Husain Radjapov

Lecturer, Head of Business law department, Tashkent State University of Law

December 11, 2020

UzAutoMotors is an absolute state-owned monopoly company, which focuses on producing automobiles mainly for local market, but after 2000 the entity also expanded its focus in neighboring market of CIS countries. Initially, it was established as a joint stock company with Korean Daewoo named as “UzDaewoo Auto”, later      in 2007, its majority stake was bought by General Motors, and it was renamed as “GM Uzbekistan”. In 2019 the General Motors completely pulled out from “GM Uzbekistan” and the company was renamed as “UzAutoMotors” The automobile giant of Uzbekistan produces around 180-220 thousand cars per year for a population of 34 million people. For a long time, the company enjoyed an exclusive monopolist position in the market, and was protected from foreign competition via almost 100% customs fee for foreign cars at the      expense of local consumers. To build a competition in car production sphere, Uzbek government announced a creation of a new factory Uzbekistan Peugeot Citroёn Automotive in Djizzakh region. The factory should have started its production in December of 2018, however, due to some unclear reason the project has been suspended.

Later on, the government announced the initiation of automobile production with KIA in 2020 and Volkswagen  starting from 2022. Nonetheless, these two factories focus on production of only premium class-based models so far: Volkswagen Caddy, KIA Seltos and KIA К5. Therefore, the entrance of these two companies in Uzbek automobile market hardly affects the monopoly position of UzAutoMotors in economy-based models, which has the biggest demand in the country.  

Despite having a state aid and being immune from foreign competition, UzAutoMotors has proved its inefficiency which is observable in significant price increases taking place every year. For instance, just in last three years prices for popular models have almost doubled: the price increase in 2017 was on average 30% in 2018 -7,7%, in March 2020 – 10,29%.

The latest price increase has sparked a massive social criticism, so based on consumers’ complains and the parliamentary request, the Antimonopoly Committee of Uzbekistan(ACU) has initiated an investigation and found that the price increase was unreasonable.

After finishing the investigation on August 19, 2020, the Special commission of  ACU issued a cease and desist order requesting UzAutoMotors to reduce prices by 10.29% and submit an updated price list to ACU. Nonetheless, disagreeing with ACU’s order, UzAutoMotors asked the Tashkent City Administrative Court to invalidate the cease and desist order.  UzAutoMotors argued that ACU failed to follow procedural rules of investigation and so its outcome should be unacceptable. As a result, the court issued the decision in favor of UzAutoMotors. On its turn, ACU filed an appeal against the court decision on November 18 of 2020.

It should be noted, the court hearing was closed to the public because of the UzAutoMotors’ request, which was justified as prevention of secret commercial information disclosure. Therefore, the details of the court trial are unclear and the analysis below is based on the information published by mass-media.

First, I do not consider the case as a defeat of the Antimonopoly Committee. This case shows that the newly established Antimonopoly Committee is becoming a true watchdog that does not hesitate to apply competition law even on state owned enterprises. When the government announced the establishment of the independent antimonopoly body in January 2019, many accepted the news skeptically, because not many people believed that the state authority was able to go against the state itself. At least, the case has forced  monopoly companies to think twice before raising prices unlawfully hereafter.

Second, the general public was unreasonably disappointed by the court decision because they perceived it as the court’s refusal to recognize the fact of unreasonable price increase by UzAutoMotors. But it is a misunderstanding. The administrative court concluded that the investigation process was inappropriate, not the outcome of the investigation. It is under the jurisdiction of economic courts, not administrative ones, to consider whether price increase was reasonable or not because the conclusion requires a deep economic analysis. The administrative court is authorized only to make sure whether a state body follows the due process in decision-making. Therefore, the court’s decision does not imply that the ACU’s conclusion on UzAutoMotors’s price increase was unreasonable.

Third, in my opinion, fighting against powerful monopolies in this way was a risky approach for the newly re-established Committee’s reputation. Even from the beginning, the ACU could have easily predicted that UzAutoMotors would not accept the Cease and Desist Order and ACU would appeal to the court. The ACU should not rely on court’s neutrality much as judicial system of Uzbekistan has proved a lack of independence many times(for information, according to the WJP Rule of Law Index rankings in 2020, Uzbekistan placed 92 out of 128 countries, 12th out of 14 in the Eastern Europe and Central Asia Region). Perhaps, it was better for the young and ambitious ACU to apply indirect regulative instruments to combat monopolies such as  enhancing competition for UzAutoMotors by reducing custom fee for foreign cars; depriving UzAutoMotors from the state aid, tax incentives; abolishing previous governmental decision granting favorable conditions to the UzAutoMotors.

Cite as: Husain Radjapov, “Why did the Antimonopoly Committee lose the battle against the biggest monopoly in Uzbekistan – UzAutoMotors?” Uzbekistan Law Blog, 11.12.2020.