Russian Federal Antimonopoly Service threatens Renault and others with prosecution for unfair competition

23 October 2017

Parallel importation has been a hot topic in Russia for some time. We have covered this topic earlier in the year (see our previously published articles "Parallel Imports Sneak into Russia through Procedural Loophole" and "New Proposed Eurasian Trademark System".)

In those articles, we pointed out that Russia is a national exhaustion of rights country by reason of the provisions under Part IV of the Civil Code that stipulate that it is a form of trademark infringement if goods are introduced into commerce in Russia, without consent, by anyone other than the owner of the registered trademarks. We also mentioned that Russia's national exhaustion regime evolved recently to a regional exhaustion regime because of Russia's membership in the Eurasian Economic Union (EAEU). The news at the time was that there is a move afoot to introduce industry exceptions for parallel importation in sectors such as automotive, pharmaceutical and medical devices.

Businesses warn that full or partial legalization of parallel importation will lead to an increased volume of counterfeit goods entering the Russian market because grey goods are often commingled with counterfeits (see https://themoscowtimes.com/articles/b2b-discussions-on-legalizing-parallel-imports-47575).

The Russian newspaper, Kommersant, reported on August 4, 2017 that Russian Vice Prime Minister Igor Shuvalov was to hold a consensus meeting on August 8 to decide on Russia's official position on parallel importation. But the outcome of that meeting has not yet been disclosed (see https://www.kommersant.ru/doc/3373050).

It now seems that the implementation of the industry exceptions approach to otherwise illegal parallel importation, might take at least another 18 months, possibly two years or even longer.

In the meantime, the Russian Federal Antimonopoly Service (FAS) is trying to take matters into its own hands. According to information published on its own webpage in July 2017, the FAS has issued a warning to Renault, KYB Corporation and YD-Diagnostics, among others, that suggests that these organizations may be in breach of Russian anti-monopoly laws because they are unreasonably refusing, when asked on a case by case basis, to consent to parallel importation of goods (see http://fas.gov.ru/press-center/fas-in-media/detail.html?id=50929).

The FAS warning stems from routine requests made by importers of goods seeking permission from brand owners to import genuine branded goods made elsewhere. The brand owners are said to have either refused permission or to have simply not responded (see http://rusautonews.com/2017/07/19/russian-federal-antimonopoly-service-has-urged-oems-against-the-prevention-of-genuine-spare-parts-imports/). The FAS says that failing to consent may be a form of unfair competition.

According to the online publication, RusAutoNews, the FAS appears to be trying to discourage manufacturers of spare parts and medical equipment from interfering with the importation of genuine goods by legitimate but unauthorized distributors (see http://rusautonews.com/2017/07/19/russian-federal-antimonopoly-service-has-urged-oems-against-the-prevention-of-genuine-spare-parts-imports/).

In his interview, the Deputy Head of the FAS, Andrei Kashevarov, clarified that a refusal by a brand owner to consent to an import request can be justified in cases where the goods are not genuine or when their production is already "localized" in Russia. He also noted that, at present, the FAS has not determined that Renault has localized production in Russia. The FAS position seems to be aligned with the Government's broader program aimed at increasing "localization" viz., localized manufacturing by foreign companies in Russia.

The warning to Renault, KYB Corporation and YD-Diagnostics simply obliges the companies to stop restricting the independent importation of their products within a month; otherwise, each of the companies will be facing a fine up to 500,000 RUB (about $8,500 USD) under the Code of Administrative Offences (N 195-FZ).

The FAS is acting under the Russian Law on Protection of Competition (N 135-FZ) and the Decree of the FAS N 57/16 of January 22, 2016 which requires legal entities to comply with an FAS warning within the term specified in the warning (see Article 39.1(5), Russian Federal Law on the Protection of Competition (N 135-FZ) of 26.07.2006; and Section 3.1, Federal Anti-monopoly Service Decree N 57/16 of 22.01.2016).

Should recipients of the FAS notice fail to comply, the FAS may initiate administrative proceedings and the decision may be appealed in court within 3 months.

Stay tuned! More developments are expected later in the Fall.


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

Related Insights & Resources