State policy and regulatory framework
Pursuant to Article 15 of the Constitution of the Republic of Azerbaijan, the State guarantees free business activity, prevents monopoly and unfair competition in economic relations. In order to fulfill the requirements of the Constitution, several legislative documents have been adopted:
- Law of the Republic of Azerbaijan No 405 “On entrepreneurship activity”, dated December 15, 1992
- Law of the Republic of Azerbaijan No 526 “On antimonopoly activity”, dated March 4, 1993
- Law of the Republic of Azerbaijan No 1049 “On unfair competition”, dated June 2, 1995
- Law of the Republic of Azerbaijan No 590-IQ “On natural monopolies”, dated December 15, 1998
- Law of the Republic of Azerbaijan No. 1281-IVQ “On advertising”, dated May 15, 2015
With the aim to prevent competition offences, the following legislative acts exist:
WTO Agreements cover various specific aspects of trade and competition policy. For example, Article II:4 of the General Agreement on Tariffs and Trade 1994 ("GATT 1994") and Article IX of the General Agreement on Trade in Services ("GATS") reflect the provisions on monopolies and exclusive service providers. Along with this, in Article 40 of the Agreement on Trade related Aspects of Intellectual Property Rights ("TRIPS Agreement") and in Article IX of the GATS the negative effect of anti-competitive practices on trade is recognised and this can lead to the creatation of procedures for cooperation between WTO Members in the field of similar practices.
Unfair competition: Core elements of national legislation
The following are considered as forms of unfair competition in the field of entrepreneurship:
- Imitation of economic activity of the competitor
- Discrediting of economic activity of the competitor
- Interference in the economic activities of the competitor
- Unfair entrepreneurship activity
- Unfair business behavior
- Misleading of consumers
The following actions imitating the economic activity of a competitor are prohibited:
- Unauthorized imitation of competitor’s commodity as well as its commodity form, packaging and external design, except the technical characteristics of the commodity
- Direct repetition of the goods of another economic entity by violating its patent and license rights
- Illegal use of trademark, geographical indication, firm name, as well as name of another market entity, with the exception of the use by the entity with the same name of its name with any distinguishing marks as the name of the company
The following actions leading to discrediting of economic activity of a competitor are prohibited:
- Dissemination of false and distorted information about the business reputation and financial position of other market entities
- Disclosure of information on a competitor’s scientific-technical and industrial capabilities in distorted form
The following actions of market entities aimed at misleading consumers are prohibited:
- Use of any information that can mislead the consumer regarding the origin, production method, suitability for use, quality and other features of good, as well as regarding the entrepreneur’s personality or specificity of his economic activity
- Use of unfair, inaccurate and confidential advertising techniques that affect the selective freedom of consumer during the purchase or sale of the good
- An erroneous comparison of the good, which can mislead the consumer, as well as the disclosure of the product as an advertising or information material
- Supplying the good with an inappropriate distinctive mark or brand with the aim of misleading the consumer about the good’s consumption and other important properties
- Concealment of non-conformity of the goods to its purpose and requirements
The following actions with the aim to interfere with the economic activities of a competitor are prohibited:
- Intentional break (violation), interruption, and termination of a competitor’s business relationships by illegal means
- Influencing competitor’s employees by illegal means to encourage them to non-performance their service duties
The following actions in the field of entrepreneurship activity are prohibited:
- Illegal acquisition, use and dissemination of information on scientific-technical, industrial or trade activity of a market entity, including commercial secrets
- Influencing the adoption and enforcement of a competitor’s economic decisions by illegal means to gain unreasonable superiority over him
- Compulsory sales of goods in an additional assortment
- Unreasonable unilateral advantages in contracts
- Exclusion from the economic turnover or non-circulation of goods to the day of price increasing or with the aim to create conditions for such increasing
The following actions in the field of business behavior are prohibited:
- Violation of an agreement concluded by a party (counteragent) on refusal for an indefinite time from competition or some form of it and which does not create serious problems for business entities in the market
- Making unreasonable requests to other market entities with the aim of destroying the business relations of the competitor and preventing them from concluding such contacts
The illegal payments with the aim of obtaining unilateral superiority in competition, as well as for the following actions are prohibited:
- Creating a favorable environment for this or another economic entity, including providing favorable contracts, loans, subsidies, preferential customs duties and tax regimes
- Individual privileges for the provision of certain orders or artificial improvement of the general conditions of their obtaining
- In comparison with the competitor, the artificial acceleration of conclusion of the contract
Improvement of competition legislation
Improvement of the competitive environment is indicated as one of the priority area in “Strategic Roadmap on production of consumer goods at the level of small and medium entrepreneurship in the Republic of Azerbaijan” and adoption of the Competition Code is defined as the main task. Along with this, the following must be performed pursuant to the Action Plan on implementation of Presidential Resolution dated 13 July 2016, No. 2199 "On additional measures to improve the business environment in the Republic of Azerbaijan and further improve the position of our country in international ratings":
- Reflection in the legislation of the provisions on bringing legislation into conformity with the requirements of the European legislation
- Increasing the rights and responsibilities of the commission considering cases of violation of the competition law
Executive authorities and their responsibilities
The State Agency on Antimonopoly and Consumer’s Rights Protection and the Agency on Development of Small and Medium Businesses are the Government entities responsible for the implementation of competition policy in the Republic of Azerbaijan. Along with them, the State Advertising Agency of the Republic of Azerbaijan is the body responsible for compliance with the legislation in the field of advertising.
