Recent amendments to the Kazakhstan Entrepreneurial Code (the “EC”) with regard to the protection of competition introduced by Kazakhstan Law

Hereby we would like to inform you about recent amendments to the Kazakhstan Entrepreneurial Code (the “EC”) with regard to the protection of competition introduced by Kazakhstan Law On Amendment of Certain Legislative Acts of the Republic of Kazakhstan Concerning the Regulation of Agribusiness Industry No. 268-VI of 28 October 2019 (the “Law”).

Most of the Law provisions entered into force upon the expiration of a 10-day period after the first official publication of the Law in the Kazakhstanskaya Pravda newspaper on 5 November 2019.

Scope of an Open Antitrust Compliance Policy

From now on, the Antitrust Authority will check the open antitrust compliance policy of an Applicant for conformity with the Kazakhstan law provisions regulating the protection of competition.  In the past, the Regulator checked such policy just for conformance with the model open antitrust compliance policy adopted by Order of the Kazakhstan Minister of National Economy No. 65 of 13 February 2017.

Given the fact that such draft open antitrust compliance policy reviewed and approved by the Antitrust Authority is an instrument that gives official guidance on the application of Kazakhstan competition law to particular undertaking(s) or situation(s), such undertaking(s) acquire an efficient tool to mitigate their potential risks.

We believe that the amendments will encourage a far greater number of undertakings to apply to the Regulator for approval of their open antitrust compliance policies.

When such a need arises, we could provide a comprehensive range of services for implementation of a robust antitrust compliance program, including, but not limited to, the performance of antitrust due diligence, drafting of various compliance documents, negotiation of an open antitrust compliance policy with the Regulator, implementation of an antitrust compliance system, etc.

Broadening the Definition of “Control”

Article 169.6 of the EC provides that “the prohibition of anticompetitive agreements does not apply to the agreements between undertakings belonging to one group, where one of the undertakings exercises control over another such undertaking and where the undertakings are controlled by one and the same person”.

The Law has broadened the definition of “control” by extending it to the capability of an individual or legal entity to, either directly or indirectly, influence decision-making of another legal entity through “the acquisition of the right to determine the course of business of such entity or to issue directions binding on such entity in accordance with a public-private partnership agreement, franchise agreement, license agreement or any other agreement between the right holder (or nominee thereof) and the undertaking with regard to the organisation of sales under a certain trademark or another visual identity of the right holder”.

Hence, in fact, the amendments may exempt certain anticompetitive agreements from antitrust liability when an undertaking asserts control under such agreements.

It is of interest to note that, in this regard, the amended EC contradicts the provisions of the Treaty on the Eurasian Economic Union.

We would like to emphasize that it is still required to notify the Antitrust Authority of an effective economic concentration when “an undertaking acquires a right (including as a result of signing a trust management agreement, joint operations agreement or agency agreement) that enables them to issue directions binding on another undertaking in the course of its business or to exercise the functions of the executive body of such other undertaking” (Article 201.1(4) of the EC).

Broadening the Definition of “Permissible” [Concerted Practices]

In the past, for concerted practices to be “permissible”, the involved undertakings had to prove that such practices were needed for improvement of their production processes through the implementation of advanced technologies.  Now, the improvement of production/distribution processes can be achieved by such means as “standardization, quality control assurance, sustainability and transfer of a proportionate share of the achieved efficiencies to consumers”.

Amendments to Investigation Procedure

The Law clarifies that a failure to notify the Antitrust Authority of signs of Kazakhstan competition law offence in actions/omissions of an undertaking within a specified period is deemed as a sufficient ground for investigation.

Besides, from now on, an order on investigation must specify, inter alia, the subject matter of such investigation and the investigated period.  The latter amendment was introduced to prevent antitrust officers from unreasonable (unauthorized) extension of the list of information to be reviewed in the course of investigation.

The Law has, to a certain extent, enhanced the role of a conciliation commission in the Antitrust Authority.  From now on, when an investigated undertaking objects to any comments or recommendations of the conciliation commission, the responsible officer must issue a reasoned opinion subject to consideration/review at the conciliation commission.  The investigation must be suspended for a period from the date of receipt of such objection or the officer’s reasoned opinion until the date when the conciliation commission issues relevant comments or recommendations.

It is also worth mentioning the amendments concerning an order on approval of an investigation report, in particular:

• when an investigator decides to initiate administrative proceedings, the respective order on approval of the investigation report shall enter into force in 10 days after its issuance;
• the date of detection of an administrative offence shall be deemed the date when the respective order on approval of the investigation report enters into force (rather than the date of its issuance); and
• an appeal against such order on approval of the investigation report shall postpone the effective date of such order until the appeal is examined.

By these amendments the lawmaker implies that an order on approval of an investigation report may be appealed in accordance with Chapter 29 of the Kazakhstan Civil Procedure Code.  As a reminder, in the past, a court closed such case as not subject to civil proceedings.

However, the established 10-day period will be obviously interpreted as the deadline for filing an appeal against such order.