Cartels and Bid Rigging: Detection, Evidence and Liability in Russia

1) What evidence do antitrust authorities use to prove a cartel if there is no written agreement?

Antitrust authorities, when establishing the existence of a cartel, typically rely on a combination of indirect evidence. Such evidence may include correspondence, document exchanges, matching IP addresses and files, shared contacts or financial links, as well as synchronized and otherwise atypical conduct by the participants in the tender process.

They also assess whether the participants had a common coordinated strategy aimed at restricting competition. In this regard, the absence of a signed agreement does not, in itself, preclude a finding that a cartel existed. Particular weight is given to digital traces and behavioral patterns that cannot be reasonably explained by ordinary commercial activity.

2) How do competition authorities detect bid rigging in public and private tenders?

Antitrust authorities detect collusion in tenders based on a combination of indicators: they analyze the participants’ conduct, compare the submitted bids, and check for совпadения in prices, IP addresses, files, contacts, and business relationships. In addition, the FAS reviews correspondence, minutes, audit materials, and other digital traces that may indicate coordinated behavior rather than independent competition.

In public procurement and private bidding, particular significance is attached to repeated wins by the same parties, the formal participation of “cover” companies, minimal price reductions, and other atypical patterns of conduct.

3) Which types of information exchange between competitors may constitute an antitrust violation?

Information exchange between competitors is not, in and of itself, unlawful; however, it may give rise to antitrust risks if it concerns commercially sensitive information and affects the independent conduct of market participants. The greatest risk arises where the parties coordinate prices and pricing terms, allocate markets, agree to avoid dealing with certain counterparties, or coordinate production volumes.

Risk also attaches to the exchange of data that enables a competitor’s behavior to be predicted in advance, such as planned discounts, tariffs, product assortment, sales territories, customer base, quotas, investment plans, and the launch of new projects. If such information is used to develop a common market strategy, the antitrust authority may treat this as coordinated conduct or an anti-competitive agreement.

In other words, what matters is not only the fact of information transfer, but also whether it facilitates coordination among competitors and weakens competition.

4) What types of interactions with competitors are permissible under antitrust laws, and where is the line drawn between legitimate cooperation and unlawful coordination of competitive conduct?

Any interactions between competitors that violate antitrust laws and restrict, or may restrict, competition are prohibited. However, competing businesses can interact to achieve common industry goals (e.g., discussing industry issues, promoting legislative or other initiatives, and addressing social, technological, and other matters). At the same time, the exchange of information regarding the commodity market (prices, production and sales volumes, etc.) is highly sensitive and requires special attention and review for antitrust risks. If such an exchange is necessary, only aggregated, anonymized, and historical (non-current) data may be exchanged, subject to approval by the legal department.

5) What are the most common red flags indicating possible bid rigging?

The existence of bid rigging and concerted practices could be indicated by a set of circumstances, which frequently include, among other things, the submission of bids from identical IP addresses, the indication of identical contact details, identical document templates and properties, sham participation in tenders followed by an intentional withdrawal from competition, other uncommon types of conduct and similar factors.

6) What liability may a company and its executives face for participation in a cartel or bid-rigging arrangement?

If we speak of public-law sanctions, the first consequence for participants in bid rigging will be administrative fines. For a legal entity, the fine ranges from RUB 100,000 to one twenty-fifth of the offender's aggregate revenue, while for an official it ranges from RUB 20,000 to RUB 50,000 (Article 14.21(2) of the Code of Administrative Offences of the Russian Federation). It should also be borne in mind that an official may instead be disqualified from holding certain positions for a period of up to three years.

Administrative liability, however, is not the most severe consequence.

Where a cartel agreement has caused substantial damage or resulted in the generation of substantial income, the offenders may incur criminal liability (Article 178(2) of the Criminal Code of the Russian Federation). In such cases, the offenders may face imprisonment or compulsory labour for a term of up to five years, accompanied by disqualification from holding positions or engaging in activities specified by the court. In addition, criminal fines may also be imposed by the judgment of the court.

