Antimonopoly Compliance In The Republic Of Armenia

In order to improve economic market relations, in addition to the legal norms regulating the given sector, it is also necessary to take actions aimed at preventing possible illegal behavior by business entities.

For years now, a number of states have developed various tools to prevent antitrust behavior. Antimonopoly compliance is among the mentioned tools.

Through the introduction of an antitrust compliance program and its effective enforcement;

• business entities get the opportunity to avoid problems and to comply with the law,
• business entities save their money and reputation,
• the necessary environment for normal competition is provided through the consistent implementation and control of the project.

The key to any successful compliance programme, whether it relates to antitrust or another topic, is to reach the stage where the behaviour required under the programme is an indistinguishable part of the company culture.¹

In the sense of the legislation on the protection of economic competition, compliance can be defined as a set of actions aimed at complying with the legislation and legal acts regulating the sector, as well as preventing possible violations.

Competition compliance programmes have the greatest potential with respect to preventing and uncovering hardcore cartels. Competition compliance programmes are more likely to prevent some types of misconduct than others. Programmes are not especially well-suited to conduct that is known to require complex legal and economic analysis as well as in-depth inquiries into facts and market effects, such as abuse of dominance and monopolisation. On the other hand, programmes can be very helpful in preventing and exposing hard core cartel conduct, which is illegal per se and which lay people can more easily understand. Hard core cartels, however, also represent a monitoring challenge because they are deliberate and conspiratorial violations in which deception and secrecy are used to hide the illegal activity².

Compliance with the law has become particularly important in the field of antitrust law, where the proliferation of laws across the globe has been unprecedented. Existing antitrust laws are constantly evolving and new laws are being adopted. Sanctions for antitrust violations are often substantial and reputational damage to companies as a result of an adverse antitrust finding is massive³.

Compliance programs are designed to perform three main functions. The first function is to educate personnel and to provide relevant information about what types of conduct are prohibited by antitrust or competition law. The second is to signal to the outside world that the company has the commitment and determination to comply with competition rules, which contributes to building a positive brand for "ethical businesses." And the third function is to either prevent anticompetitive behavior or, if misconduct has already occurred, to detect that misconduct, preferably at an early stage. It has been said that the goal of a compliance program is to let the businessman feel the antitrust laws, and to make him think twice before engaging in conduct liable to constitute a violation⁴.

Having an effective culture of compliance with competition law will help a business to avoid the many adverse potential consequences of competition law infringement including the following:

• financial penalties of up to 10 per cent of group turnover
• adverse reputational impact (business and personal) associated with having committed a competition law infringement
• director disqualification orders for the directors of infringing companies
• criminal convictions for those individuals involved in a cartel
• considerable diversion of management time and the incurring of legal costs in order to deal with investigations by competition authorities
• unenforceability of restrictions in agreements that infringe the law, and
• lawsuits from those who have suffered harm as a result of the infringement.

Effective competition law compliance has greater benefits than just avoiding the adverse consequences mentioned above. Other potential advantages of an effective competition law compliance culture include the following:

• the early detection and termination of any infringements that have been committed by the business allowing, in appropriate cases, immunity or leniency applications to be made, potentially helping to reduce or eliminate financial penalties
• taking appropriate steps to comply with competition law might result in an up to 10 per cent reduction in the amount of the financial penalty imposed by the Office of Fair Trading for a competition law infringement, depending upon the circumstances
• employees being able to recognise the potential signs that another business might be infringing competition law, particularly in situations where their own business might be the victim of such an infringement and might decide to take appropriate action
• employees being confident of 'the rules of the game' and able to compete vigorously for business without fear of infringing competition law, as well as recognising when they should seek legal advice on potential competition law issues, and
• an effective culture of competition law compliance is an essential part of an ethical business culture, which can provide reputational advantages.⁵

Recently in the Republic of Armenia, the term compliance is often discussed, it became more relevant after it was introduced as a new institution in the competition protection legislation.

