Russian regulator still discussing settlement with steelmakers, sees no grounds for minimum fines

MOSCOW. Oct 6 (Interfax) - Russia's Federal Antimonopoly Service (FAS) is continuing to discuss a possible settlement with steel companies, but does not see any grounds for imposing minimum fines in the case of unjustified inflation of steel prices in 2021 because they had strong results in 2022, the head of the regulator, Maxim Shaskolsky said.

"We were saying that if companies were in a difficult financial position, then it might be possible to consider a so-called 'lower than the lowest' fine, meaning 0.5% of the possible fine. But 2022 results were positive, companies earned a good financial result, despite the situation, so there are no grounds for a 'lower than the lowest' fine. Therefore, we're working on having the reduction [of the fine] not be 'lower than the lowest,'" Shaskolsky told reporters on the sidelines of the fourth Eurasian forum on cartels.

He said "companies do not agree, but they understand that they earned additional income."

Asked if a settlement is being discussed with steelmakers, he said "[w]e are moving toward this."

"The talks are not easy, but everything is going according to plan," Shaskolsky said, adding that court proceedings might conclude before the end of this year.

Sources told Interfax in the spring of 2023 that, in talks on the terms of a settlement in the steel case, the regulator proposed to take the price of metal in 2019 as the basis for determining the price of hot-rolled flat products on the domestic market, adjusted for the dynamic of companies' expenditures on iron ore and coking coal concentrate. It proposed to peg steel prices to changes in the cost of raw materials in this manner until February 2025, the sources said.

This was one of the conditions under which the regulator was prepared to consider imposing the minimum fine in the case, where Severstal , Magnitogorsk Iron & Steel Works (MMK) and Novolipetsk Steel (NLMK) were found in violation of antimonopoly legislation on the rolled steel market.

By law, the fine can be anywhere from 1% to 15% of revenue. Shaskolsky said earlier that revenue figures for 2020 would be used to calculate the fines. VTB analysts estimated in February 2022 that the maximum fine would probably be $130 million-$140 million for Severstal and MMK, and $100 million-$150 million for NLMK.

In February 2022 the FAS ruled that MMK, NLMK and Severstal violated antitrust law on the steel market. "From January 2021 the companies set and maintained monopolistically high prices for hot-rolled flat steel on the domestic market," the regulator said at the time, remarking that "the growth of prices for hot-rolled steel on the domestic market in 2021 was not completely due to market factors."

All three of the companies were ordered to stop abusing their dominant position and act in a manner that ensures competition. After the publication of the decision, the companies said they disagree with the regulator's rulings and later filed lawsuits to challenge them.

At the beginning of 2023, the FAS confirmed in court that settlements might be possible with Severstal, NLMK and MMK "amid the significant deterioration of the financial position of these companies due to the imposition of restrictive measures by foreign countries."