By John Helmer, Moscow
In the game of cricket, nothing is rarer than a hat-trick. That is when the bowler for one side dismisses three batsmen for the opposing side in three successive balls. For the bowling side, it is a rare triumph, and almost never happens in international test games. For the batting side, it is one of the greatest of humiliations.
In Russia, cricket is almost unheard of, and up against the Russian oligarchic combines, the Federal Antimonopoly Service (FAS) rarely inflicts humiliation.
Nonetheless, on April 7 the Evraz steel group, owned by Alexander Abramov and Roman Abramovich, was found guilty of illegally rigging the domestic price of vanadium, according to a judgement handed down by the FAs in Moscow This is the third FAS conviction in a row for Evraz, whose Kachkanarsky mine is the sole source in Russia of mined vanadium.
A brief release by FAS says that Evraz’s vanadium subsidiary, Kachkanarsky GOK, arranged “an economically, technologically and otherwise unjustified establishment of different prices for Russian consumers, as well as in establishing and maintaining monopolistically high prices for vanadium iron raw materials, which resulted in a restriction of competition in related markets.”
Maxim Ovchinnikov, head of the industry department at FAS, told CRU Steel News today “the FAS commission [of enquiry] regarding the investigation of the vanadium case was held yesterday [April 7], and Evraz was found guilty of violating Items 1 and 6 of Part 1 of Article 10 of the Federal Law on protection of competition. Evraz was ordered to provide non-discriminatory conditions for all of its buyers. The fine will be imposed within three to four months, as the administrative procedure requires.”
Item 1 in the Russian law prohibits monopolistic price-fixing; item 6 bars a supplier with dominant market share in a product range from pricing the same goods differently for different buyers. The law allows the FAS to impose a fine for conviction of up to 15% of the sale revenues of the affected product for the previous financial year.
According to the latest 2010 financial report, issued by Evraz on March 31, last year it produced 21,000 tonnes of primary vanadium (up 8% on the 2009 level), selling 19,776 tonnes to buyers outside the group. Sale revenues for the year were reported as $566 million, a gain of 56% compared to 2009. The FAS has the authority to impose a fine of up to $48 million on Evraz for the latest conviction.
According to Ovchinnikov, “Kachkanarsky GOK was selling its vanadium ore to two types of buyers. The buyers of the first type, ZSMK [West Siberian Metallurgical Combine, owned by Evraz] and some Ukrainian companies don’t buy specifically for the vanadium inclusions in the ore, they use it for steel production. The second type of buyers who produce ferrovanadium and cast-iron are NTMK [Nizhny Tagil], which is a subsidiary of Evraz, and ChMZ [Chusovskoy Metallurgical Plamt, owned by pipemaker, United Metallurgical Company], which is not part of the [Evraz] holding, and thus is its competitor. This is a classical monopoly scheme of price-pressing on the competitor to make it cede its market positions.”
Chusovskoy was the complainant to the FAS who initiated the case against Evraz.
Asked what sanctions will be imposed on Evraz, Ovchinnikov said: “we have the same sequence with the coking coal case. As soon as the ruling was delivered, we filed an administrative suit demanding to fine the company. The decision will arrive within the period of 3 to 4 months, no sooner.”
An Evraz spokesman told CRU Steel News the company has no comment to make at present.
Last month, FAS convicted the Evraz main mill, Nizhny Tagil, of illegally rigging the price of Z-profile steel products, which are used in rolling stock for railroads. Reviewing prices of these steel products over an 18-month period from January 2009 to June 2010, FAS found there were significant differences in the pricing of the same product for five different Russian customers. The complainant in that case, Uralvagonzavod, a railcar builder, was found to be the leading buyer of this steel, but was disadvantaged in relation to its competitors by Nizhne Tagil’s price discrimination policy.
A source close to the investigation has told CRU Steel News the price differential between buyers of the Z profiles ranged from 10% to 60%, while the profit markup differed by between 12% and 200%. No explanation for this differential has been published by FAS or admitted by Evraz.
Last November, and then again last month, FAS found Evraz’s coking coal subsidiaries guilty of similarly illegal price rigging and differential charging between customers. In that case, begun in July of 2010 on the complaint of other steelmills, Evraz and Raspadskaya (Evraz owns 40% of the mining company) were judged to have violated the law by selling coking coal to domestic and foreign buyers at price differentials that amount to anticompetitive discrimination. “The difference in prices to various consumers of the same product,” declared an FAS statement issued on March 14, “ranged from 20% to 48%. In this case, the company did not provide the Commission of the FAS Russia convincing arguments that warrant such difference.” The fines have not been set yet in the steel and coking coal cases.
A precise value for sales of Z-profiles is not available in the published Evraz financial reports; they count $1.5 billion for railway product sales, most of which were rails and wheels. Evraz declined today to provide the Z-profile sales figure. The sales figure for coking coal concentrate in 2010 was $622 million, so the fine FAS may levy against Evraz in that case could run as high as $93 million. Adding that to the maximum of $48 million for the vanadium penalty, and about $5 million in the steel case, makes $146 million. If imposed and paid, that would be the biggest fine ever imposed by the fledgling Russian antitrust enforcer against an oligarch-owned metals company.
And now for the purer enjoyment of what a hat-trick looks like, here is one of the greatest cricketing hat-tricks ever played – India v Australia, January 8, 2007 — Harbhajan Singh of India takes the wickets of Ricky Ponting, Adam Gilchrist, and Shane Warne.