A dominant position in a product market is the exclusive position of an economic entity or several economic entities in the market for a product that does not have a substitute or interchangeable goods, giving it (them) the opportunity to exert a decisive influence on General terms circulation of goods on the relevant product market or impede access to the market for other economic entities.
Signs of a dominant position:
1. A dominant position is established in relation to economic entities, i.e. Russian and foreign commercial organizations, their associations, non-profit organizations engaged in entrepreneurial activity, and individual entrepreneurs.
2. A dominant position is established in relation to economic entities engaged in the production of goods. A product is a product of activity, including works and services, intended for sale or exchange.
3. The dominant position of the subject is established in the commodity market. Taking into account various characteristics For each product, its own product market is determined, called the market for a specific product, within the boundaries of which the dominant position of the economic entity is established.
4. A qualitative sign of a dominant position is the exclusivity of the subject’s position, which gives it the opportunity to influence the state of the competitive environment in the market for a certain product.
5. The quantitative sign of a dominant position is determined by the share that an economic entity occupies in the market for a certain product:
- a) if the share of an economic entity in the market for a certain product is 65 percent or more, then its position is recognized as dominant. In this case, the entity is given the right to prove that despite exceeding the specified value, its position in the market is not dominant, that is, it does not correspond to the qualitative sign of a dominant position;
- b) if the entity’s share in the market is more than 35 percent, but less than 65 percent, then its position can be recognized as dominant. This provision is not presumed, but must be established by the antimonopoly authority. The antimonopoly authority is guided by the stability of the subject’s share in the market, the ratio of its share to the shares of competitors, the possibility of access to the market of other competitors and other criteria;
- c) if the entity’s share in the market does not exceed 35 percent, then its position cannot be recognized as dominant.
6. The dominant position of an economic entity in the market must be established by the federal antimonopoly body (its territorial division) in compliance with the procedure defined by law.
Subjects of competition law
The main "actors" in competitive relations are competitors , which recognize only economic entities: Russian and foreign commercial organizations and their associations (unions or associations), some non-profit organizations, as well as individual entrepreneurs. The main parameter for classifying these persons as subjects of competition is their entrepreneurial activity.
Commercial organizations (Clause 2 of Article 50 of the Civil Code of the Russian Federation) and individual entrepreneurs (Article 23 of the Civil Code of the Russian Federation) constitute the main group of competing entities, since the main goal of their activities is to make a profit. Non-profit organizations, i.e. not having making a profit as the main goal of their activities and not distributing the profits received between participants (clauses 1 and 3 of Article 50 of the Civil Code of the Russian Federation), the law allows competitive actions only when they carry out entrepreneurship. Non-profit organizations can engage in business activities insofar as they serve the purposes for which they were created.
A certain group of participants in property turnover does not have the right to compete. These include, for example, certain individuals, not registered as individual entrepreneurs. Non-profit organizations include agricultural consumer cooperatives. Federal executive authorities and executive authorities of the constituent entities are also deprived of the right to compete Russian Federation and local government bodies, including officials of state authorities and administration.
Moreover, consumers are not considered competing subjects, since they do not directly participate in competition in the market. In this regard, in the definitions of the concepts “competition” and “economic entities” contained in Art. 4 of the Competition Law, there is no mention of consumers at all.
Under dominant position recognized exceptional position of an economic entity or several economic entities on the market for goods that do not have a substitute, or interchangeable goods (hereinafter referred to as a specific product), giving him (them) the opportunity to exert a decisive influence on the general conditions of circulation of goods on the relevant product market or to impede access to the market for other economic entities(Article 4 of the Competition Law).
The dominant position is recognized as the position of an economic entity whose share in the market for a particular product is 65% or more, except in cases where the business entity proves that, despite exceeding the specified value, its position in the market is not dominant. The dominant position is also recognized as the position of an economic entity whose share in the market for a particular product is less than 65%, if this is established by the antimonopoly authority based on the stability of the business entity’s share in the market, the relative size of market shares owned by competitors, the possibility of new competitors entering this market, or other criteria characterizing the product market. The position of an economic entity whose share in the market of a certain product cannot be recognized as dominant does not exceed 35%.
Analysis of the legal definition allows us to outline the signs of a dominant position 1:
1) a dominant position is established only in relation to economic entities;
2) economic entities whose situation is being analyzed must be engaged in the production of goods;
3) the dominant position of the subject is established in the commodity (financial) market;
4) a qualitative sign of a dominant position is the exclusivity of the subject’s position, which gives it the opportunity to influence the state of the competitive environment in the market for a certain product. Here you need to be guided by the Methodological Recommendations for determining the dominant position of an economic entity on the product market, approved by Order of the State Customs Committee of the Russian Federation of June 3, 1994 No. 67;
5) the above-mentioned quantitative sign of a dominant position is determined by the share that an economic entity occupies in the market for a certain product;
6) the dominant position of an economic entity in the market must be established by the federal antimonopoly body (its territorial division) in compliance with the procedure defined by law.
