Competition and Antitrust Regulation in EAEU
The origins of the Eurasian Economic Union (EAEU) are closely intertwined with the regional strategy of economic cooperation and integration between former Soviet Socialist republics. In the initial period of independence, the efforts of newly formed countries were directed at the formation of a new legal framework, which would create conditions for the exchange of goods and services. However, then formed intergovernmental organization, known as The Commonwealth of Independent States (CIS), had a formal character and fundamentally lacked supranational powers (Charter of the Commonwealth of Independent States, 1993). Moreover, the issue of disintegration processes, that prevailed due to the economic recession after the collapse of the USSR, required a resolution in the form of a multilateral integration development model. The initiative assumed a gradual deepening of economic unification through the establishment of regional trading bloc: the creation of common markets and a customs union. As a result, numerous treaties have been signed, however, they did not have direct effect and for almost two decades remained as a mere declaration of intent (Treaty establishing the Economic Union, 1993). Finally, the Treaty on the Eurasian Economic Union was signed by the leaders of the Russian Federation, Kazakhstan and Belarus in 2014, which was a logical extension of the Eurasian Customs Union and Single Economic Space.
It is no secret to the international community, that the formation of a single market for goods, services, capital and labor in the Eurasian area closely resembles a classic integration model that is implemented on a full scale in the European Union (EU). While the EU experience demonstrates the need for the removal of technical and administrative barriers to trade, it also emphasizes the importance of prevention of those barriers, that may be created by economic entities (market participants). These barriers include anti-competitive agreements or an abuse of dominance by economic entities, that lead to any prevention, restriction or elimination of competition. In this sense, competition policy is an integral element of the political economy, which aims at the development of competition culture through the promotion of market principles, norms and values.
Legal Basis
Competition policy of the Eurasian Economic Union combines both national and supranational antitrust regulations, therefore it is coordinated by competition authorities of the EAEU member states and the Eurasian Economic Commission (EEC), a permanent governing body of the Union. According to the Treaty (2014), the Commission consists of a Council and a Board. The latter is an executive body that has several lines of activity, including competition and antitrust regulation. The EEC Board uses the Treaty on the Eurasian Economic Union as a source of law, because it states, among other things, the general principles and rules of competition (Section XVIII, Articles 75 and 76, respectively). Agreement on common principles and rules of competition (2010), that expired with the entry into force of the EAEU Treaty, served as a legal framework that was used for the development of the general principles and rules of competition. However, it should be pointed out that the name change is not arbitrary. In the Treaty, the term “common principles” corresponds with the term “common policy” (Section I, Article 2), which is defined as “the policy implemented by the Member States in certain spheres as specified in this Treaty and envisaging the application of unified legal regulations by the Member States”. However, norms of competition policy, specified in Section XVIII of the Treaty, do not require the member states to unify their legislation in this area. A close examination of this section establishes that it sets certain guidelines for the implementation of competition policy on the territory of member states (principles of competition) and introduces the minimum set of prohibitions that should be respected on the territories of member states and the EAEU transboundary markets (rules of competition). Moreover, in Article 74 (3), it is stated that the member states “may determine in their legislation any further prohibitions, as well as additional requirements and restrictions with regard to the prohibitions set out in Articles 75 and 76 of this Treaty” (2014). According to the conclusion of the EAEU Court, the Treaty grants the Union with supportive competence in the area of competition policy. In other words, the member states, having outlined the common basis, can develop their competition legislation independently based on the nature of their state structure and product markets.
Policy cycle
The two major objectives of the Union – integration and cooperation – are harmonized within its policies, including competition and antitrust regulations. However, before a policy can be created, “there must be a political agreement on the existence of a problem” (McCormick, 2014). In the EAEU, problem identification and agenda-setting are a prerogative of the Supreme Eurasian Economic Council (the Supreme Council), the highest supranational body of the Union. According to Article 12 (1) of the Treaty, the Supreme Council possesses a power “to determine the strategy, directions and prospects for the formation and development of the Union and make decisions aimed at implementing the objectives of the Union” (2014). The Supreme Council issues decisions and dispositions, that are adopted by consensus. Meetings of the Council are held at least once a year, and the agenda for each meeting is arranged by the Commission based on proposals made by the member states (Section III, Article 11 (3)). Therefore, it is the Council’s responsibility to outline broad policy goals and propose policy initiatives.
Once a problem has been identified, the Commission manages the process of policy formulation and adoption. In accordance with Annex 1 to the Treaty of the EAEU, the Commission carries out its activities based on the “principles of mutual benefit, equality and respect for the national interests of the member states” (2014). According to Article 18 (3), the Commission issues decisions, dispositions and recommendations: decisions have regulatory and binding effect for the member states, dispositions have organizational and administrative character, and recommendations have non-binding nature (Annex 1 (13)). The Council of the Commission adopts decisions, disposition and recommendations by consensus only, while the Board reaches and agreement by a qualified majority and resolves sensitive issues by consensus. In both the Council and the Board, a single vote of either the Council or the Board member is equal to one vote (Annex 1 (21)). The two-tier system significantly complicates the process of decision-making, especially when it comes to competition and antitrust regulation, which is an area that usually requires measures to be taken in a proactive manner (Blockmans et al., 2012).
