Anti-competitive agreements and actions
ANTI-COMPETITIVE AGREEMENTS AND ACTIONS
The Entrepreneur Code of the Republic of Kazakhstan contains many provisions that could restrict any competition in doing business. In our legal insight, we would like to outline main rules that could save and avoid significant charges from the state authorities.
Written form of the anti-competitive agreements
Any contracts, documents, or letters with aim to divide market or territory of products or services could be considered as a violation of competition law. Competition law prohibits any form of restrictions for business. We recommend to check contracts, agreements with any elements of the market territory. For example, a large food retail chain A made the contract with meat supplier B, that states supplier B must work only with food retail A. This will be a violation of competition law. Presumptions of agreed actions In Kazakhstan competition protection authorities could use presumption of agreed actions even if there are no any written evidences. Kazakhstan’s legislation allows state authorities and courts to recognize the existence of oral anti-competitive agreements, even if there are no written agreements in fact. Courts and state authorities will consider that anti-competition agreement was concluded orally. In Kazakhstan the practice has developed mostly for the benefits of the state authorities. For example, Kazakhstan authorities impose penalties on petrol stations with grounds that petrol stations sell petrol with price higher than average market price. Kazakhstan courts and authorities apply penalties from turnover and received income, which is quite huge. Business activity coordination Kazakhstan’s legislation envisages the concept of Business activity coordination. This concept implies that a third legal entity undertakes coordination or performs different actions that restrict competition market. For example, a beverage manufacturer Company A gave different instructions for its subsidiary trading Company B. Company A instructed Company B to make an agreement with only one distributor in each region. Company A was recognized as the coordinator under business activity coordination concept. Violation of competition law The Kazakhstan Administrative Breaches Code establishes different penalties for competition law violations. These could be: 1. Administrative fine calculated as 3% to 5% of the income received under the anti-competitive actions, agreements; 2. Court decision to expropriate all income received under the anti-competitive actions, agreements; 3. Administrative fine from 1 000 US dollars up to 7 000 US dollars. Historical period for imposing penalties Kazakhstan Entrepreneur Code allows for the court or Kazakhstan authorities to track and fix breaches for the last five years. The state bodies can start inspection over the past five years and submit any claims based on inspection’s results. Negligence by state bodies for imposing penalties In practice, there are different approaches for imposing penalties. Sometimes courts and state bodies impose penalty on the basis of percentage from income which fully corresponds with the Kazakhstan Administrative Breaches Code. However sometimes state bodies impose penalties as a whole received income without taxes, which do not correspond to the law. Our recommendations Since the legislation provides major penalties for anti-competitive agreements anti-competitive actions, we recommend to check any contracts or business models or business development for compliance with the Entrepreneur Code and competition law. This legal insight was prepared by Synergy Partners lawyers: Mr. Nurzhan Stamkulov, Mr. Ali Dautalinov, Mrs. Anar Dautalinova.