13 january 2011

Prime Minister Vladimir Putin meets with Federal Anti-Monopoly Service Head Igor Artemyev

Vladimir Putin and Igor Artemyev discussed the Federal Anti-Monopoly Service’s efforts to combat price collusions. Notably, Mr Artemyev told Prime Minister Vladimir Putin about joint work with the Interior Ministry exposing a cartel conspiracy on the coal market. Other anti-monopoly investigations, chiefly on the chlorine market, were also raised. Mr Putin and Mr Artemyev also discussed the results FAS has achieved in cutting the costs of mobile-phone use and roaming charges. As Prime Minister Putin stressed, this work must be followed through to completion.

Transcript of the beginning of the meeting:

Vladimir Putin: Mr Artemyev, at our last meeting we discussed the Federal Anti-Monopoly Service’s role in creating a favourable market environment. To that end, your service should also ensure that services are priced at substantiated market rates, and that goods are also sold at substantiated market prices. Consequently, I would like to repeat that your service has the difficult, but very noble, task of ensuring that we see a normal market-style economic environment develop, so that the general public feel tangible results, in their pockets, of the work the state is doing in the economy. I very much hope that your efforts to lower prices for mobile-phone services will be completed. Certain steps have already been taken on this. This chiefly concerns domestic and international roaming services, as we discussed.

We should also closely follow all those processes actually underway in real life, not on paper. Not just in areas where you have concluded specific agreements but also monitor what companies are doing in their day to day work. I know that you have now concluded your work in a different sector. Say a few words about it, please. Tell me about the ongoing work, what sector it is being conducted in and what results can be seen.

Igor Artemyev: Mr Putin, thank you very much for this opportunity to meet with you. I would like to start by saying that we are acting as you instructed us to, in a high-priority area of our activity, namely, the clear need to take an active role in combating price fixing by unscrupulous Russian companies. Through such collusion, these companies are violating both anti-monopoly law and the Criminal Code. Price fixing results in the consumer paying higher prices. In late December, the FAS and the Interior Ministry exposed a cartel conspiracy over the division of the coal market between several companies. Notably, our colleagues in the Interior Ministry have been investigating. They have managed to obtain convincing evidence of price fixing, when managers agree, between themselves, to raise prices, without having any economic substantiation for their actions. In the long run, it’s the population that pays. Companies involved include the Siberian Coal Energy Company, the Russian Coal Company and many others. I would like to give a special vote of thanks to the Interior Ministry. This was the first time they took one of these cases, in our area, on. They have done a marvellous job. And I believe this is an important event. Not only is an anti-monopoly investigation ongoing, a criminal case has been launched against particular managers. Whatever the court verdict, it is very important that such issues were raised so clearly. Everyone must surely now realize that state and society alike condemn this practice, and that it is simply intolerable.

Moreover, I would like to add that, having collated the relevant information we launched an anti-monopoly investigation into the chlorine market. We believe that all the required legal grounds exist for drawing attention to corporate price fixing between chlorine producers nationwide. Last year, they raised chlorine prices almost three-fold without any justification, through sheer collusion. This, too, hits our citizens right in their pockets, because chlorine is used to decontaminate drinking water. Consequently, the population has to cover all the extra costs.

In addition, we are examining similar issues in the pharmaceuticals market, in the food and staple goods trades. In my opinion, price fixing in this field is particularly cynical. Price fixing in the chemical, petro-chemical and many other sectors are also being investigated.

Consequently, efforts to fight price fixing are seen as extremely important.

Mr Putin, you also mentioned the issue of roaming charges for mobile phone users. We are keeping an eye on the situation. Russian companies are fulfilling their nationwide and intra-CIS commitments. Moreover, Ukraine and other countries, including Tajikistan, have joined the investigation. This happened after you and other CIS heads of government signed the related agreement in St Petersburg. We are closely monitoring this to ensure it is followed through. I have the impression that we will see improvement on this issue. Moreover, all the companies involved have sent their demands to non-CIS countries and discussions are underway with our Western partners that should see them agree to lower roaming charges for Russian companies, on a mutual basis. I think that substantial efforts will have to be made in order to persuade our Western partners to make the necessary changes. In my opinion, this can be done. Overall, this line of work must certainly continue because roaming services are expensive all over Russia and abroad.

Vladimir Putin: As for the inflated chlorine prices, you said they had been unjustifiably raised several times over. And as regards the first investigation: What price gap was revealed? To what extent was this rise unfounded?

Igor Artemyev: We are talking about a hike of, say, several dozen percent – a several-fold increase. The situation on the global market was different and market-wide fluctuations played a part. These companies conspired to create three types of collusion. First, they raised the price for direct energy supplies – the overall heating costs for the general public. Second, they carved up the market between themselves, in effect, delineating their respective spheres of influence, agreeing to deliver products to specific entities and to stick to their own turf. This was a gross violation of competition law. Third, they fiddled all the various tenders. When municipalities bought coal for their own needs, these companies agreed who would win the tender in advance. As a result municipal entities paid the highest prices possible. So, we believe that they committed… We believe that we have all the required evidence of this, although it is not for us to say whether or not they are guilty. Of course, the court will make the final ruling. Although it’s still too early to talk about this, we believe that we have every indication, and more than that, we believe that proof exists of their price-fixing conversations, as uncovered by our Interior Ministry colleagues. They openly talk prices with each other, bargaining behind our citizens’ backs.

Vladimir Putin: Good work. Thank you.

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