Among the powers of the Commission for the Protection of Competition in the Republic of Armenia is also the implementation of measures to prevent violations of the legislation on the protection of economic competition, which also includes the approval of guidelines and other documents of an advisory nature related to economic competition.

By issuing various guidelines and/or organizing meetings with business entities, the Competition Protection Commission tries to make the provisions of the competition protection legislation available to the widest range of people and the importance of maintaining them.

Until 2023, there was no legal regulation that would promote the implementation of antimonopoly compliance in their activities by economic entities, but on May 23, 2022, the Commission for the Protection of Competition published the "Guideline on the Implementation of Antimonopoly Compliance" (hereinafter: the Guideline). Where antimonopoly compliance is defined as a set of measures aimed at an economic entity to carry out activities in accordance with the legislation on competition protection.

The implementation of the antimonopoly compliance program by economic entities implies the adoption of an internal legal act from a legal point of view.

The requirements for the antimonopoly compliance program should be clearly defined by the regulatory and supervisory bodies of the sector, because only if such guidelines and the requirements in it are clearly formulated, it is possible to create an objective and real opportunity for business entities to adopt and maintain the compliance program.

Therefore, the existence of the Antimonopoly Compliance Guide of the Republic of Armenia is very important, because the guideline defines both the circumstances that business entities must take into account, as well as the conditions imposed on the content of the internal legal act adopted by business entities.

Especially, when developing the compliance program, the business entity's field of activity and its features, the competitive risks recorded during the activity, the characteristics of the product market structure where the business entity operates, the fact that the business entity has a monopoly or a dominant position must be taken into account⁶.

According to Guideline, the compliance program/act must contain the competitive risks recorded during the activity of the economic entity, a list of measures aimed at reducing the risk of violation of the economic competition legislation (risk determination, risk assessment, reducing the risk occurrence probability, periodic risk assessment), information on the system for ensuring the implementation of the antimonopoly compliance program and etc.

At the same time, the Guideline states that in case of changes in the legislation on the protection of competition, the compliance program is subject to alignment with the existing legislation⁷.

Thus, we can record that the antimonopoly compliance enforcement policies and procedures of the Republic of Armenia, through their real and effective implementation, can contribute to the improvement of the competitive environment, which in the end will also contribute to the revitalization of investment activities.

A number of states, in order to bring the behavior of business entities into compliance with competition legislation and to ensure the practical applicability of the legislative regulations, provide incentive norms for those business entities that have implemented antitrust compliance.

The percentage reduction of the amount of the fine when imposing a fine on an economic entity can be included among the incentive norms, if the economic entity has accepted the anti-monopoly compliance.

As a result of the legislative reforms implemented in the Republic of Armenia on February 1, 2023, changes were made in the methodology of choosing the measure of responsibility and calculating the fine, and among the circumstances mitigating the measure of responsibility, in particular, in the presence of a compliance program, a percentage reduction should be applied to the applicable fine;

• When calculating the fine, 10% is reduced if the compliance was accepted and submitted to the Competition Protection Commission by the business entity prior to initiating proceedings on the offense, and if the business entity committed an offense for the first time after the compliance was introduced.
• When calculating the fine, 5% is reduced, if the compliance was accepted by the business entity after the initiation of proceedings regarding the offense in the field of economic competition and before the decision to apply a measure of responsibility was submitted to the Commission for Protection of Competition.

Envisioning the implementation of antimonopoly compliance as a basis for reducing the fine, at the same time, the lack of proper control over the actual implementation of this compliance can lead to situations when business entities implement the compliance solely to avoid large fines.

In order to exclude such situations, it is necessary for the Competition Protection Commission not to limit itself to the existence of a compliance program at the economic entity, but to find out through appropriate mechanisms whether the relevant economic entity is guided and previously guided by the compliance act adopted by it, or whether its existence is formal.

