispose of more than 50% of shares - such a transaction will be subject to approval.

B. If a person obtains ownership, use or possession of fixed production assets (except for land plots and real estate objects with no industrial purpose) or intangible assets of another person, if the book value of the subject of the transaction exceeds 20% of the book value of the seller's fixed production assets and intangible assets.

C. If a person acquires rights that allow to determine the terms of the business entity's business activities or to exercise the functions of its executive body. Most often these are transactions between foreign companies abroad resulting in the establishment of indirect control over a Russian company.

As follows from the FAS clarification dated June 11, 2021 No. 19, the following are subject to approval: 

• transactions of purchase and sale of shares or shares in companies;
• creation and reorganisation of companies;
• conclusion of agreements on joint activities;
• transfer of rights to shares or shares without completing a transaction, for example, redistribution of voting rights due to the withdrawal of a participant, inheritance;
• transfer of shares, interests in trust management, investment funds, as collateral.

6. What are the notification thresholds, which a concentration must trigger for a merger control filing to be required?

Pursuant to Articles 27-28 of the Law on Protection of Competition, the threshold values in respect of the value of assets and the amount of proceeds of the parties to a transaction or other action, in case of exceeding which the transaction or other action may be subject to antimonopoly control, are equal to:

• the total value of assets of commercial organisations participating in the merger or consolidation (and participants of their groups of persons), according to the latest balance sheets, exceeds RUB 7 billion, or
• the total proceeds of these entities from the sale of goods for the calendar year preceding the year of merger (consolidation) exceeds RUR 10 billion.
• the value of the economic entity's assets is more than RUB 800 million;
• the transaction price exceeds RUR 7 billion.

Similar thresholds for the value of assets or revenue are set for the conclusion of a merger between business entities-competitors entering into a joint activity agreement on the territory of the Russian Federation

Establishment by a commercial organisation will require the prior consent of the antimonopoly authority in the following cases:

- the authorised capital of a commercial organisation being created is paid for by shares (shares) or property (fixed assets or intangible assets, but not cash) of another commercial organisation;

- the created commercial organisation acquires certain rights in relation to the shares (shares) or property transferred to it, provided for in Article 28 of the Law on Protection of Competition.

If transactions on acquisition of shares, stakes of commercial organisations exceed the following thresholds:

• more than 25, 50 or 75% of the voting shares of a joint stock company;
• more than 1/3, 50% or 2/3 of shares of a limited liability company.

7. Does the authority have any discretion to review transactions that do not meet the notification thresholds?

Such a discretion is not expressly provided for. Nevertheless, if the transaction, in FAS's opinion, affects the state of competition in a commodity market, FAS may initiate an inspection.

8. Do the merger control rules apply to foreign-to-foreign transactions taking place outside Russia?

Yes, if a person acquires rights that allow him or her to determine the conditions under which a business entity carries out entrepreneurial activity or to exercise the functions of its executive body. Most often these are transactions between foreign companies abroad resulting in the establishment of indirect control over a Russian company.

9. Are there specific merger control rules relating to the notification thresholds (e.g., specific merger control notification thresholds for specific sectors; different rules to calculate turnover for specific industry sectors such as banks and insurances or retail, specific rules relating to foreign subsidies, companies, etc.)?

Yes. For example, if the object of economic concentration is a financial organisation, the special rules set out in parag. 3, 5-7 part. 1 of Art. 27 and Art. 29 of the Law on Protection of Competition are applied. 

When shares of a financial organisation are acquired, the only financial criterion is the value of assets according to the latest balance sheet of the UEC. Taking into account the existing regulations, a transaction with shares (stakes) of a financial organisation will require obtaining the consent of the antimonopoly authority if the value of the UEC's assets exceeds:

• RUB 31 bln. - in relation to credit organisations;
• RUB 3 bln. - in respect of microfinance organisations;
• RUB 2 bln. - in respect of non-state pension funds;
• RUB 1 bln. - in respect of trade organisers;
• RUB 500 mln. - in relation to mutual insurance companies and credit consumer cooperatives;
• RUB 200 million — in respect of insurance organisations (with the exception of medical insurance organisations), insurance brokers, professional securities market participants, clearing organisations, investment fund management companies, mutual fund management companies, non-governmental pension fund management companies, specialised investment fund depositories, specialised mutual fund depositories, specialised non-governmental depositories pension funds, pawnshops;
• 100 million rubles. - in respect of insurance medical organisations. 

10. Whether Russia requires the payment of filing fees and if yes, when?

For making decisions on the implementation of transactions, other actions, subject to state control, a state duty is paid in the amount and manner established by the Tax Code of the Russian Federation. 

The amount is RUB 35 000 rubles in accordance with paragraph 89, paragraph 1 of Art. 333.33 Tax Code of the Russian Federation.

11. Whether there is a filing deadline in Russia requiring a notification to be filed within a certain period of time following a particular transactional event (e.g., signing a share and purchase agreement)?

There is no such deadline. FAS consent must be obtained before the transaction is completed. Typically, in practice, documents are submitted to the FAS two months before the transaction itself in order to allow time for consideration of the application and possible additional requests from the antimonopoly authority.

The FAS consent to the transaction is valid for 1 year. If it has expired, consent must be obtained again.

12. What information and documents must be disclosed or provided to the authority for the purposes of merger clearance? 

To get consent, you must first gather the necessary documents. Among them:

• the application for the transaction itself;
• notarized copies of the constituent documents of the applicant-legal entity or the passport of the applicant-physical entity;
• notarized copies of constituent documents of the object of economic concentration (EC);
• information on the applicant's activities;
• data on the applicant's products.

In total, the list contains more than 20 mandatory documents. All of them are listed in Part 5 of Article 32 of the Law "On Protection of Competition".

13. What are the time periods within which the authority must reach a decision on the merger clearance? Is any fast track or simplified procedures available? 

As a general rule, the FAS reviews documents within a month. By law, the service can make two types of decisions:

• final - whether a deal can or cannot be concluded;
• intermediate - the final decision is postponed in order to request additional information. 

The antimonopoly authority may extend the review for two months. And if we take into account the period of preparation of documents (also about a month), then the whole process can take at least four months.

It should be taken into account that the antimonopoly authority may refuse to approve the transaction or approve the transaction with the order. Then the applicant will have to take into account the requirements when completing a transaction and subsequently conducting business.

14. What are the penalties which the authorities may impose for "failure to file" or "late notification"?

Failure to timely submit an application for FAS consent to economic concentration may be considered as carrying out such concentration without the appropriate permit. Responsibility:

• fine from RUB 300 000 to 500 000. according to Art. 19.8 of the Code of Administrative Offences of the Russian Federation on failure to submit documents to the antimonopoly authority;
• claim by the FAS to declare the transaction invalid;
• reorganisation or liquidation (if the creation of a new company or a reorganisation already carried out has not been approved).

15. Have there been any recent developments regarding the merger control regime in Russia?

From 01.09.2023, if, following a review of an application, the FAS provisionally decides that the transaction will restrict competition, the regulator will send the parties an opinion on the circumstances. This is a new mechanism. The document will specify the conditions under which competition can be ensured. Companies can familiarise themselves with the FAS conclusions and prepare explanations. In other words, firms have the right to prepare objections even before the final decision is made in order to influence the regulator's final decision.

Author: Vladislava Novokreshchenova