Purchases of capital-intensive products - obvious solutions for competition organization there don’t exist

28 may 2014

“Antimonopoly Service has no right to interfere in the activities of companies. It is important for us to preserve the competition environment”, stated Head of the Department for Control over Industry and Defence Complex of the FAS Russia Maksim Ovchinnikov during the roundtable. This event was organized due to a couple of so called “pipe cases” with violations of antimonopoly legislation. Many issues were discovered during the analysis of these cases, which will require additional examination as they had an ambiguous consequences and influence over the competition environment.

Roundtable “Purchase of capital-intensive products by large consumers: ways to organize and conditions for competition” took place at the Analytical Center. Experts discussed the consequences of “pipe cases” and underlined three important issues like: long-term planning of economic activity in major infrastructure projects, participation of intermediaries (traders) in tenders and acceptable methods for organizing procurements of capital-intensive products taking into consideration the maintenance and development of competition.

Maksim Ovchinnikov mentioned that participation of traders in procurement procedures is not excluded but it must be fundamented and the FAS Russia must create the conditions so that companies could independently participate in tenders avoiding intermediaries. “Intermediaries – is not an accurate term, - considers Pprofessor of the Higher School of Economics - National Research University (HSE) Svetlana Golovanova. – Will it be justified to keep outside the market these types of agents? At a closer look they are active not only in buying and selling but also execute specific tasks like mediation or independent evaluation”. Chairman of the Coordinating Council of the Russian Pipe Producers Association Ivan Shabalov exemplified that only 4 out of 9 producers that took part in the “South stream” tender are direct suppliers and the other 5 are traders.

Deputy Head of the Pricing and Economic Expert Analysis Department at Gazprom Roman Barakov talked about the acceptable forms of procurements. He mentioned that “competition is not perfect in this market because Russian companies prefer to work through direct contacts and it is a positive situation”. According to him, “Gazprom” is ready to discuss short and long-term mixed contracts. Experts agree that definitive solutions don’t exist in this situation and each case must be analyzed independently.

Summarizing the discussion, Director of the Center for research in competition and economic regulation Andrey Shastitko who was also the moderator of the roundtable, mentioned the need to improve the organization of business planning and to fight for a signaling system for choosing the types of the contracts. “We don’t have simple and obvious solutions and the global experience will not offer one. We have many debates ahead of us”, concluded the expert.