FAS removed shavings from Russian subsidiaries of Kronospan

Three Russian enterprises affiliated with the Austrian group Kronospan will have to pay fines in the amount of more than 200 million rubles. They were unable to challenge the decision and order of the FAS Russia. In 2022, the agency found that companies dominating the oriented strand board market unreasonably increased their selling prices. In court, the representatives of the plaintiffs, in particular, tried to prove that Kronospan did not occupy a dominant position in the market. Lawyers consider it unlikely that the court’s decision will be revised.

The Moscow Arbitration Court upheld the decision and order of the FAS Russia, issued in July 2022 to the Russian subsidiaries of the Austrian holding for the production of wood-based panels Kronospan – Kronospan LLC near Moscow, Kronospan GMH LLC and Kronospan OSB LLC, registered in Ufimsky area. The court also denied companies the cancellation of fines imposed by the antimonopoly agency in October 2022-January 2023.

As follows from the materials of the court, in September 2021, the FAS initiated a case on the grounds of a violation of clause 1, part 1, article 10 of the Federal Law “On Protection of Competition” (prohibits restriction of competition by a market participant that occupies a dominant position on it).

The agency then reported that the Russian enterprises of Kronospan unreasonably increased selling prices for products by 300%. “Analysis of the companies’ performance indicators showed that the cost of production of oriented strand boards did not increase significantly, in contrast to the price. These circumstances testify to the presence of an unreasonably high mark-up on products manufactured by the Kronospan group of companies,” the ministry said in a statement.

In July 2022, the defendants, who, according to the FAS, occupy a dominant position in the Russian oriented strand board market, were found to have violated antitrust laws. The decision of the antimonopoly service has not been published on its official website.

Turnover fines were imposed on the companies (not less than 100 thousand rubles and not more than 2%) of the total amount of proceeds from the sale of goods for the part of the calendar year preceding the date of detection of the administrative offense). Kronospan was ordered to pay 176.5 million rubles, Kronospan OSB – 45.3 million rubles, and Kronospan GMH – 100 thousand rubles.

Kronospan LLC and Kronospan OSB LLC are registered in Yegorievsk near Moscow and in the Ufimsky district, where Kronospan plants are located. Kronospan GMH is the managing company of both LLCs. According to SPARK-Interfax, the total revenue of Kronospan’s subsidiaries in 2020 amounted to 35.5 billion rubles, and in 2021 – 60 billion rubles. In 2020, only Kronospan LLC showed a profit – 3.8 billion rubles, two LLCs were unprofitable (2.5 billion rubles). In 2021, all three companies turned out to be profitable – 22.3 billion rubles.

In court, the representatives of the plaintiffs insisted that the FAS erroneously determined the product and geographical boundaries of the commodity market and the shares of its participants. The antimonopoly agency, in particular, allegedly did not take into account that the product boundaries of the commodity market should include not only oriented strand boards, but also plywood, and geographical ones, in addition to Russia, should include the member states of the Eurasian Economic Union.

As the court noted, the FAS made a controversial decision after analyzing various sources, including Rosstat data, and found that in the first half of 2021, the average increase in the cost of oriented strand board was 140%, and plywood – 106.5%. At the same time, an analysis of the change in the volume of demand with price changes showed that, at the end of 2021, the volume of plywood consumption in the domestic market increased compared to 2020, while the OSP, on the contrary, decreased. Thus, plywood and oriented strand board are not interchangeable goods, the court found.

Assessing the geographical boundaries argument, the court noted that the share of imports of TSOs in 2020 was only 14%, and in 2021 – 6.3%. At the same time, the main import of panels comes from Belarus, the court drew attention, and “almost the entire volume of imports in 2020-2021” accounted for the Belarusian Kronospan OSB LLC. And the share of exports of products to the EAEU countries in the same period was less than 10% – that is, the main sales market for products is in Russia, the court concluded.

After analyzing all the arguments of the representatives of the plaintiffs, the court found no grounds to satisfy the claim. The court also left the amount of fines unchanged, noting that it is less than 2% of the revenue of each LLC for 2020.

It was not possible to get through to the general director of Kronospan GMH Ardasher Kurbansho yesterday.

“I believe that the chances of overturning the decision on appeal are minimal,” said Yury Fedyukin, managing partner of the law firm Enterprise Legal Solutions. At the same time, the court quite rightly points out that expanding the geographical boundaries of the commodity market to the countries of the post-Soviet space is impossible due to the fact that the predominant share of OSB products is sold precisely on the territory of Russia, and in connection with this, signs of a dominant position can be traced even more clearly.