Eurasian Economic Union Minister Discusses Competition, Antitrust Regulatons

Nurlan Aldabergenov is the minister for competition and antitrust regulation of the Eurasian Economic Commission. The creation of a supranational antimonopoly body on Jan. 1 established the legal base for conditions of equal competition under the Eurasian Economic Union market. Minister Aldabergenov talked about further developing the ecconomic union.

aАлдабергеновHow powerful is the supranational antimonopoly body and most importantly, how does it help Kazakh producers who are now entering the Russian and Belarussian markets?

We face a complicated task. On one hand, the Eurasian Economic Commission must ensure equal conditions for competition in cross-border markets and on the other, we want to protect domestic businesses. This can be achieved only by introducing antitrust laws. We are talking about eliminating dominant market positions, identifying unfair competition and third, the early elimination of cartels in cross-border markets. All of these tasks should be executed by the supranational antitrust body.

This mechanism enables monitoring compliance with antitrust laws not only within one state, but also throughout the entire union. To be able to track violations in cross-border markets, the Eurasian Economic Commission formed a relevant regulatory framework. Two commissions have been created via the union’s court in Minsk. These commissions will address issues of competition policy. As for the benefits, the union offers many to each participant, but especially, to Kazakh producers. It is vital for our fast growing economy to have access to other markets, first and foremost, Russian markets.

The union also opens new opportunities for Kazakhstan based manufacturers in transporting goods through member states. Geographically, our country is located in the middle of the continent; an open border with Russia provides access to the sea and consequently, to third country markets. In this regard, the supranational antitrust authority prevents and eliminates existing obstacles to the movement of goods originating in Kazakhstan.

Can you name such obstacles?

Unfortunately, we are often confronted with obstacles in exporting gas, oil and electricity. Aktobe and West Kazakhstan are now experiencing electricity shortages; the ability to transport through Russian networks via our country’s northern regions would solve this problem.

You want to say that the supranational authority is capable of punishing monopolists who misuse their dominant position in a particular market?

The responsibility, which the commission imposes on unfair market players, is equivalent to a court resolution. I must say, in some cases, these sanctions are wider and stiffer than national antitrust laws.

However, it should be understood that in order to invoke the responsibility of a large monopoly, it is necessary to make a case using a legal basis. Therefore, the commission monitors the flow and realisation of goods and services. It also tracks down large monopolists on a national and transnational level. Such research includes poll analysis, sales conditions, interaction with consumers and obstacles that stop the flow of goods. By analysing this information, researches are able to confirm whether the monopolist is violating the law or not.

You said that the legal framework for cross-border markets has been completed. It also means that a law on competition should be implemented. What can you say about that?

There is a model law on competition with a lot of provisions that have not been taken into account by national legislations before. As practice shows, executing all the provisions within one year is possible. It has been decided to divide the implementation process into phases. The result of the first phase was the establishment of the admonition institute, which is also a tool for supporting local businesses. The next phase will solve the problem of eliminating discriminatory conditions.

The provisions of this law have also been included in Russian legislation; in particular, the provision concerning control over the creation of municipal enterprises. Similar legislative work is also taking place in Belarus.

Speaking of the transparency of cross-border markets, when will Kazakh entrepreneurs be able to participate in electronic trading on public procurement in Russia and Belarus?

Last year, our manufacturers had already signed about 166 contracts worth 265 million tenge (US$1.42 million). Next year, we plan to introduce electronic trading on public procurement across the union. In the meantime, it is necessary to modify several legal and regulatory frameworks at the national level. Let me explain, the competition at first glance was legally correct. But there were doubts if there was collusion between participants.

Unfortunately, there are no standards that allow proving such in Kazakhstan’s laws. But let us imagine that our businessmen were involved in trade with Russia, where antitrust authorities are entitled to identify anti-competitive behavior. In opening our borders for Russian and Belarusian bidders, we must understand that despite the fact that we are working in a friendly atmosphere, it is still a competitive environment. Consequently, national authorities should be equal in their powers.

One of the most discussed issues of today is about opportunities for parallel imports. What are, in your opinion, the main options for how to move forward, if we choose the principle of the exhaustion of rights that is?

In Kazakhstan, Russia and Belarus and in today’s world of open international exchange of goods, this principle is alive in well. Development of the domestic market is not always profitable. Under the current conditions, Kazakhstan can buy branded goods only from authorised distributors who dictate their own prices and conditions.

Here is a simple example, the medication Fosavance, which is produced in Spain, costs $35. The legal owner of the trademark in Kazakhstan sells it for $65. In Russia, the medication can be bought for $108. However, in England, the same medicine can be easily purchased for $32 from the local distributor. What does this mean? It means that the central office of the company or a dealer, who manufactures and sells the medicine, has simply divided the market into geographical and price segments. This is a violation of the rights of the competition policy.

Although we are changing the principle of the exhaustion of rights, we are not going to close the national market to foreign industrial giants, it must be admitted that the domestic manufacturing sector is dependent on foreign imports. We are pursuing only one goal: letting foreign partners work in our market under the same rules they adhere to in their domestic markets. The very first task of the commission is to protect the rights of domestic producers and we intend to defend the interests of the nation’s economy.

The issue of parallel imports entails positive changes in many related industries. In addition, the change in the principle of exhaustion of trademark rights will open new opportunities not only to Kazakh business, but also to third country manufacturers who can supply us with branded products at prices set by competitive markets. This will significantly increase the performance of cross-border turnover and lower the prices of imported goods in Kazakhstan.

Today, we see two ways of resolving the situation: either using the international principle of exhausting withdrawal rights (with the ability to regulate the market in some areas), or keeping the regional principle of the exhaustion of rights, but while opening some markets. I think we will come to a unanimous decision with our colleagues within a couple of months. After that, the issue will be submitted to the board of the First Deputy Prime Ministers of Participating States.

You are constantly talking about supporting domestic producers, but consumers often need to be protected too. What can you say about this?

The competition and antitrust regulation board is constantly researching goods and services markets as well as price fluctuations. We are working hard to ensure that our customers do not feel cheated. Our current priorities are the cellular market, rail and air transport, as well as pharmacuticals.

Our experts are negotiating with manufacturers and explaining to them how they lose profit when overpricing merchandise. If a monopolist does not listen to our arguments and their actions do not change for a long time, it can be concluded that the company is deliberately violating the rules of competition.

One example is the cellular market. We keep urging its operators to revise roaming tariffs, as they are too high. Currently, people have to change operators after crossing the border. Likewise, in aviation, high ticket prices offered by local companies cause Kazakh companies to seek other options in the Eurasian Economic Union space. We would be glad to support our domestic carrier Air Astana, but there is lack of flights within Eurasia. I hope that the situation will change for the best in the near future.

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