In the WTO, State-Trading Enterprises are defined as:
"Governmental and non-governmental enterprises, including marketing boards, which have been granted exclusive or special rights or privileges, including statutory or constitutional powers, in the exercise of which they influence through their purchases or sales the level or direction of imports or exports."
State-Trading Enterprises in Azerbaijan
Following the review of Government and non-government entities with exclusive or special rights, as well as entities with a dominant position, four enterprises had fallen under the definition of state-trading enterprises, as provided for in the Understanding on the Interpretation of Article XVII of the GATT 1994, namely:
- SOCAR (State Oil Company of the Republic of Azerbaijan)
- Nakhchivan Zonal Gas Production Institution
- The Ministry of Health
SOCAR, together with joint ventures/operating companies as envisaged under relevant oil/gas production sharing agreements, is engaged in the production, refining, and sale of oil products, pipeline transportation of crude oil, the import and export of natural gas, and the export of oil and oil products. While SOCAR manages the import/export pipelines for natural gas, other companies are free to get access to the import/export of natural gas through relevant agreements with the Government. Gas production sites are developed by the "Azneft" Production Union of SOCAR and 12 operation companies (which had foreign shareholders).
The internal transportation of oil is carried out by the "Oil Pipelines" Department of SOCAR. Oil intended for export is transported by the Azerbaijan International Operation Company ("AIOC"), via BTC and Baku-Supsa pipelines. Both SOCAR and the joint venture companies are involved in oil exportation. The domestic pipelines are owned by SOCAR, which also own parts of pipelines located in Azerbaijan for international oil transportation. Foreign companies wishing to use these pipelines would apply to the Government of Azerbaijan, and contracts would be concluded in mutual agreement and in accordance with international norms.
Foreigners could supply natural gas to Azerbaijan under agreements with SOCAR and the "Nakchivangas" Production Unit (for the Nakhchivan Autonomous Republic). The supply and distribution of natural gas within the domestic market (other than the Nakhchivan Autonomous Republic) is provided exclusively by SOCAR (Azerigaz); if foreign companies want to engage in such activities they should apply to the Ministry of Energy of Azerbaijan for relevant licenses. Foreigners could export liquid gas and oil products to any person in Azerbaijan. Residents (with or without foreign participation) and branches of foreign companies can equally supply liquid gas and oil products to the domestic market. No special conditions are imposed.
AzerEnergy is engaged in the production, transmission and import/export of electric energy, and as such, is the only entity engaged in the import and export of electric energy.
Nakchivangas Production Unit is involved in the transportation and distribution of natural gas and is the exclusive importer of gas from Iran to the Nakhchivan Autonomous Republic.
The Ministry of Health has the exclusive right to import certain narcotic substances in accordance with the Rules "On keeping, acquisition, transportation, dispatch, use of narcotic drugs and psychotropic substances, furthermore drawing, keeping of documents and carrying out illegal operations related with their circulations" approved by the Resolution of the Cabinet of Ministers of the Republic of Azerbaijan No. 57 of May 13, 2003.