OREANDA-NEWS. March 20, 2013. The Federal Antimonopoly Service (FAS Russia) completed an investigation of a case against large-diameter pipes: “TMK” Trading House” CJSC, “OMK-Steel” OJSC, “Chelyabinsk Pipe-Rolling Plant” Group” CJSC and “Izhorsk Pipe Plant” CJSC.

Investigating the case, the Commission established that the main suppliers of large-diameter pipes to the facilities of main gas pipelines of “Gazprom” OJSC are “Severny Evropeisky Trubny Proekt” Ltd. (“SETP” Ltd.), “Truboprovod” Trading House” Ltd. and “StroiPromDetal” Ltd. The companies do not have their own capacities for manufacturing large-diameter pipes and they buy these products from Russian pipe companies and supply them to the facilities of “Gazprom” OJSC.

Since 2005 till present participants of the tenders for supplying large-diameter pipes have not included direct manufacturers of the products – Russian pipe companies.

Russian pipe companies did not take part in tenders of “Gazprom” OJSC due to technological and economic reasons because “Gazprom” OJSC purchased products for the current needs of several projects through a single tender, which constituted considerable volumes exceeding technological manufacturing capacity of each market player separately.

According to FAS Russia, the practice of “Gazprom” OJSC for purchasing large-diameter pipes does not allow manufacturers to supply products directly, by-passing intermediaries, and thus, restricted their possibilities to actively compete with each other.

From 5th March 2008 to 2011 Russian pipe manufacturers: “ITZ” Group” CJSC (the group of persons of “Severstal”), “TMK” Trading House” CJSC, “OMK-Steel” OJSC, and “Chelyabinsk Pipe-Rolling Plant” Group” CJSC reached arrangements for supplying large-diameter pipes to the facilities of “Gazprom” OJSC in accordance with the balanced long-term schedules. In particular, they signed the “Schedule for supplying large-diameter pipes from the plants on the projects of “Gazprom” OJSC in 2008-2010”, which later was itemized with additional schedules. The schedules include allocation of large-diameter pipes supplies to the facilities of “Gazprom” OJSC between manufacturing plants with itemizing by projects, standard size (diameter, width of pipe walls), and strength classes.

The Commission established that the schedules were devised by an intermediary “SETP” Ltd., or “Pipe Manufacturers Association” Non-Commercial Organization. Manufacturing plants accepted the volumes proposed by the intermediary or the Association without correcting them in accordance with their production capacities, which means that they effectively refused to compete between each other.

The Commission concluded that by signing the schedules for supplying pipes to the facilities of “Gazprom” OJSC and not undertaking any actions towards increasing the volume of product sales, the manufacturers of large-diameter pipes refused to undertake independent actions in the market in question, which is a sign of restricting competition.

In view of the above, the Commission found that actions of the manufacturers of large-diameter pipes were in breach of Part 4 Article 11 of the Federal Law “On Protection of Competition”.

In the course of the investigation, the manufacturers presented evidence of acceptability of their conduct under Article 13 of the Federal Law “On Protection of Competition”. Due to sale of large-diameter pipes in accordance with the balanced schedules, the plants were able to plan manufacturing and investments in its development and improvement. A new industry was formed in Russia, and the plants managed to expand the range and increase the quality of their products. As a result of large-scale investments, competitive ability of the industry on the global market increased. Development of the industry created 6000 work places, while tax payments to the budget also increased. The prices of domestic manufacturers are lower than the prices for similar products of foreign manufacturers.

“Taking into account positive social-and-economic factors, the Commission found that the conduct of market players could be allowed under Article 13 of the Federal Law “On Protection of Competition”. However, further refusals to compete on the market, or participation of pipe manufacturers in a competition-restricting agreement will be considered by the antimonopoly body as a gross violation of Article 11 of the Federal Law “On Protection of Competition” and if such a violation is found the violators will be imposed turnover fines”, the Commission Chairman, Stats-Secretary, Deputy Head of FAS Andrey Tsarikovskiy commented the decision.