Along with antimonopoly compliance providing a condition for the reduction of fines assigned by the Competition Protection Commission, effective mechanisms are needed to find out the actual application of that compliance.

The requirements reflected in the Guidelines submitted to antimonopoly compliance are only indicative in nature and cannot be binding for the business entity, as the Guidelines are not a normative legal act.

At the same time, the Guide stipulates that the business entity can submit the antimonopoly compliance plan project to the Competition Protection Commission to receive a conclusion.

It is noteworthy that applying to the Commission for the Protection of Competition in order to obtain a conclusion is a right for business entities, not a duty, and the risk of negative consequences of not applying must be borne by the business entity.

The guidelines for the application of liability measures by the Competition Protection Commission only state that the existence of a compliance program or its acceptance during the initiated proceedings may be sufficient to reduce the amount of fines.

That is, to discuss the issue of reducing the amount of the fine, the Competition Protection Commission must be satisfied with the existence of the compliance document and does not have the opportunity to take actions aimed at revealing the compliance of the program with the competition protection legislation, because the submission of the compliance plan is sufficient to reduce the amount of the fine.

Summarizing the study, we find that to ensure the effective enforcement of antimonopoly compliance, the simultaneous presence of the following conditions is necessary;

• In the case of submitting an antimonopoly compliance plan for the purpose of reducing the amount of the fine, the Competition Protection Commission should have the authority to assess the compliance of the plan with the requirements of the law and the Guidelines and reduce the amount of the fine only in the case of a plan that meets the requirements.
• The Competition Protection Commission must have the objective ability to monitor compliance with the compliance program approved and submitted by business entities after the reduction of the fine, as well as after receiving the positive conclusion of the Competition Protection.
• If the existence of a compliance program is the basis for the reduction of the fine, the decision to apply a measure of liability must contain an order to the economic entity to comply with the compliance program, which in case of non-compliance, the economic entity will be held liable.
• In case of violation of the terms of the compliance program based on the reduction of the fine (the order issued by the decision to apply a measure of responsibility), the amount of the fine imposed should be an amount reduced (5-10 percent) from the previously applied fine.

Footnotes

* The term "anti-monopoly" is used as an internationally recognized term and does not characterize the nature of the legislation of the Republic of Armenia on the protection of competition.

1. The ICC Antitrust Compliance Toolkit. p. 4 (available at 30.03.23 https://compliance.concurrences.com/en/compliance/2020/corporations-initiatives/the-icc-antitrust-compliance-toolkit)

2. OECD Policy document DAF/COMP (2011)20 Promoting Compliance with Competition Law 2011. P 14 ( available at 26.03.2023 http://www.oecd.org/daf/competition/Promotingcompliancewithcompetitionlaw2011.pdf):

3. International Chambers of Commerce. "The ICC Antitrust Compliance Toolkit", 2013. p. 4 (available at 24.03.2023 chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://iccwbo.org/content/uploads/sites/3/2013/04/ICC-Antitrust-Compliance-Toolkit-ENGLISH.pdf):

4. Ma, Jingyuan and Marquis, Mel (2018) "Corporate Culture and Competition Compliance in East Asia," South Carolina Journal of International Law and Business: Vol. 15: Iss. 1, Article 5. (Available at 05.04.2023 https://scholarcommons.sc.edu/scjilb/vol15/iss1/5 )

5. United Kingdom Office of Fair Trading Guidance document 1341 How your business can achieve compliance with competition law 2011. p.5-6 (available at 26.03.2023 http://oft.gov.uk/shared_oft/ca-and-cartels/competition-awareness-compliance/oft1341.pdf.):

6. Compliance-guideline. 2022 p. 19, (available at 27.03.23 http://competition.am/wp-content/uploads/2022/05/Complience-guideline.pdf):

7.Compliance-guideline. 2022 p. 19-20, (available at 27.03.23 http://competition.am/wp-content/uploads/2022/05/Complience-guideline.pdf):

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.