When Well-Intentioned Legal Reform Goes Awry : A Case Study of Legal Loopholes and Challenges to Anti-Corruption Reform of Russia ’ s Complex Procurement System
Key Challenges of the Russian Procurement System
The term “ competition ” received
its legislative definition in Federal Law No . 135-FZ of July 26 , 2006 “ On Protection of Competition ” ( Section 7 , Article 4 ): “ Competition is defined as a rivalry between economic entities , in which independent actions of each of them are excluded or the ability of each of them to unilaterally influence the general conditions of circulation of goods in the relevant product market is limited .” ( SMB , 2016b )
In the same law in paragraph 17 of Art . 4 the indications of competition restriction are identified ( SMB , 2016b ). Despite the rather wide list of signs of restriction of competition , in our opinion , it does not include all possible cases , and the list is closed , it does not imply the possibility of expansion by other cases . With regard to the activities of state and municipal customers , there is directly listed only one option for their possible actions to limit competition : the establishment of requirements for goods or economic entities that are not provided by law .
For example , government procurement of goods at overpriced or undervalued prices is in fact an increase or decrease in the price of the goods , not due to market circumstances . However , this wording presents the result of unfair actions of officials , but not their essence , and this result is rather difficult to identify . The reduction in the number of entities involved in public procurement , of course , can serve as a sign of restricting competition , but in reality , this effect can only be assessed by the results of a long period of time , which makes it difficult to apply measures here and now . In addition , this formulation deals with the product market as a whole , which makes it difficult for one specific customer to analyze whether all interested participants have the opportunity to take part in the procurement process . The statements related to the definition of the general conditions for the circulation of goods in the market or the creation of other circumstances that give individual business entities to influence this market also do not take into consideration the possible actions of individual customers , despite the fact that the general conditions of commodity circulation in the market can also be formed from such separate actions .
Thus , the wording of the signs of restriction of competition , available in the legislation , does not make it possible to realistically assess the specific actions of individual officials that limit competition , assess their individual effect and make its practical application difficult , including by regulatory authorities .
An analysis of the Federal Law 44 immediately makes clear that the rights and obligations of procurement participants and customers , as well as the ways to protect their rights , are very asymmetric ( SMB , 2016a ). For example , procurement participants who do not fulfill their duties in the public procurement process are punished seriously enough . They are entered in the register of unscrupulous suppliers . In accordance with Part 2 of Art . 104
155