Translated material
Tribute from the brand
Representatives of major brands were warned about changing the rules of the game in the Russian market
Representatives of the largest brands operating in Russia, at the Brand Day conference held on November 17, were told what changes to the rules of the game await them in the near future. This includes strengthening administrative responsibility for the reliability of information about products, a ban on the use of a number of words in advertising, reducing the sound of commercials, the struggle to oust food imports from the domestic market, as well as difficulties in promoting new brands on supermarket shelves. As a bonus, entrepreneurs will be given the opportunity to complain about the actions of officials who limit competition.Deputy Minister of Industry and Trade Vladimir Salamatov promised those present to speed up work on updating safety standards for manufactured products. Now, of the 23,595 national standards that existed before the start of the technical regulation reform, only 36.4% have been revised and harmonized with international and national standards. “Updating 800-1000 standards a year means that the work is being done very slowly,” admitted the deputy minister. “There are plans to increase the number of revised standards by 2-2.5 times and bring them to 2.5 thousand per year.”
In the next three months, the government will submit about 20 technical regulations to the State Duma. By the end of 2010, the share of products that will be produced in accordance with the requirements of technical regulations will be 5.2%, by the end of 2011 - 36.7%, by the end of 2012 - 51.2%. The government is not satisfied with the situation when, with the end of the transition period provided for in the law “On Technical Regulation” on January 1, 2010, all existing regulations regarding potentially dangerous products for which no new technical regulations will appear will be abolished. “It is impossible to do this for 95% of products. Our consumer will simply be unprotected,” Mr. Salamatov warned. And he assured that this most likely would not happen.
According to the Deputy Minister, by the end of 2010, 100% of food products will be subject to safety guarantees from the manufacturer. True, the two key departments have different approaches to this issue. The Ministry of Economic Development believes that the director’s signature is sufficient to confirm security certificates. The Ministry of Industry and Trade is confident that at least 50% of food products require mandatory testing and laboratory confirmation.
At the same time, Vladimir Salamatov assured: “There is a general opinion in the government that a massive transition to self-declaration of product compliance with safety requirements is impossible without increasing the responsibility of manufacturers and certification organizations for the reliability of product information.” Corresponding amendments to the Code of Administrative Offenses have been prepared and submitted to the government. “But perhaps in some cases there should be criminal liability,” Mr. Salamatov expressed his point of view.
In addition, the Deputy Minister of Industry and Trade reproached both manufacturers and the public for their passivity in the fight for quality. According to Mr. Salamatov, “the voluntary certification systems for food producers are clearly underdeveloped.” And the government clearly lacks the activity of consumer protection societies.
The director of the Department of State Regulation in Economics and Competition Development of the Ministry of Economic Development, Alexander Pirozhenko, also spoke about the need to more actively help government agencies: “Administrative barriers are a significant obstacle to the development of competition in the country. Behind each of them is the interest, usually corrupt, of some specific officials.” To identify and eliminate them, we need the help of businesses that face these problems every day. To this end, in the near future the Ministry of Economic Development will open a special portal competition.ru, where it will be possible to give its recommendations on the development of competition, as well as report examples of officials countering business development in the regions.
Deputy Head of the Federal Antimonopoly Service Andrei Kashevarov admitted that the “fairly effective administrative way of considering cases of unfair competition” that has emerged in the country is “exclusive.” “Nowhere in the world, except Russia, does the protection of rights to means of individualization of goods, works and services take place administratively. Throughout the world, this is exclusively a judicial prerogative,” explained Mr. Kashevarov. In 2008, the FAS reviewed 440 similar cases throughout the country (an increase of 40% compared to 2007), of which 153 concerned trademarks. In the first half of 2009 there were 189 and 55 such cases, respectively. “Traditionally, there are more of them in the second half of the year than in the first. So, most likely there will be no fewer such cases than last year,” assured the deputy head of the antimonopoly service.
To equalize the conditions of competition, the FAS is preparing a draft law that will introduce a ban on the use in advertising of the words “most”, “only”, “best”, “absolute”, “first”, “number one”, “main” and words formed from them. “Such a ban existed in the law until 2006, and it justified itself,” believes Andrei Kashevarov. “This is not a practice of prosecuting violators, but of preventing violations.” In this regard, Mr. Koshevarov recognized the experience of fighting umbrella brands (when alcohol is advertised under the guise of other products) in the alcohol market as very effective.
