OREANDA-NEWS. April 14, 2008. The Federal Antimonopoly Service (FAS Russia) imposed administrative chargers upon "RZhD" OJSC and its subsidiary - "Refservice" OJSC under Article 14.31 of the Code of Administrative Violations - fines 151 167 210 and 2 532 480 Rubles accordingly for abusing dominant position, reported the press-centre of FAS Russia.

The fact of antimonopoly violation was established by FAS Russia in course of processing the case initiated on 14th September 2007 against "RZhD" OJSC and its subsidiary - "Refservice" OJSC: the group of persons comprising "RZhD" OJSC and "Refservice" OJSC violated Article 10 of the Federal Law "On Protection of Competition".

FAS Russia considered the actions of "RZhD" OJSC and "Refservice" OJSC as actions of a group of persons of an economic entity: Article 9 of the Federal Law "On Protection of Competition" defines a group of persons as a business entity (partnership) and a legal person if such a legal person has, due to its participation, more than 50% of all voting shares of the registered (joint-stock) capital of the business entity (partnership) in question.

Statutory proscriptions of actions (lack of actions) of an economic entity or economic entities, set by the Federal Law "On Protection of Competition", also cover actions (lack of actions) of a group of persons.

"RZhD" OJSC (the Carrier) violated the law by failure to provide to the consignors for loading insulated and refrigerated rolling stock of the Carrier under the rates, set by the 10-01 Price List for the Carrier and approved by the Resolution of the Federal Energy Commission of the Russian Federation. Furthermore, the Carrier provided the above rolling stock exclusively to its subsidiary, which operated as an intermediary between the Carrier and the consignors and increased the charges (tariffs) set for the Carrier.

Therefore, the Carrier provided its insulated and refrigerated rolling stock to the consignors not on the basis of a public contract for railway freight between the Carrier and the consignors in accordance with the application submitted by a consignor (Form GU12), but on the basis on the contracts that were not of public nature: the contract with "Refservice" OJSC - a "RZhD" OJSC subsidiary - on transportation and payment for transportation in the insulated and refrigerated rolling stock provided to "Refservice" OJSC, and /or the contract singed by "Refservice" OJSC and a consignor (or its representative) on transportation and payment for transportation, which resulted in the increased prices for food products.

Having considered the case, FAS Russia recognized that the group of persons - "RZhD" OJSC and "Refservice" OJSC violated Clauses 1,4,5 and 8 Part 1 Article 10 of the Federal Law "On Protection of Competition" and closed the case against "RZhD" OJSC and "Refservice" OJSC for breaching Article 11 of the Federal Law "On Protection of Competition" due to the absence of violations.

This is not first, and not the last violation related to transportation of refrigerated cargo.

For instance, on 24th March 2008 FAS Russia established that "RZhD" OJSC committed another antimonopoly violation: FAS Russia recognized that the company breached Article 10 of the Federal Law "On Protection of Competition" and issued a determination to eliminate the violations.

The case was processed upon a petition of "Heineken Brewery" Ltd. regarding the actions of an economic entity, occupying the dominant position on the market of railway cargo transportation, that were aimed at preventing, restricting and eliminating competition and infringing the interests of other economic entities. "Baltika" OJSC was also brought into proceedings.

"RZhD" OJSC violated the law by refusing to conclude a contract for beer transportation under special conditions, in specially equipped cars during the winter season. It forces the freight owners to use for transportation the rolling stock of "Refservice" OJSC - a subsidiary of "RZhD" OJSC. Currently FAS Russia is determining the level of penalties appropriate for this offence in accordance with the Code of Administrative Violations.

Moreover, in its ruling of 03.03.2006 the Federal Arbitration Court of the Moscow District had already recognized as illegitimate and unjustified the actions of "RZhD" OJSC on abusing the company's dominant position by entering into contracts for transportation under special terms the pasteurized beer, produced by the "Baltika" Brewing Company" OJSC and "Heineken Brewery" Ltd., in the cars that are owned by the above economic entities and /or belong to them under any other statutory rights.

"RZhD" OJSC violated the law by sending on 2nd November 2007 a telex, shortening the delivery time of pasteurized beer in the winter season in the covered cold-proof cars (technology developed in the All-Russian Research Institute for Automated Control Systems, a State Unitary Enterprise of the Ministry of Railways) owned by the "Baltika" Brewing Company" OJSC and "Heineken Brewery" Ltd. from 15 to 10 days. FAS Russia confirmed the fact of violations while processing the antimonopoly case of 10th January 2005.

Processing the case, FAS Russia revealed a possibility to transport pasteurized beer in the winter period in the covered cold-proof cars using the technologies applied by the "Baltika" Brewing Company" OJSC and "Heineken Brewery" Ltd. when the transportation deadline is less than 15 days.

"RZhD" OJSC was issued a determination to set the deadlines for transportation of pasteurized beer in the winter period in accordance with the well-established, proven technology for the covered cold-proof cars. Under the ruling of the Federal Arbitration Court of the Moscow District of 03.03.2006, the decision and determination on the case of 10.01.2005 finally came into force.

The decision forbade the subjects of natural monopoly, which include "RZhD" OJSC, from abusing their position by entering into transportation contracts in special conditions, which infringe the interests of counteragents.

On 17th May 2007, FAS Russia processed another case, initiated upon a petition of the "Baltika" Brewing Company" OJSC and "Heineken Brewery" Ltd. against "RZhD" OJSC, which was evading beer transportation in the summer and interim seasons. On 2nd July 2007, in course of the case processing, "RZhD" OJSC sent a telex authorizing transportation of pasteurized beer in the summer and interim seasons, and, therefore, eliminated the antimonopoly violation. The case was closed due to voluntary elimination of the antimonopoly violation. Based on this decision, "RZhD" OJSC was fined 22 780 000 Rubles for committing the antimonopoly violation. FAS Russia imposed the minimum fine taking into consideration voluntary elimination of the violation by the company.

The Moscow Arbitration Court found the FAS Russia's decision legitimate and justified. The Appeal Court processed the complaint of "RZhD" OJSC on 12th March 2008; the Court did not take into account the arguments presented by FAS Russia and revoked the ruling of the Moscow Arbitration Court. The antimonopoly authority intends to lodge an appeal to the Cassation Court against the ruling of the Appeal Court in the near future.

"Refservice" OJSC - a subsidiary of "RZhD" OJSC - was formed in 2006; "Refservice" OJSC operates the whole fleet of insulated rolling stock, which previously was in possession of the Carrier - "RZhD" OJSC.

Refusal to enter into a contract for transportation of pasteurized beet under special terms in the covered cold-proof cars and unlawful actions by "RZhD" OJSC, forcing to use the rolling stock that belongs to the Carrier's group of persons, increase significantly the transportation costs.

Attempts to introduce free market pricing on the services for offering refrigerated rolling stock without creating the necessary competition environment and ensuring consumer rights of choice result in considerable losses of the beer producers, which only in the last winter exceeded 400 mln Rubles.

Such business practice contradicts the objectives of the railway reforms. Unjustified growth of the transportation prices increase the prices on the end-use products. It affects not only the beer prices but also the prices for various food products. FAS Russia continues receiving complaints regarding these issues.