1. Introduction

Geographic market definition is a fundamental component of Russian competition law. It determines the geographical boundaries within which products or services compete and within which consumers can realistically obtain alternative supplies.

Under Russian competition law, geographic market definition is particularly important when determining:

Whether an undertaking occupies a dominant position.

Whether a company has substantial market power in a particular territory.

Whether an agreement restricts competition.

Whether a merger creates or strengthens market dominance.

Whether territorial exclusivity arrangements violate competition rules.

Whether a refusal to supply or discriminatory pricing constitutes an abuse of dominance.

Russia's principal competition legislation is Federal Law No. 135-FZ of 26 July 2006, On Protection of Competition (Competition Protection Law). The Federal Antimonopoly Service (FAS Russia) is the principal competition enforcement authority.

2. Legal Framework Governing Geographic Market Definition

A. Federal Law No. 135-FZ

The central statutory provision is Article 4, which establishes the terminology used in Russian competition law.

Article 4 addresses the concept of a commodity market, understood through the circulation of goods or services that cannot be replaced by other goods or services, including the geographical boundaries within which purchasers can economically and practically acquire those goods.

Geographic market definition therefore requires consideration of both:

The substitutability of the relevant product or service.

The territory within which economically and technically feasible purchasing alternatives exist.

B. Article 5 – Dominant Position

Article 5 governs the determination of an undertaking's dominant position.

The geographic boundaries of the relevant market are important because market shares and competitive constraints must be assessed within the correctly defined territory.

For example, a cement producer might have a relatively small share of the national Russian market but a very substantial share of a regional market where transportation costs prevent customers from obtaining cement from distant producers.

C. Article 10 – Abuse of Dominant Position

Article 10 prohibits the abuse of a dominant position.

Geographic market definition is important in examining:

Regional monopolies.

Territorial price discrimination.

Unjustified refusals to supply.

Exclusive distribution arrangements.

Restrictions on access to infrastructure.

Discriminatory conditions for customers in different regions.

D. Articles 11 and 11.1 – Restrictive Agreements and Coordinated Conduct

These provisions address agreements and coordinated conduct that restrict competition.

Territorial allocation agreements between competitors may constitute unlawful market allocation where they divide customers, territories or commercial opportunities.

E. Merger Control

Articles 27–32 regulate economic concentration and merger-control procedures.

Geographic market definition helps determine whether a proposed acquisition may eliminate competitors or create significant market power in a particular region.

3. Methodology for Determining Geographic Market Boundaries

The principal procedural instrument is FAS Order No. 220 of 28 April 2010, approving the Procedure for Analysing the State of Competition in Commodity Markets.

Section IV establishes the methodology for defining geographic boundaries.

A. Preliminary identification of geographic boundaries

The FAS initially identifies the territory in which the relevant undertaking operates and where the alleged competition infringement occurs.

The preliminary territory may be:

A municipality.

A city or district.

A federal subject (region).

Several federal subjects.

The entire Russian Federation.

A territory extending beyond Russia.

The initial territory is not automatically the final relevant market.

B. Economic accessibility

The authority examines whether purchasers can realistically obtain the product from suppliers located outside the preliminary territory.

Relevant factors include:

Transportation costs.

Delivery time.

Distance between suppliers and purchasers.

Availability of transport infrastructure.

Storage and preservation requirements.

Import and export restrictions.

Distribution networks.

Technical compatibility.

Contractual territorial restrictions.

Consumer purchasing behaviour.

For example, consumers purchasing fresh milk may have limited access to suppliers located hundreds of kilometres away because of transportation costs and product-preservation requirements.

By contrast, purchasers of standardised industrial software may be able to obtain the same service throughout Russia or internationally.

C. Price differences

The FAS considers whether prices differ significantly between geographical areas.

Persistent price differences may indicate that different territories constitute separate markets.

However, price differences alone do not establish separate geographic markets. Differences may also result from transportation costs, taxation, quality, local demand or temporary supply disruptions.

D. Trade-flow analysis

The authority examines the movement of goods between territories.

It considers:

The origin of goods.

The destination of goods.

The volume of imports into the territory.

The volume of exports from the territory.

The proportion of local consumption supplied by external producers.

The ability of outside suppliers to enter the territory.

