Gold Mine or Minefield: Understanding Russian Law on Vertical Restraints

Abstract

While the Russian Federation represents a significant opportunity for growth, that opportunity is coupled with serious risks. As it relates to managing product distribution, Russian vertical restraint law remains significantly more restrictive than that of the U.S. and, since unless a company is fully integrated, it must manage its distribution system by way of vertical agreements, presents a large problem for businesses seeking to conduct business in Russia. While Russia has made significant steps in the right direction, the lack of consistent application of economic analysis to evaluation of vertical restraints leaves companies exposed. Further, the sometimes inconsistent application of the laws also makes it hard to predict how any particular vertical agreement would be evaluated. Neither American nor Russian antitrust laws establish a list of possible vertical restraints. Thus, there is no exhaustive guidance regarding how these restraints should be treated. U.S. antitrust laws, however, generally place all vertical restraints into one of two categories, intrabrand restraints and interbrand restraints. Intrabrand restraints are those that restrain the downstream firm’s freedom with regard to the resale of the product at issue (distribution restrictions). Interbrand restraints are those that restrict a downstream or upstream firm’s freedom to deal with competitors of the firm imposing the restraint (interbrand restrictions). It should be noted that Russian law does not make this distinction.