Companies with a market share of a particular product more than 35%, are entered into the Register in accordance with Decree of the Government of the Russian Federation dated February 19, 1996 No. 154 1. MAP of Russia is obliged to publish the Register annually as of January 1, including using the all-Russian media.
Among all economic entities, the current legislation particularly distinguishes the legal status of persons occupying a dominant position in the market. In the legal literature, such entities are sometimes called monopolists. A dominant position is the exclusive position of an economic entity or several economic entities in the market of a product that does not have a substitute or interchangeable goods, which makes it possible to exert a decisive influence on the general conditions of circulation of goods on the relevant product market or to impede access to the market for other economic entities.
The dominant position is recognized as the position of an economic entity whose market share of a certain product is 65% or more, except in cases where the economic entity proves that, despite exceeding the specified value, its position on the market is not dominant. The dominant position is also recognized as the position of an economic entity whose share in the market for a certain product is less than 65%, if this is established by the antimonopoly authority based on the stability of the economic entity’s share in the market, the relative size of market shares owned by competitors, the possibility of access to this market by new competitors or other criteria characterizing the product market. The position of an economic entity whose market share of a particular product does not exceed 35% cannot be recognized as dominant.
In addition, a dominant position may arise due to agreements between competitors, as well as the monopolist and its buyer or consumer.
According to the Methodological Recommendations for Determining the Dominant Position of an Economic Entity in the Product Market, approved by the order of the State Committee for Arbitration of the Russian Federation dated June 3, 1994, the dominant position of an economic entity can be the result of both external and internal factors, including:
state policy, including a differentiated tax system, provision of subsidies and other benefits;
mergers, acquisitions, and liquidation of business entities;
production or scientific and technical strategy, including the introduction of innovations;
activities of an economic entity to eliminate competitors from the market using non-competitive methods;
agreements between business entities (explicit, secret);
other factors.
Maintaining a dominant position is not in itself an offence.
By Decree of the Government of the Russian Federation of February 19, 1996, as amended. from 01.02. 2005 approved the Procedure for the formation and maintenance of the Register of business entities with a market share of more than 35% of a certain product.
Inclusion in the Register and exclusion from it of economic entities (regardless of their place state registration) are carried out on the basis of a decision of the federal antimonopoly body, if the economic entity has a share of more than 35% in the relevant product market of the Russian Federation as a whole.
The register is open. The information contained in it is provided upon requests from interested legal entities and individuals.
If an organization disagrees with the recognition of its position as dominant in the product market, the arbitration court evaluates the antimonopoly authority's compliance with the rules for establishing this fact. Thus, the antimonopoly authority found that the organization dominates the regional enamel cookware market with a share of 77.7%. At the same time, the antimonopoly authority proceeded from the fact that enamel cookware does not have interchangeable goods, its market coincides with the boundaries of the region in which the applicant is located. The latter’s market share, taking into account the above circumstances, should be determined based on the indicators of statistical bodies on the volume of enamelware supplied to this area. The organization appealed to the court with a demand to invalidate the decision of the antimonopoly authority, citing incorrect definition of the geographical and product boundaries of the market, which resulted in an overestimation of its share. The court satisfied the stated requirement, rightfully guided by the following. Determining the boundaries of the market and calculating the share occupied by an economic entity in it must be carried out by the antimonopoly authority according to the rules set out in Methodical recommendations to determine the dominant position of an economic entity in the commodity market, approved by Order of the State Committee for Arbitration of the Russian Federation dated June 3, 1994 No. 67, and the Procedure for analyzing and assessing the state of the competitive environment in commodity markets, approved by Order of the State Committee for Arbitration of the Russian Federation dated December 20, 1996 No. 169. B in this case such rules were not followed. In establishing the fact of the dominant position of the applicant organization, the antimonopoly authority did not determine either the type of market (wholesale or retail) or the composition of the sellers and buyers participating in it (clause 2.2. and 3 of the Procedure). The structure of the market and its openness to international and interregional trade were not studied (clauses 6 and 7 of the Procedure). Thus, instead of conducting an analysis of capabilities and identifying the volumes of supplies to the region of similar goods from other regions, these volumes were recognized as equal to the indicators statistical authorities. The presence or absence of barriers to entry into the regional market for other manufacturers was not studied by the antimonopoly authority (clause 7.3 of the Procedure). The conclusion that enamel cookware represents a separate product market and has no substitutes was made as a result of checking the capabilities of only regional manufacturers of metal cookware and did not take into account the fact that the products of the applicant organization have multifunctional purpose(sugar bowls, bread bins, teapots, saucepans, etc.) and some of them can be replaced with products made of wood, glass, porcelain, earthenware, plastic, etc. , produced both in the region and beyond. Since the assessment of the boundaries of the product market and the share of an economic entity in it was carried out by the antimonopoly authority in violation of established requirements, the decision based on such an assessment on the dominance of the applicant organization in this market was rightfully declared invalid by the court.
