2.1. Overview
The Competition Law defines organizational and legal framework for protection and development of competition and is aimed to prevent, restrict, suppress monopolistic activity and unfair competition, as well as to provide conditions for establishment and effective functioning of market in the Kyrgyz Republic.
The actions of a business entity (group of persons) occupying a dominant position, which have or may have effect of restricting competition and (or) infringing the interests of other business entities or individuals, including such activities as creating barriers to market access of other business entities are prohibited.
The Department forms and maintains the state register of natural and permitted monopolies, subject to state regulation and control.
Under the Law on Monopolies, the following methods of regulating activities of the entities of natural and permitted monopolies are applied:
- Price regulation by the establishment of prices/ tariffs or their limits;
- The establishment of profitability limits;
- Identification of consumers/subscribers entitled to mandatory servicing, and/or establishment of minimal level of their supply in cases where their needs in goods/services produced/sold by a natural or permitted monopoly may not be fully satisfied, taking into account the protection of citizens’ rights and legal interests, national security, the protection of the environment, and the protection of cultural property;
- The imposition of trade mark-ups;
- The imposition of obligations on engineering and technical services being natural monopoly entities , development of respective nets of engineering and technical maintenance in case it is impossible to fully satisfy the demands for goods (services) manufactured (provided ) by this entity.
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The Competition Law differentiates between such concepts as “monopolistic activity” and “dominant position”.
The monopoly activity is qualified as an abuse of a dominant position by the business entity, group of persons, agreements or coordinated actions contradicting with the antimonopoly legislation, actions (inactions) of business entities (group of persons), state authorities and local authorities directed to prevention, restriction or elimination of competition.
A business entity shall be deemed to occupy a dominant position if it meets one of the following qualifications:
- business entity’s share in a certain market is 35% or more;
- business entity’s share exceeds a maximum permitted domination rate established by the public antimonopoly authority and it is determined that such business entity is abusing such position in the market;
- business entity has a market power (authority) enabling it to cause a substantial influence on the market (demand, offer, price, market players conduct etc.);
- joint domination of more than three business entities where the share of each is more than the share of other entities in this market and jointly exceeds 50 percent, or the joint share of not more than five business entities where the share of each is more than the shares of other business entities in the respective market;
- over the long period ( not less than one year or, where such term is less than one year, over the period of existence of the respective market) relative sizes of shares of business entities remain unchanged or are subject to minor changes and access to respective market for the new competitors is difficult;
- a commodity to be sold or purchased by business entities cannot be replaced by the other commodity during consumption (including for production purposes), with the information about the price, conditions of sale or purchase of this commodity in the respective market being available to a definite range of persons.
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The Competition Law prohibits any agreements (or concerted actions) of competing business entities (potential competitors) if such agreements (concerted actions) limit or may limit competition, including those aimed at:
- establishing (maintaining) prices (tariffs), discounts, allowances (surcharges), margins;
- increasing, decreasing or maintaining prices in the market;
- division of the market by territory, scope of sales or procurements , assortment of goods or range of sellers or buyers (customers);
- limiting market entry or exit for other business entities as sellers of certain merchandise or their buyers (customers) ;
- refusal from contracting with certain sellers or buyers (customers);
- agreement on volume of production with the purpose to artificially changing the volume of supply; unreasonable refusal from contracting with certain sellers or consumers;
- price discrimination;
- artificial increase (decrease) of prices for goods that leads to restriction of competition;
- unreasonable decrease or termination of supply of goods for invalid reasons;
- establishing standard terms and conditions of contracts that put consumers at a disadvantage or restrict the freedom of choice of goods and business entities manufacturing these goods, or have provisions irrelevant to the subject of the contract;
- providing some business entities with an opportunity to acquire a significant amount of goods in the conditions of limited offer.
Anti-competitive agreements (concerted actions) are achieved in any form by non-competing business entities if such agreements (concerted actions) result or may result in restriction of competition and are prohibited and recognized void in whole or in part, including agreements (concerted actions):
- Imposing contractual terms which are disadvantageous for the counteragent;
- Imposing exceptions which require purchasing certain goods only from the given seller, but not its competitor ;
- Limiting territory or range of buyers;
- Imposing price limitations on resale of goods acquired by the buyer;
- Prohibiting sale of goods manufactured by the competitors.
In exceptional cases, the above-stated agreements (concerted actions) of business entities can be recognized by the Department as lawful if a business entity proves that positive effects outweigh negative effects of the agreement (concerted actions), or if they do or may result in the better manufacture or sale of goods, promotion of technical or economic progress, or increased competitiveness of goods in the world market etc.