Order No. 220 includes a trade-flow indicator concerning territories beyond which no more than 10% of the relevant commodity mass is exported and into which no more than 10% is imported. This is an analytical indicator, not an automatic legal rule determining every market boundary.

E. Hypothetical monopolist test

Under paragraph 4.5 of Order No. 220, the FAS may use the hypothetical monopolist test.

The authority asks whether a hypothetical monopolist controlling supply in a proposed territory could profitably impose a small but significant and non-transitory price increase.

If consumers would switch to suppliers outside that territory, the geographic market may need to be expanded.

If such switching would not make the price increase unprofitable, the proposed territory may constitute a relevant geographic market.

F. Actual sales-area method

The FAS may also identify the actual geographical areas in which sellers compete for the same purchasers.

This involves examining:

Customer locations.

Supplier locations.

Actual sales territories.

Delivery destinations.

Distribution arrangements.

Customer substitution patterns.

The authority may combine this method with the hypothetical monopolist test or another reliable analytical method.

G. Special treatment of natural monopolies

In infrastructure industries, geographic market definition may depend on the location and configuration of technological networks.

For example:

Electricity transmission.

Gas transportation.

Railway infrastructure.

Water distribution.

Heating networks.

Telecommunications infrastructure.

A market may be limited to the area served by a particular network or interconnected infrastructure system.

Consequently, the geographic market need not coincide with administrative boundaries.

4. Categories of Geographic Markets in Russia

These classifications describe possible market boundaries, not fixed presumptions.

A market's actual geographic extent depends on the economic and technical conditions of competition.

5. Important Factors Affecting Geographic Market Definition

A. Transportation costs and logistics

Transportation costs are particularly important in determining the geographic boundaries of markets involving bulky or heavy goods.

For instance, cement, sand, construction materials and industrial chemicals may have geographically restricted competitive conditions.

A producer located in one region may not effectively compete with another producer located far away because transportation costs make its products commercially uncompetitive.

B. Infrastructure availability

Infrastructure may create geographic barriers to competition.

Examples include:

Railway access.

Port facilities.

Electricity grids.

Gas pipelines.

Telecommunications networks.

Water distribution systems.

Where access depends on a particular network, the geographic market may be restricted to the network's service area.

C. Consumer purchasing behaviour

The authority considers where consumers actually purchase products and whether they would switch to alternative suppliers located elsewhere.

For example, a hospital may obtain specialised medical equipment from suppliers across Russia, whereas ordinary patients generally obtain emergency medical services within a much smaller geographical area.

D. Regulatory and administrative restrictions

The FAS also considers regulatory barriers that affect the ability of suppliers to compete across territorial boundaries.

These may include:

Licensing requirements.

Regional procurement conditions.

Local concessions.

Import restrictions.

Transport permits.

Public-service obligations.

Administrative borders are relevant evidence, but they do not independently determine the market.

E. Digital markets and online distribution

Digital distribution complicates traditional geographic market analysis.

A platform may provide services throughout Russia, but its effective competitive conditions may differ between regions because of:

Delivery limitations.

Regional payment infrastructure.

Language requirements.

Local advertising markets.

Internet accessibility.

Location-based pricing.

Regional network effects.

FAS guidance issued in 2022 concerning trademark-related unfair competition specifically recognises that the nationwide legal protection of a trademark does not automatically establish a nationwide geographic product market.

The actual delivery territory and characteristics of the product must also be considered.

6. Important Russian Case Laws

The following decisions and judicial proceedings illustrate the principles applied to geographic market definition. Some are cited in FAS interpretative guidance as examples of judicial review of market analysis; they should not be treated as a uniform body of binding precedent.

Case 1. Arbitration Court of the West Siberian District – 2 June 2015, Case No. A81-2757/2014

Legal principle: Sequential assessment of geographic boundaries

The court decision is cited in FAS Explanation No. 17 concerning the methodology for determining geographic boundaries.

The relevant principle is that geographic market definition requires a sequential examination of purchasers' actual economic, technical and other opportunities to obtain the product.

The authority must examine the conditions restricting purchasers' access to alternative suppliers.

Importance: An authority cannot simply assume that a market is geographically restricted because a company operates in a particular region. It must substantiate the geographic boundaries through market evidence.

