FAS v VSW: winning a dispute over market dominance

FAS v VSW: winning a dispute over market dominance

On 8 July 2020, the Federal Antimonopoly Service of Russia (FAS) brought to a close one of the largest antitrust investigations in the last several years: Vyksa Steel Works (VSW), the leading manufacturer of railway wheels in Russia, was found guilty of price gouging on the market for solid-rolled wheels. The firm’s lawyers represented the interests of two market actors in the case: the Union of Railway Transport Operators and Transoil, one of the country’s biggest railway transporters of oil products.

The subject matter of the comprehensive investigation by the FAS was the supplier’s activities in 2019, when, during unmet demand on the market, VSW sold solid-rolled wheels via competitive tendering. As a result, the price for wheels increased by over 40% for some customers by August 2019.

Ekaterina Smirnova, the firm’s lead lawyer in the case:

VSW’s actions caused a shock in the market: firstly, none of the players knew the volume of goods to be put up for competitive tenders and could not project their economic activity. Secondly, it was proposed that all buyers purchase wheels namely via the bidding procedure and not on the basis of concluded supply contracts, which provoked additional speculative demand. Thirdly, the starting price at the auction was monopolistically high. What is more, in the eight days between the closing of the first auction and the beginning of the second one, VSW raised the price by another 25%, which had no production or economic grounds.

As a result of the proceedings, the FAS agreed with the arguments of market actors: VSW truly abused its dominant position by setting and maintaining monopolistically high prices for solid-rolled wheels beginning in April 2019.