The Commission ensures the implementation of its policies through national bureaucracies, however, it is important to remember that the Union has been granted by the Treaty with supportive competence in the area of competition and antitrust regulations, thus the member states are not required to fully comply with them, but rather use them as a starting point to further develop their own policy line. The Protocol on General Principles and Rules of Cooperation advises authorized authorities of the member states to cooperate in the development of national legislation on competition policies through the exchange of information and methodological assistance (Annex 19 (47)). Moreover, it asks the member states to pursue a coordinated competition and antitrust policy with respect to acts performed by economic entities (market participant) of third parties, if such actions may restrict or eliminate competition in the internal market of the Union. Such a coordinated competition policy is implemented by applying the legislation rules of the member states to economic entities (market participants) “in the same manner and to the same extent, irrespective of their legal form and place of registration” (Annex 19 (54)).
Finally, in the case of the member state’s disagreement with the decision of the Commission, then the matter should be by the Supreme Council and until then, the Commission’s decision is considered to be not enforceable.
Policy Output
Two years before the Treaty on the Eurasian Economic Union was ratified, the Supreme Council approved the Model Law “On Competition”, which is one of the main instruments of harmonizing antitrust laws in national legal frameworks. The main provisions of the Model Law were later reflected in the Treaty. The law aims at the approximation of the regulatory process in the area of competition policy on the territory of the Common Economic Space. The nature of this law is non-regulatory; however, the member states are expected to complete the process of its implementation. The Model Law (2013) recommends the member states to coordinate their national law with its norms, thus establishing a harmonized legal framework for the protection of competition on the territory of the Union. The General Provisions, listed in Chapter 1 of the Law, identify expected aims of the national law, which should include the prevention and suppression of monopolistic behavior and unfair competition (Article 1 (1)), and the development of a favorable environment for the proper functioning of goods markets. The Model Law incorporated the best practices of legal regulation in the field of competition from national laws of the member states and international practices of foreign countries, including recommendations of OECD. The main aims and positions regarding regulations in the sphere of competition policy are similar to the EU’s general rules to antitrust enforcement and competition law, however in the EU decision concerning competition policy are made exclusively by supranational bodies of the Union and not national bureaucracies (Article 3 of TFEU), thus in the EU competition rules are harmonized and deeply integrated within national laws of the member states.
Degree of Integration
Formal documents regarding competition and antitrust regulations authorized within the Eurasian Economic Union are not mandatory by their legal nature, thus they do not have a direct effect on the territory of the member states. In the context of the Union, this raises a question of the degree of integration and the extent to which general principles and rules of the competition are implemented within national legislation of the member states. It is obvious that without joint efforts of the member states to introduce the provisions of competition law (e.g. The Model Law on Competition) into national legislation, its mere adoption will not contribute to the goal of approximation of national legal frameworks and legal regulations in the field of competition policy. However, it is also worth noting, that the process of legal framework approximation between several sovereign states is a complex measure, which may lead to some complications. For example, there may occur difficulties in operational arrangements that will lead to different degrees of policy implementation in some member states, or difficulties that are related to the content of the policy i.e. concerning unique characteristics of internal commodity markets of the member states. Taking into account all possible opportunities and obstacles, this review paper argues that supranational and national legislative regulation of competition protection is based on similar principles, norms and values, which in turn demonstrates a sustainable process of policy harmonization.
Literature Review
The EAEU member states have experienced economic and policy integration in a differentiated manner. This phenomenon is called multi-speed integration and is defined as a non-uniform method of integration, when countries integrate either at different levels or different speeds (McCormick, 2014). In the context of the Union, differentiated integration is a natural incident, since all the EAEU member states represent transition economies i.e. they are undergoing structural transformations to replace a former centrally planned economy with a market economy. However, the existence of an indicative source of law, such as the EAEU Treaty, and its incorporation in the legislative and regulatory activities in the field of competition policy has substantial benefits for the member states (Dutz & Vagliasindi, 2000). Therefore, multi-speed integration in the area of competition policy is supported as long as member states follow the general rules and principles of competition in their legal frameworks. However, some critics argue that differentiated integration may have potential, yet there is also a threat to the stability and consistency within the Union, as each country will choose among the menu of policies the ones they would and would not like to enforce (Kelemen, 2007). Other formal theorists have argued that bringing states into the economic regime at the same pace and under the same conditions is desirable for its proper functioning, therefore it is important to make sure that no laggard-state is invited to join the Union (Alesina & Grilli, 1993). At the same time, some scholars believe that flexibility in policy adoption may have a positive effect on further cooperation within the Union. Downs, Rocke and Barsoom (1998) advocate for multi-speed integration, because it allows the member states to harmonize their legal framework with the international agreement in the most effective way. The latter position corresponds with the mission and vision of the EAEU. In the context of the Union, the member states pursue economic integration at a different pace, therefore independently developing their competition and antitrust regulations in accordance with the functioning specificity of their commodity markets and the government structure.
