2.1 Overview

State regulation of monopolistic activities and unfair competition prevention in Kazakhstan is achieved by way of setting criteria for recognition of market entities as monopolistic and dominant and inclusion of such entities in the register, establishing a list of actions considered to be violations of antitrust legislation, and classifying certain commodity markets as regulated markets. In particular, the following activities in Kazakhstan are referred to naturally formed monopoly:

1. transportation of oil and petroleum products via trunk pipelines;
2. storage and transportation of gas or gas condensate via trunk and distribution pipelines;
3. transfer and distribution of electric and heat power;
4. services of trunk railway networks, ports and airports.

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2.2. Dominance

The Law on Competition differentiates between the concepts of dominant position and monopolistic position. Recognized as dominant is a position of a market entity whose share in the relevant commodity market is 35% or more, or a position of several entities, if: 1) the aggregate share of three or less market entities holding the largest shares in a certain market is 50% or more; or 2) the aggregate share of four or less market entities holding the largest shares in a certain market is 70% or more. Financial institutions are subject to other criteria. Entities whose share is 15% or less cannot be recognized as dominant.

When classifying market entities as dominant entities, only quantitative, not qualitative indicators of the market are taken into consideration.

The position of naturally formed monopoly entities, state monopoly entities, and market entities holding 100% dominance share is recognized as monopolistic.

The state carries out monitoring of such entities by way of putting them on State Registers.

The Law provides for a number of restrictions for the said entities; failure to comply with such restrictions is regarded as abuse of one's position. Thus, actions or omissions, which resulted or may result in limitation of access to the relevant commodity market; prevent, restrict or eliminate competition; and/or prejudice consumers' legitimate rights, are prohibited.

The Law provides for the creation of state monopoly entities based on the RoK Government decision

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2.3. Monopolistic agreements and concerted actions

Although the Law on Competition employs the concepts of anti-competition agreements and anti-competition concerted actions, there is no clear delimitation between them, because the Law sets forth that any form of agreement may be recognized as anti-competition.

The following indirect evidences are sufficient for recognizing actions as concerted:

1. concurrent actions of market entities performed within a three month period, each market entity gaining an uncontemplated benefit as a result;
2. actions of market entities were known to each of them in advance;
3. actions of each market entity did not result from the circumstances equally affecting such market entities.

Provisions restricting anti-competition agreements do not apply to a number of agreements, for example, to licensing agreements, franchising agreements, agreements and actions within the same group of persons, and to long-term investment or concession agreements.

Anti-competition agreements and concerted actions between market entities are permitted if they do not prejudice consumers' legitimate rights and:

1. their aggregate share in the commodity market does not exceed 15%;
2. they are aimed at improving production by way of introduction of advanced or resource-saving technologies;
3. they are aimed at small and medium business development; and
4. they are aimed at drafting and application of regulatory documents on standardization.

Concerted actions are permitted between entities, which are part of the same group of persons.

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2.4. Unfair competition

The key regulations restricting unfair competition are set forth in the Civil Code and the Law on Competition. Any actions in competition aimed at achievement or provision of unlawful advantages as well as those violating consumers' legitimate rights are recognized as unfair competition and are prohibited. The Law contains an exhaustive list of 12 actions recognized as unfair competition, which does not contain any reference to violation of requirements of honesty, reasonableness or ethics, as well as to some other forms of unfair competition, which are very common worldwide.

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2.5. Antitrust investigation

An antitrust investigation may be initiated on the basis of information about violations received by the Agency, as follows:

1. materials from governmental authorities
2. application from an individual or a legal entity
3. signs of antitrust legislation violations in the actions of market entities identified by the Agency in the course of its activities. The legislation, however, does not provide for regular inspections of market entities' activities by the Agency
4. address from mass media to the Agency.

Identification of violations of antitrust legislation goes in three stages, as follows:

1. preliminary review of information about the violation
2. investigation of the violation
3. legal proceedings on the case.

The period of preliminary review cannot exceed one month and the period of investigation cannot exceed two months. However, these periods may be extended. The period of legal proceedings on the case is 15 days.

Information about commencement of investigation is to be published on the official website of the Agency, including information on the imposed liability measures and the particular market entities and violations committed thereby.

Beside the claimant and the subject of investigation, the interested parties, witnesses and experts may also participate in the investigation conducted by the Agency officials.

In case a violation is identified in the course of investigation, the Agency may choose one of the three options to be applied to the offender:

1. initiate an administrative case;
2. issue ordinance to rectify the violation;
3. transfer materials to law enforcement authorities for initiation of a criminal case.

Ordinances of the Agency, which may be appealed in court, may contain demands that market entities stop violations or eliminate their consequences, make restitution, terminate or amend agreements contradicting the legislation, or enter into an agreement with another market entity.

Administrative proceedings, depending on the case category, may be conducted by either the Agency, or specialized administrative courts. The Agency's competence includes review of violations connected with economic concentration, unfair competition, and failures to perform under Agency's ordinances. The head of the Agency and his/her deputies, as well as heads of the Agency territorial subdivisions and their deputies, have the right to review cases and impose administrative penalties.

Acts issued upon the results of proceedings may be appealed by interested parties. A ruling issued by a specialized court may be appealed in a higher court instance; a decision issued by an official may be appealed in a specialized court.

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2.6. Implications for infringers

Civil liability

Civil liability for violating the antitrust laws is primarily based on the general grounds of applying liability for causing damage (tort liability). The method of protecting one's rights and interests in the form of filing a claim in court is available to all market entities and consumers.

The Agency is vested with powers to claim in judicial authorities invalidation of transactions consummated without obtaining prior consent to economic concentration. The Agency may also file a claim in court for a forced split of a market entity or spin-off of one or more legal entities from such market entity, if such market entity twice in one year committed violations associated with the abuse of its position, commitment of anticompetitive actions or execution of anticompetitive agreements.

Moreover, the Agency has the right to file in judicial authorities claims for declaration as illegal the state registration or re-registration of legal entities, as well as rights to immovable property obtained as a result of transactions entailing economic concentration consummated without the Agency's prior consent.

Administrative liability

The RoK Administrative Violations Code provides for the following types of penalties for violation of antitrust legislation: fines and confiscation of monopolistic profit.

The Code provides for the grounds for exempting persons from administrative liability due to the expiration of period of limitations, which is one year for individuals and five years for legal entities.

A conflict of laws regarding administrative liability of foreign market entities exists between the RoK administrative legislation and the Law on Competition. The Law on Competition applies to relationships, including those effectuated outside the RoK, while the RoK Administrative Violations Code is limited to actions, which commenced, continued or terminated in the territory of Kazakhstan. The foregoing does not allow applying to full extent administrative penalties, particularly to acts associated with entering into anticompetitive agreements or abuse of dominant or monopolistic position, committed by foreign market entities. However, if a legal assistance treaty is in place between Kazakhstan and another state, in which the foreign person committing violations of Kazakhstan's antitrust laws is a resident, such foreign person may theoretically be subject to administrative penalty.

Criminal liability

The Criminal Code provides for market entity officers' liability for monopolistic activities if such activities resulted in a large damage to an individual, organization or state, or if such activities are connected with derivation of large profit by the market entity. Such actions are punishable by a fine, corrective labor, or deprivation of liberty for a period, which depends on the qualifying elements of crime.

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