Case 2. Arbitration Court of the Volga-Vyatka District – 18 March 2013, Case No. A82-16787/2011

Legal principle: Use of relevant information in market definition

This decision is cited in FAS Explanation No. 17 in connection with paragraph 4.2 of Order No. 220.

The relevant procedural principle is that the authority is not necessarily required to use every listed category of information simultaneously when determining geographic boundaries.

The analysis must nevertheless be adequate and supported by the available evidence.

Importance: Geographic market definition requires a reasoned assessment of relevant evidence rather than mechanical reliance on every possible indicator.

Case 3. Arbitration Court of the Ural District – 6 February 2014, Case No. A71-5134/2013

Legal principle: Appropriate selection of market-definition methodology

This decision is cited in FAS Explanation No. 17 regarding paragraph 4.5 of Order No. 220.

The methodology for identifying geographic boundaries may include:

The hypothetical monopolist test.

Actual sales-area analysis.

A combination of methods.

Another appropriate method capable of identifying competing sellers and their sales territories.

Importance: Russian competition authorities are not confined to a single economic methodology. However, the chosen method must reliably identify the geographical areas in which suppliers compete.

Case 4. Arbitration Court of the Far Eastern District – 28 March 2012, Case No. A59-3010/2011

Legal principle: Actual geographical areas of supply and consumption

This case is cited in FAS Explanation No. 17 concerning the use of actual sales areas and purchasers' locations.

The relevant principle is that the authority may consider the economic, technical and other practical suitability of consuming the relevant product or service when identifying geographic boundaries.

Importance: A market must be defined with reference to actual commercial conditions, including the practical possibility of purchasing and consuming the product in different territories.

Case 5. Moscow Arbitration Court – 7 September 2016, Case No. A40-54700/2016

Legal principle: Territorial market boundaries and cross-border competition

FAS Explanation No. 17 refers to this proceeding in discussing geographic market definition and the distinction between domestic and transboundary markets.

The important principle is that geographic boundaries should not automatically be equated with national administrative borders.

The applicable competition regime must also be considered where a market crosses national boundaries.

Importance: A Russian geographic market may be national, regional, local or potentially international, depending on the relevant legal and economic circumstances.

Case 6. Ninth Arbitration Court of Appeal – 27 September 2010, Case No. A40-46035/10-2-185

Legal principle: Substitutability and geographic market assessment

This proceeding concerned the analysis of services involving grain transshipment.

The court emphasised the importance of examining whether the services offered by different operators were substitutable when defining product and geographic boundaries.

The competitive significance of alternative grain-transshipment facilities must be assessed rather than assuming that all facilities compete merely because they perform broadly similar operations.

Importance: Geographic boundaries must be considered together with product substitutability. Facilities located in different regions may not be effective substitutes where logistics and transportation conditions prevent customers from switching.

Case 7. Supreme Court of the Russian Federation – 23 November 2022, Case No. AKPI22-901

Legal principle: Geographic boundaries in natural monopoly services

The Supreme Court considered provisions governing the regulation of natural-monopoly services and geographic market assessment.

The decision discusses the identification of the smallest territory within which a supplier could increase the price of a service without losing the economic benefit of providing it.

It also addresses the special criteria in paragraph 4.7 of Order No. 220 for natural-monopoly services.

These criteria include:

Administrative-territorial criteria: The Russian Federation, federal districts, economic regions, federal subjects, cities or other territories.

Organisational criteria: The area in which an undertaking or its branch operates.

Technological criteria: The existence and location of technological infrastructure, including network access and connection possibilities.

Importance: Geographic boundaries for network industries must reflect the actual technological and organisational structure of service provision rather than simply applying ordinary regional-market assumptions.

7. Application Across Major Economic Sectors in Russia

8. Geographic Market Definition and Abuse of Dominance

Geographic market definition is particularly important under Article 10 of the Competition Protection Law.

Consider the following hypothetical situation.

A Russian undertaking supplies 85% of the cement sold in a particular region. Other cement producers operate in neighbouring regions, but transportation costs make their products commercially unattractive to local purchasers.

The undertaking subsequently increases prices by 25%.

The FAS would need to examine:

Whether cement from neighbouring regions constitutes a genuine substitute.

Whether transportation costs prevent customers from switching.

Whether alternative producers can economically enter the region.