Analytical Framework
When analyzed in a broader context, regional integration of the EAEU member states goes against a global trend of economic fragmentation (Hartwell, 2016). While the world has been struggling with consequences of the financial crisis that led to a distancing of economic coordination, the internal integration within the Union has accelerated: the establishment of the Eurasian Customs Union and then the Single Economic Space was finalized within five years, from 2010 to 2014, while similar processes took a couple of decades in the EU. The reason behind this variance in the pace of integration lies in the different integration dynamics of each union. The European Union has put its efforts at a broader integration, which implied bringing more and more members into the bloc, while the EAEU aimed at harmonization of legal and administrative within the bloc i.e. a deeper integration. However, taking into account the intergovernmental character of the EAEU, the process of policy approximation may face some challenges. Indeed, since the Union’s competence in the area of competition is limited, there might be a case of the prevalence of national preferences in bargaining over the Union’s general competition policies (Hix & Hoyland, 2011); whereas, the European Union enjoys exclusive competence in the same area, which means that supranational bodies are responsible for legislation and adoption of binding acts. Yet, the interests and preferences of national governments still recognize the importance of competition policy approximation within the Union (Hartwell, 2016), as it contributes to the general economic growth through shaping fair and healthy competition arena for all member states. Thus, it does not exactly indicate the emergence of supranational politics, but rather the convergence of both national and supranational goals.
Analysis and Conclusion
The Eurasian Economic Union member states use general principles and rules of competition contained in the Treaty to integrate the internal market and protect competition, yet they preserve a right to amend their national legislation based on their economic development objectives. As a result, each founding member state of the Union – Belarus, Kazakhstan and Russia – has adopted general competition and antitrust regulations in various forms. For example, the analysis of competition law in the Republic of Belarus shows that the main impetus for the development of antitrust regulations was dictated by the international obligations of the republic to harmonize their national legislation within the framework of integration processes of the Customs Union, Common Economic Space, and then later, Eurasian Economic Union (Decree on Approval of the National Security Concept of the Republic of Belarus, 2010). Subsequently adopted antimonopoly law on Counteraction to Monopolistic Activity and Development of Competition (2013) closely resembled the Agreement on common principles and rules of competition (2010), and introduced a list of new concepts to the Belarussian legislation on competition e.g. vertical agreements, state or municipal preferences, coordination of economic activities, discriminatory conditions and so on. However, the above-mentioned law has norms and regulations that differ from those that are authorized by the Model Law (2013) and anti-trust regulations of the Union. For example, according to the norms of the scope of application, the antimonopoly law of Belarus applies to commodity markets, where goods are in limited circulation, including the financial services market (Article 4 (2)), while the EAEU Treaty does not provide these qualifications.
Another member state of the EAEU – Kazakhstan – has experienced dramatic changes in its competition and antitrust regulations. In 2015, the Entrepreneur Code of the Republic of Kazakhstan has been adopted, which “defines legal, economic and social conditions and guarantees that ensure the free enterprise in the state”. One of the major amendments to the competition law was the exclusion of consumer protection from qualifying sings of antitrust violations. Previously, the antimonopoly institution performed the function of the body that protected the rights of consumers from unjustified price increases, price discrimination and so on. However, in general, consumer protection does not fall under the competences of antitrust institutions, which primarily operates to ensure a free and fair competition environment; while consumer rights protection is often regarded as a positive consequence of a developed competition policy. Thus, consumer interests are not taken into account in the legal qualifications of the act, that was supposedly performed to restrict or eliminate competition. However, this does not mean that consumers are denied the right to appeal to the national antitrust body with complaints, because they may serve as a basis to start an investigation.
The final founding member state of the Union – Russia – dynamically develops and regulates its antitrust legislation by focusing on solving problems in a post-socialist market economy. After the federal law on Protection of Competition (2006) has been adopted, four large-scale amendments have been made and subsequently called “the antitrust packages”. A major trend that has been prominent throughout these amendments was a shift of emphasis from suppression of antitrust violations with further application of the responsibility to their prevention. The preventive measures taken by the Federal Antimonopoly Service mainly involve an expansion of the list of violations of the competition rules e.g. some forms of abuse of dominant position, unfair competition, actions that restrict competition and actions (omission) of public authorities that violate the rules of competition.
Thus, it can be stated that the goals defined during the adoption of the Treaty of the Eurasian Economic Union and the Model Law on competition are generally achieved. Member states, indeed, depart from the general principles and rules of competition defined by supranational competition and antitrust regulation bodies and/or they implement them at a different pace. However, the differentiated integration model proves to be successful at providing a favorable environment for each member state to approximate its national legislation in the most effective way.
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