FAS discovered another major cartel

The Federal Antimonopoly Service (FAS) has found companies Pharm SKD and Novofarm guilty of forming a cartel during auctions for the supply of medicines and medical devices to medical institutions totaling over 400 million rubles, said Andrey Tenishev, Head of the FAS Cartel Fighting Department, at a meeting of the FAS commission.

"The FAS commission ruled to deny the respondents' petition. To recognize LLC Pharm SKD and JSC Novofarm as having violated the law on protection of competition, which led to the maintenance of prices at auctions. To issue binding orders to LLC Pharm SKD and JSC Novofarm to cease actions that restrict competition," said Tenishev.

He added that the case materials would be sent to the Main Directorate for Economic Security and Combating Corruption of the Russian Ministry of Internal Affairs to decide on initiating a criminal case. An administrative case will also be initiated against LLC Pharm SKD and JSC Novofarm; the fine for an anticompetitive agreement ranges from 10% to 50% of the initial minimum value of the auction subject.

"Dozens of state customers suffered losses from the activities of this cartel: when collusion participants entered the auctions, the price reduction from the initial price was only 0.5%, while with the appearance of independent players, the price reduction reached up to 30%. That is, there was a potential opportunity to bargain," Tenishev commented on the investigation.

"We do not understand the essence of the price collusion. We did not find a single circumstance where the commission would say that we profited from a cartel agreement. We were forced to involve another legal entity to fulfill the obligations we undertake," said a representative of LLC Pharm SKD.

According to the FAS, "FARM SKD", "Simbirsk Pharm", and joint-stock companies "Novofarm" and "Medintorg" entered into an anticompetitive agreement to maintain prices at auctions during more than 400 open auctions for the supply of medicines to hospitals and dispensaries. The antimonopoly authority identified signs of collusion during auctions in five Russian regions, including for the supply of antiretroviral drugs (for HIV treatment) and medicines for hepatitis B and C. The total value of state contracts where violations were established exceeded 700 million rubles.

On December 8, 2016, the Russian Government approved a bill developed by the FAS, implying increased fines for officials and companies participating in anticompetitive cartel collusions. The document will be submitted to the State Duma.