Whether the undertaking has substantial market power.

Whether its price increase constitutes abusive conduct.

If the regional market is properly established and dominance is demonstrated, the undertaking's conduct may be investigated under Article 10.

However, dominance alone does not establish an infringement. The authority must also establish the prohibited abusive conduct.

9. Challenges in Geographic Market Definition

A. Russia's geographical size

Russia's enormous geographical area makes market definition particularly complicated.

The same product may have national competitive conditions in one industry and highly localised competitive conditions in another.

B. Regional infrastructure disparities

Differences in transport infrastructure, logistics and network availability may prevent suppliers from competing effectively across regions.

C. Natural monopoly problems

Electricity, gas, water and railway infrastructure may create territorial monopolies because competing infrastructure is economically impractical.

D. Digitalisation

Online distribution can expand the potential geographic reach of suppliers, but it does not automatically eliminate geographical market boundaries.

E. Cross-border competition

The Eurasian Economic Union introduces an additional dimension.

Where a market qualifies as a transboundary market under applicable EAEU competition rules, enforcement competence may belong to the Eurasian Economic Commission rather than the Russian FAS.

F. Inadequate economic evidence

Incorrectly defining geographic boundaries can distort:

Market shares.

Concentration calculations.

Dominance assessments.

Merger evaluations.

Competitive effects.

The identification of relevant competitors.

10. Practical Compliance and Enforcement Recommendations

Businesses operating in Russia should adopt the following measures:

Maintain reliable records of geographical sales distribution.

Document transportation and distribution costs.

Monitor regional price differences.

Identify alternative suppliers in neighbouring territories.

Examine regional exclusivity arrangements.

Evaluate the competitive consequences of acquisitions.

Maintain evidence of customer substitution possibilities.

Review infrastructure access restrictions.

Assess whether digital delivery actually enables nationwide competition.

Prepare economic evidence supporting the geographic boundaries used in competition assessments.

11. Overall Legal Significance

Geographic market definition in Russia is not simply an exercise in identifying administrative territories. It is an economic and legal investigation into the actual geographical conditions under which purchasers can obtain goods or services and suppliers compete.

The most important principles are:

Geographic boundaries must be supported by evidence.

Administrative boundaries are not automatically decisive.

Transportation costs and infrastructure can restrict competition.

Actual sales areas and customer locations are relevant.

The hypothetical monopolist test is an accepted methodology.

Natural monopoly markets require special technological and organisational analysis.

Digital markets must be examined according to actual delivery and competitive conditions.

Incorrect geographic market definition can undermine findings of dominance and competition infringement.

The central legal proposition is that the relevant geographic market must reflect the smallest economically coherent territory within which purchasers can realistically obtain the relevant product and outside which effective purchasing alternatives are unavailable.

12. Conclusion

Geographic market definition is one of the most important analytical foundations of Russian competition law. Federal Law No. 135-FZ and FAS Order No. 220 establish the legal and economic framework for identifying the geographical boundaries of commodity markets.

Russian judicial practice demonstrates that competition authorities must adopt a reasoned methodology, consider actual market conditions and avoid relying exclusively on administrative borders.

The decisions concerning grain transshipment, regional market analysis and natural-monopoly services illustrate the importance of examining transport accessibility, substitutability, technological infrastructure and actual purchasing opportunities.

Ultimately, accurate geographic market definition ensures that the FAS can identify genuine market power, prevent territorial monopolisation, assess mergers properly and protect competitive conditions throughout the Russian economy.

Principal legal authorities for examination

Federal Law No. 135-FZ of 26 July 2006, On Protection of Competition.

FAS Order No. 220 of 28 April 2010.

FAS Explanation No. 17 of 10 April 2019.

FAS Letter No. KT/39533/22 of 20 April 2022.

Treaty on the Eurasian Economic Union, 29 May 2014.

EAEU cross-border competition criteria.

Research note: The seven judicial decisions above are useful authorities for studying Russian geographic market analysis. Several are district-court decisions cited in FAS Explanation No. 17; they are illustrative judicial applications rather than seven Supreme Court precedents. The Supreme Court decision in Case No. AKPI22-901 concerns the regulatory framework for natural-monopoly services, not a conventional Article 10 abuse-of-dominance finding.