As we can see, disputes regarding the invalidation of decisions to include organizations in the Register of Business Entities that have a market share of more than 35% of a certain product are subject to consideration by arbitration courts on claims of interested organizations.
Inclusion in the Register of economic entities acting as a group of persons is made based on their total market share. For example, a joint-stock company applied to the arbitration court with a request to invalidate the decision to include it in the Register, since its market share of a certain product does not exceed 35%. When considering the case, the court found that the plaintiff owns a share of 50 to 100% of the votes in subsidiary joint-stock companies of a similar profile. Based on Article 4 of the Competition Law, the plaintiff and its subsidiaries constitute a group of persons that is considered as a single economic entity. Consequently, for inclusion in the Register of persons acting as a group, it is sufficient that their total market share of a particular product exceeds 35%. Under such conditions, the court stated that the antimonopoly authority correctly determined the share joint stock company on the market and included it in the Register as part of a group of persons.
If antimonopoly legislation is violated by one of the members of the dominant group of persons, a corresponding order may be given to other members of the group who are capable of ensuring the elimination of the violation.
At the same time, it should be borne in mind that the decision of the antimonopoly authority to include an economic entity in the Register is not a necessary condition to recognize it as a dominant entity in the market. The organization filed a request to invalidate the decision of the antimonopoly authority to force it to enter into an agreement with the consumer. The court of first instance satisfied the stated requirement, since the organization was not included in the Register. At the same time, the court believed that a dominant position can only be established in relation to organizations included in the Register. Since Article 5 of the Competition Law establishes prohibitions exclusively for entities that dominate the market, the antimonopoly authority had no grounds for issuing an order. The cassation court overturned the decision and refused to satisfy the claim. At the same time, she proceeded from the fact that the authority to establish the dominant position of an economic entity in the market in accordance with Article 12 of the Competition Law is granted to the antimonopoly authorities. The fact of dominance is determined based on the criteria provided for in Article 4 of the Competition Law. This article does not require the inclusion of an economic entity in the Register as a condition for recognizing its position as dominant. If there is evidence of the dominance of an entity in the market, the antimonopoly authority has the right to apply to it the measures provided for in Article 12 of the Competition Law. The provision of evidence confirming the share of an economic entity in the market is the responsibility of the antimonopoly authority.
The rapid growth of some companies often leads to their dominance in the market. A dominant position is the exclusive position of an economic entity or several economic entities in the market for a product that does not have a substitute or interchangeable goods, giving it (them) the opportunity to exert a decisive influence on the general conditions of circulation of goods in the relevant product market or to impede access for other economic entities.
The dominant position of an economic entity is characterized by the following features:
an economic entity is a Russian or foreign commercial organization, their associations, non-profit organizations engaged in business activities, as well as an individual entrepreneur;
production of goods, i.e. life products, including works and services intended for sale or exchange. Consequently, a product intended for the personal needs of the subject cannot be a commodity;
the exclusivity of the position of an economic entity, which gives it the opportunity to influence the state of the competitive environment in the market for a certain product. The exclusivity of a dominant position is determined by the share that an economic entity occupies in the market for this product.
If the share of an economic entity is up to 35% in the market for a certain product, its position cannot be recognized as dominant.
If the share of an economic entity is more than 35%, but less than 65% in the market for a particular product, its position may be recognized as dominant. But such a provision is not presumed, but must be established by the antimonopoly authority, and the business entity is entered into the Register. The status of the Register is defined as information and observation, i.e. in case of abuse by an economic entity, the fact of an offense will be established.
If the share of an economic entity is 65% or more, then this position is recognized as dominant.
The provision of evidence confirming the share of an economic entity in the market is the responsibility of the antimonopoly authority. If the antimonopoly authority establishes the fact of a dominant position, then it should determine the type of market, the composition of the sellers and buyers participating in it, examine the structure of the market and its openness to interregional and international trade. In addition, the possibility of supplying similar goods from other regions is being explored. In this case, the subject is given the opportunity to refute the data of the antimonopoly authority that such a position is not dominant, i.e. does not meet the qualitative definition of a dominant position. If an organization disagrees with the recognition of its position as dominant, the arbitration court evaluates the antimonopoly authority’s compliance with the rules for establishing this fact.
So, taking into account the above characteristics, for each economic entity and its business products, the market for its participation is determined, within the boundaries of which the entity can occupy a dominant position.