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The Competition Law contains the list of actions which can be regarded as unfair competition. The following actions are prohibited as bad faith competition practices:
- Unauthorized copying of the business entity’s goods and form of packaging and exterior design, except for the goods whose appearance is conditioned by their technical function;
- Direct reproduction of the other business entity’s products by violating its licensing patent rights;
- Illegal use of another person’s trademark, service mark, appellation of origin, business name, capable of creating confusion with other business entity;
- Distribution of false or distorted information on business profile and financial condition of the other business entity, capable of causing damage or harming its business reputation;
- Manufacture , sale, or other entry of the other business entity's products in the market by violating its intellectual property rights and similar rights of participants of civil circulation of goods, works and services (illegal use);
- Disclosure in the distorted way of the data on scientific and technical and production abilities of the competitor;
- Intentional violation, disruption, and termination by illegal means of the competitor’s business relations;
- Bringing pressure by illegal means on the competitor’s employees with an aim of inducing them to neglect of duties;
- Illegal receipt , use and disclosure of data on scientific- technical, production, or commercial activities of a business entity, including its trade secret;
- Agreements (coordinated acts ) limiting competition;
- Bringing pressure by illegal means on the making and carrying out of business decisions by the competitor for the purposes of getting unfounded predominance over it;
- Unfounded appeals (addresses) to other market participants encouraging to terminate business relations of the competitor or prevent them from being established;
- Dissemination of any data capable of misleading consumers about the origin, method of manufacture, applicability for use, or quality and other features of merchandise of the business entity, identity of the entrepreneur or characteristics of his business activity;
- Marking a merchandise by an improper distinguishing sign for the purposes of misleading consumers regarding the consumption and other important qualities of the merchandise;
- Concealing the fact that the merchandise is inconsistent with its purpose or requirements set for it.
Intentional bulk sale of certain kinds of merchandise in the respective market for the purposes of price manipulation , in cases when this is directed at limiting competition or affects the interests of consumers.
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The Department considers cases involving violation of antimonopoly legislation based on the information from state and municipal authorities, legal entities and individuals, media reports and on its own initiative including after conducting the relevant inspections.
In the case of discovering a violation of law, the Department can issue a prescription to eliminate violations of antimonopoly legislation. If the prescription is not fulfilled, the Department adopts a decision:
- on imposing fine;
- on termination of the case;
- on submission of the case to court or relevant authorities competent to impose fine or sanction of another type and amount.
The actions (inactions) of territorial antimonopoly authorities can be appealed with the Department or court.
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Civil liability
Pursuant to Kyrgyz laws, transactions made in violation of antimonopoly laws might be declared invalid at the claim of the person concerned. In addition, Kyrgyz antimonopoly laws provide for the common type of civil liability in the form of compensation of damages caused by violation of antimonopoly laws. A claim for compensation of damages may be filed with the court by any individual or legal entity whose rights were abused by the violation.
Administrative liability
As the body with administrative liability for breach of antimonopoly laws, the Department may request the downsizing of a business entity and confiscate the profit received by the entity which committed violations. Moreover, the Department may apply, among others, the following administrative fines:
- for officers of business entities which used their dominant position, or executed an agreement limiting competition – from 5,000 Kyrgyzstani soms (KGS) to 10,000 KGS, for legal entities – from 1% to 15% of revenue from sale of goods (works, services) on market of which the violation was committed, but no more than one fiftieth of the total amount of revenue from the sale of goods (works, services);
- for withdrawal of goods from circulation in order to raise the prices, or artificial creation of barriers to entry for other business entities, or execution of agreements on raising prices, or the division of market into spheres of influence – from 2,000 KGS to 3,000 KGS;
- any actions of business entities aimed at gaining advantages in the business that contradict to the provisions of law, business traditions, requirements of fairness, reasonableness and fairness and can cause or has caused damage to other business entities-competitors or harm their business reputation are punishable by an administrative fine for officers - from 5,000 KGS to 10,000 KGS, for legal entities - from 50,000 KGS to 100,000 KGS;
- failure to submit (late submission) the materials for approval and submission of false (inaccurate) or incomplete data (information) in violation of the established order of the formation and application of prices (tariffs) shall entail the imposition of an administrative fine for officers - from 5,000 KGS to 10,000 KGS, for legal entities - from 10,000 KGS to 50,000 KGS; - for officers of business entities, for avoiding the fulfillment or failing to timely fulfill the prescriptions of the Department responsible for consumer rights protection – from 5,000 up to 10,000 KGS.
The fine imposed by the Department shall be paid within 30 days of issuing the relevant prescription to the legal entity.
Criminal liability
Kyrgyz Criminal Code provides for the liability of individuals for the establishment and maintenance of monopolistically high prices or monopolistically low prices as well as the limitation of competition through conspiracy or agreed actions aimed at the division of the market, exclusion of other players from the market, establishment and maintenance of unified prices, if such actions are committed by a group of persons or group of persons upon preliminary consent. Such actions are punishable by fine, or imprisonment, or imprisonment with confiscation of property depending on the qualifying elements of the criminal offence.
The Criminal Code imposes this liability irrespective of the amount of damages caused by such crime.
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