For the purposes of Article 178 of the Criminal Code of the Russian Federation, substantial damage is defined as damage amounting to RUB 16,000,000, while substantial income is defined as income amounting to RUB 80,000,000.

7) Could participation in industry associations, working groups, or market information exchange forums give rise to antitrust risks?

Yes, such participation may create antitrust risks. In particular, the exchange, within industry associations, working groups, or other professional organizations, of information constituting trade secrets or commercially sensitive information, including data on prices, production volumes, quotas, cost levels, market-entry plans, and bidding terms, may be qualified by the antitrust authority as coordinated conduct or an anti-competitive agreement, if such exchange results in, or may result in, a restriction of competition.

It should also be noted that meeting minutes, business correspondence, audio recordings, and other materials from such events may be used as evidence in antitrust proceedings. Accordingly, participation in such formats requires compliance with antitrust requirements and the exclusion of any discussion of sensitive competitive parameters.

8) What should a company do if it discovers potential cartel conduct during an internal audit or investigation?

Competition law provides for the possibility of reduction of, and exemption from liability for entering into an anti competitive agreement in certain cases, subject to compliance with a number of statutory conditions. Therefore, if indications of a cartel agreement are detected, it is advisable to undertake internal measures to investigate and terminate unlawful agreement or conduct, to undertake other competition compliance measures and to promptly consider the option of applying to FAS Russia to minimize the relevant risks.

9) Are there any leniency or cooperation programs that allow companies to reduce or avoid penalties?

Exemption from liability and mitigation of sanctions involve a number of specific requirements, but, in general terms, Russian administrative law provides for the following forms of leniency.

Under the Note to Article 14.32 of the Code of Administrative Offences of the Russian Federation, a person who voluntarily reports a cartel agreement to the Federal Antimonopoly Service (FAS Russia) may be exempt from administrative liability, provided that all of the following conditions are satisfied simultaneously:

• at the time of the application, FAS Russia had no information concerning the violation;
• the applicant ceased further participation in the infringement;
• the applicant provided sufficient evidence of the existence of the cartel agreement;
• the applicant was not the organiser of the cartel; and
• the applicant reported the cartel before any of the other participants (subsequent applicants may only qualify for a reduction of liability).

For legal entities, mitigation of administrative liability is subject to additional requirements. Along with satisfying the conditions set out in Article 4.2 of the Code of Administrative Offences of the Russian Federation, the participant in the cartel agreement must also demonstrate that:

• it was not the organiser of the infringement and/or participated in the cartel only because it received binding instructions to do so; and
• it had not yet commenced the implementation of the unlawful agreement.

10) What elements should an effective antitrust compliance program include to minimize cartel risks?

Pursuant to Article 9.1(1) of the Law on the Protection of Competition, a business entity may establish an internal system designed to ensure compliance with antimonopoly legislation and to prevent violations thereof.

According to the Explanations of the Federal Antimonopoly Service of Russia (FAS Russia) No. 20 of 2 July 2021, “On the Internal Compliance System for Antimonopoly Legislation”, preventive compliance measures may include, inter alia:

1. Obtaining approval from the officer responsible for the operation of the antimonopoly compliance system before entering into transactions or undertaking other actions that may result in a breach of applicable antimonopoly requirements.
2. Conducting a preliminary assessment of a proposed action (for example, the implementation of a pricing mechanism or the execution of a transaction within the framework of economic concentration), including, where appropriate, the engagement of external experts possessing specialised knowledge in relevant fields of technology, production, economics, or finance.
3. Submitting an application to the antimonopoly authority requesting verification of a draft agreement’s compliance with applicable legal requirements, where the agreement is not subject to prior state control under the Law on the Protection of Competition or the Federal Law “On Natural Monopolies”.
4. Providing employee training on the operation of the antimonopoly compliance system and conducting regular assessments of employees’ knowledge and understanding of competition-law compliance requirements.

Authors: Elena Kurchuk, Vladislava Novokreshchenova, Maxim Zarechin