An example of a company's actions to prevent a dominant position is Norilsk Nickel, which strengthened its position in the gold mining market by acquiring shares of gold mining companies by its subsidiaries.
The dominant participant in the market can conduct collective and (or) individual monopolistic actions.
Collective activity most often manifests itself in agreements between business entities (for example, the creation of cartels, syndicates, consortia, concerns and other monopolistic associations that limit competition).
Depending on the subject composition, there are:
1) agreements (concerted actions) of competing entities that collectively have a market share of a certain product
more than 35%. These agreements (concerted actions) can be aimed at:
division of the market according to a territorial principle, according to the volume of sales or purchases, according to the range of goods sold, or according to the circle of sellers or buyers (customers);
establishing (maintaining) prices (tariffs), discounts, surcharges, interest rates (so-called price fixing);
increasing, decreasing or maintaining prices at auctions and trades;
restricting access to the market or eliminating other economic entities from it as sellers of certain goods and their buyers;
refusal to enter into agreements with certain sellers or buyers (customers);
2) agreements (concerted actions) of non-competing business entities, one of which occupies a dominant position
position, and the other is its supplier or buyer (customer).
Individual monopolistic activity is an economic entity’s abuse of its dominant position. This may manifest itself in the form of:
withdrawal of goods from circulation, the purpose or result of which is to create or maintain a shortage in the market or increase prices;
imposing contract terms on the counterparty that are not beneficial for him or not related to the subject of the contract, including discriminatory conditions in the contract;
creating obstacles to market access for other economic entities;
violation of established regulations pricing procedures, establishing monopoly high or monopolistically low prices;
reduction or cessation of production of goods for which there is demand, or consumer orders, if there is a break-even possibility of their production, etc.
This list in the legislation is open, i.e. The antimonopoly authority has the right to apply enforcement measures to an economic entity in cases not directly specified in the law.
For example, in 2005, the Federal Antimonopoly Service officially confirmed that the Siemens concern was denied the acquisition of a stake in Power Machines.
The petition was rejected in accordance with paragraph 4 of Art. 18 Federal Law“On competition and restriction of monopolistic activities in commodity markets”, since the implementation of this transaction will lead to restriction of competition in the energy equipment markets. As the antimonopoly service explained its decision: both companies produce power equipment of all types and sizes and are competitors in the Russian and global power engineering markets.
The fight against monopolists in Western business has long history. Many of its episodes can be considered textbook. The battle between Virgin Atlantic and British Airways (BA) in the air transportation market has gone down in business history.
Virgin Atlantic airline was founded in the 80s of the last century by the owner of the Virgin record label, Richard Branson. The airline developed rapidly and soon became a serious competitor for the leader - British Airways (BA). BA did not want to put up with this and tried to force Virgin out of the market. In particular, BA increased the maintenance fee for Virgin aircraft 5 times. And then, using her connections with the management of Heathrow airport, she ensured that all Virgin flights were operated at the most inconvenient times for passengers, and as an alternative they were offered to use BA services.
In 1992, Virgin filed a lawsuit seeking compensation from BA for defamation. Branson managed to collect comprehensive evidence of BA’s illegal activities to force Virgin out of the market. The evidence collected was so powerful that British Airways admitted its guilt before the start of the trial and agreed to pay compensation in the amount of 600 thousand pounds sterling.
Note that Virgin competed with British Airways, having in case of loss a “back-up airfield” - a record company.
An interesting example is the competition between a small pharmacy and a large retail chain.
Pharmacy owner Duane Goode filed a lawsuit against Wal-Mart, alleging that Wal-Mart stores are violating Arkansas laws by charging prices below purchase price for pharmaceuticals and cosmetics. The press dubbed the lawsuit by Goode and other owners of small pharmacies who joined him as “Wal-Mart’s worst nightmare.” For several years, Good collected evidence and came to the conclusion: Wal-Mart lowered prices only in those regions where the company had serious competitors. In other places the markup was normal. Thus. Good found that Wal-Mart selectively sells its products at bargain prices - and not at all out of a desire to please consumers. Goode's arguments were approved by a local court, which recognized his case, but were rejected by the highest court in Arkansas. However, the press felt that Duane Goode had won anyway: Wal-Mart has since been forced to pay more attention to relationships with small and medium-sized businesses.
Eat wonderful example from the history American business How competitors find economically viable ways to solve their problems.
The firms of Jay Gould and Cornelius Vanderbilt competed in the railroad transportation market. Price competition led to the fact that Vanderbilt, with its enormous resources, decided to “crush” its younger competitor and appointed minimum price transportation - 1 cent per head of cattle. Transportation on its road has increased significantly. And Gould's have faded away. Finally, Vanderbilt learned that it was Gould who had bought all the cattle at the market and was transporting them for sale along a rival road, taking advantage of the generosity of a competitor.
