Published: Lexology/Getting The Deal Through 2021, April 2021
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LEGAL AND REGULATORY FRAMEWORK
1. What key legislation governs competition in your jurisdiction?
The Ukrainian competition legislation mainly consists of:
- the Commercial Code of Ukraine (2003);
- the Civil Code of Ukraine (2003);
- the Law of Ukraine On Protection of Economic Competition (2001) (Competition Law);
- the Law of Ukraine On Antimonopoly Committee of Ukraine (1993) (Law on AMCU); and
- the Law of Ukraine On Protection Against Unfair Competition (1996).
The Antimonopoly Committee of Ukraine (AMCU), being the key body in ensuring state protection of competition, has adopted a number of regulations and guidelines in the field, which include:
- the Regulation on the Procedure for Filing of Applications with the AMCU for Approval of Concerted Practices of Undertakings;
- the Regulation on the Procedure for Filing of Applications with the AMCU for Prior Approval of the Concentrations of Undertakings;
- the Methodology for Establishment of the Monopoly (Dominant) Position of Undertakings on the Market;
- Guidelines for Calculation of Fines for Violation of the Ukrainian Competition Law (Guidelines on Fines); and
- the AMCU’s Model requirements for a general exemption from the requirement to obtain a prior AMCU approval for concerted practices of small and medium-sized enterprises for the joint purchase of goods.
2. Which authorities are charged with enforcing competition law in your jurisdiction and what is the extent of their powers?
The AMCU is the main state body empowered to enforce the competition law. It is empowered to perform the following duties:
- prevent, detect and terminate competition infringements;
- control concentrations and concerted practices of undertakings; and
- promote fair competition.
To perform these tasks, the AMCU is endowed with a wide range of powers, including granting clearance for concentrations and concerted practices, conducting an investigation of competition law infringements and adopting decisions binding upon competition law violators, imposing penalties, requesting information, conducting inspections and seizing evidence, etc. While performing its powers, the AMCU may engage the police, customs and other law enforcement agencies. The statistics show that for the preceding years the AMCU’s attention was mainly focused on the detection of anticompetitive concerted practices and abuses of dominance.
The actions of both Ukrainian and foreign undertakings may be investigated by the AMCU. Both the undertakings and their officials and employees could be penalised for the competition law infringements. However, the liability of employees and officials is less strict due to the administrative nature and limitations on the amount of fines provided in the law. Neither the officials of undertakings nor the undertakings themselves can be subject to criminal liability.
Any decision taken by the AMCU on competition law infringements can be challenged in court.
Consequences of non-compliance
3. What are the consequences of non-compliance with competition law?
Under the Competition Law, the AMCU is empowered to apply penalties to:
- undertakings in the form of:
- fines of up to 1 per cent, 5 per cent or 10 per cent of the undertaking’s worldwide turnover for infringements depending on the severity of the infringement (anticompetitive concerted practices and abuses of dominance are considered to be the most serious); and
- compulsory splitting up if the undertaking abuses its dominant position on the market; and
- undertakings’ officials and employees in the form of fines ranging from 119 hryvnias to 272 hryvnias.
The fines on officials and employees are rarely applied due to their low amounts (which imply no real liability) and the complexity of justifying the sanction, which could require the AMCU to expend resources disproportional to the fine that could be applied. The nature of the AMCU’s investigation implies it is a quasi-judicial proceeding.
By default, penalties are imposed on the undertaking that committed the infringement. However, if the undertaking committed the infringement as a result of the actions of its affiliates, the AMCU may also impose a fine on the respective affiliates or persons who benefited from the infringement (eg, the ultimate beneficial owners).
Furthermore, the Competition Law also provides for the right of third parties to claim damages equal to double those suffered as a result of competition infringement.
4. Do the authorities issue guidance on compliance with competition law?
In general, competition law obligations apply to any legal entity or individual engaged in economic activity. At the same time, the best practice mostly varies on the undertaking’s size, asset volume and market position.
The AMCU provides guidance on several competition issues, which are a road map for undertakings to understand the AMCU’s approach and adjust their behaviour in compliance with the competition law (eg, AMCU’s Guidance on Competition Law Application by Medicine Market Participants in Vertical Relations Concerning Supply and Distribution of Medicines).
Other legislation and relevant practices
5. Do any other laws outside the main competition legislation regulate competition in your jurisdiction, including any sector-specific regimes? Do they cover any other anticompetitive practices not caught by the main legislation?