The deputy head of the FAS warned representatives of the advertising business present in the hall that his department had found a way to combat the increased sound of advertising blocks on TV. The service has previously lost several cases against advertisers whose ads were louder than the main background of television programs. This happened because to record the violation, the sound volume was measured in decibels: it was difficult to measure the average sound level of the background transmission, since there could be pauses with almost complete silence. But, after consulting with television crews, FAS representatives found out that it all depends on the degree and standard of audio compression of the commercial. And now FAS intends to demand mandatory reformatting of videos to the standards of the channel where it will be shown.
Andrei Kashevarov is confident that equal conditions for all market participants are created by the law “On Trade” currently being discussed in the Duma. The FAS representative only regrets that his agency’s wish that the list of prohibited unfair practices included in the draft law may be open is not taken into account. “We have already begun to encounter changes in the names of existing bonus practices,” said a FAS representative. -- A logistics bonus of 10% began to be called a good logistics organization. Bonuses have appeared for effective inventory management and effective sales practices. I’m afraid that the situation will not change, but only new words will appear.” At the same time, the deputy head of the antimonopoly agency admitted that “assessments of unfair practices will be subjective.” But he warned that the FAS will pay special attention to non-public transactions.
In this regard, according to Mr. Kashevarov, it would be logical to add to the Law “On Trade” a provision that tenders should be used as a promising procurement practice. According to him, this method of selecting suppliers, in particular, will allow retailers to bypass the maximum volume discount of 10% established in the draft law. The official assured that in open tenders, going beyond this limit will not be considered by the FAS as unfair practice. In addition, open tender procurement, according to the FAS, can be used to successfully enter the network of new brands or unbranded suppliers.
Director of the Department of Food, Processing Industry, Regulation of the Agri-Food Market and Product Quality of the Ministry of Agriculture Kirill Kolonchin spoke about the “long-suffering document” - the draft Food Security Doctrine, which will be submitted for discussion to the Security Council in the coming days. “This will be a program of clear actions for the next 10-15 years,” the official assured. According to him, the doctrine puts at the forefront the task of reducing dependence on agricultural food imports. “Food imports are becoming one of the main levers of economic and political pressure in international relations,” Mr. Kolonchin warned and cited as an example the ongoing conflict over the supply of Belarusian milk to the Russian market.
The representative of the Ministry of Agriculture referred to the point of view of the International Food Organization (FAO) that the share of imports that does not exceed 17% of the total volume of food consumed is normal for the security of the state. The Ministry of Agriculture sees ensuring the competitiveness of domestic producers in the development of large processing complexes and large retail chains. “This increases consumer demand, including for primary agricultural products, and therefore strengthens overall food security,” Mr. Kolonchin is confident. “In the task of providing the population with food, the role of processing and distribution is steadily increasing. In an urbanized society, the share of added value created by these links in the total cost of food products is the highest,” noted a representative of the Ministry of Agriculture and admitted that his department does not share the FAS’s point of view on large retail chains.
A representative of one of these networks, X5 Chief Executive Officer Lev Khasis, spoke about the most pressing issue. According to him, the new law “On Trade” deprives new manufacturers of almost all the tools for entering the network and launching new product brands there. “Retailers will have no reason to put a new product on the shelf. The assortment will begin to shrink,” Mr. Khasis warned. Mandatory disclosure of deal terms online would ruin long-term agreements with big brands, he said. “Everything will be built on short-term deals. At an accelerated pace, retailers will begin to move to private brands, since in this case the possibilities for individualizing conditions, quality, and tastes will actually remain,” Lev Khasis intimidated those present. But he caught himself in time and assured that his network “will work only with leading brands, they will seriously strengthen their positions and will be absolutely inaccessible to new entrants.”
The X5 representative called for joint action to remove “at least the most odious provisions” from the trade bill. But he immediately admitted: “There is little hope that this will succeed.” “Some factions are discussing introducing restrictions on trade margins into the law and fixing maximum price levels for a number of types of food,” Mr. Khasis warned. And he hardly meant the opposition. Very influential deputies of United Russia are active supporters of these measures. According to Lev Khasis, the general point of view of government agencies on the draft law “On Trade” is as follows: “It is unknown how it will work. There is only clear confidence that the business will still find a solution in any conditions.”