Competition-related issues are also covered by the following legislation:
- the Law on Protection from Unfair Competition (1996), defining the unfair business practices in competition;
- the Law on State Aid (2014), providing the provisions on monitoring of state aid compliance with competition law;
- the Law on Public Procurement (2015), determining the AMCU’s status as an appeal body in public procurement; and
- the Law on Natural Monopolies (2000), regulating control over the competition compliance in natural monopolies.
Commitment to competition compliance
6. How does a company demonstrate its commitment to competition compliance?
The usual way a company demonstrates a commitment to competition compliance is to approve a competition compliance programme (CCP). Along with the CCP, the companies that care about competition compliance also conduct internal training for employees on fair and legitimate ways of communication with counterparties, develop a transparent and non-discriminatory trade and commercial policy, cooperate with state bodies on competition issues, and conduct comprehensive due diligence of contracts and interactions with counterparties.
The list of arrangements on the competition compliance varies from one company to another depending on the company’s goals, values, and business features. With each passing year, Ukrainian companies, especially those controlled by parents from foreign jurisdictions with a well-established law regulation and practice in the field of competition compliance, pay more attention to this matter.
Government compliance standards
7. Is there a government-approved standard for compliance programmes in your jurisdiction?
There is no government-approved standard for CCPs. However, undertakings in their CCPs may rely on the International Chamber of Commerce Antitrust Compliance Toolkit, general practice and guidelines approved by the Antimonopoly Committee of Ukraine (AMCU) in the field, and best practices of other jurisdictions considering their own business features and goals.
8. What are the key features of a compliance programme regarding risk identification?
A cornerstone of risk identification is the comprehensive due diligence of the company’s activities, as well as internal monitoring of employees’ compliance with established competition policies, internal rules and procedures. Normally, this process starts with the identification of the areas where the compliance risks are likely to be especially high. During such an identification, various factors should be analysed. For instance, the undertaking shall consider its market share (to avoid the dominance risks), and examine employees’ interactions with counterparties, especially those of the company’s management (to prevent potentially anticompetitive concerted practices). Besides, it also beneficial to involve a professional who will constantly monitor the undertaking’s activities, as well as the legislation changes, in order to identify all possible risks in advance.
9. What are the key features of a compliance programme regarding risk assessment?
A risk assessment constitutes a process of weighing and balancing the identified risks and their possible negative consequences, as well as the probability of a risk materialising. This can involve assessing whether each identified risk is extremely significant and material or immaterial, along with evaluating its adverse effects and the probability of occurrence. Risk assessment should be a constant process, although there is no requirement regarding how frequently assessments should be carried out in competition law.
10. What are the key features of a compliance programme regarding risk mitigation?
To mitigate the risk of competition infringements occurring an undertaking may:
- implement the internal training for employees on how to duly behave with the counterparties;
- establish a procedure for obtaining advice on potential risk issues; and
- provide checklists and manuals for employees.
Compliance programme review
11. What are the key features of a compliance programme regarding monitoring and review of business practices?
From a practical standpoint, reviewing a CCP is an essential part of its effective implementation. Generally, the company should constantly review previously identified risks and review whether the CCP is implemented in accordance with its declared principles. Such reviews are particularly important in the event of significant changes in the company’s structure or activities, as well as legislative amendments. There are no negative consequences for failing to conduct a CCP review, as there are no legislative requirements concerning the use of CCPs in Ukraine.
Effect on penalties
12. Will an established competition compliance programme have any effect on penalties?
The Guidelines on Fines approved by the AMCU contain a non-exhaustive list of mitigating circumstances that form the ground for fine reductions. Although they do not mention CCPs, the AMCU may consider the decision of an undertaking to introduce a CCP or amend an existing one as a mitigating circumstance if it reduces the negative outcomes of an infringement. However, there is no well-established case law in this respect.
Arrangements with competitors
13. How does competition law govern arrangements with competitors?
As a matter of the Law of Ukraine On Protection of Economic Competition (2001) (the Competition Law), arrangements with competitors are considered concerted practices. The most common forms of concerted practices include the execution of agreements, the exchange of information, and the establishment of a joint venture leading to the coordination of market behaviour by its founders. The following horizontal dealings imply the most essential risks:
- • the setting of prices or other conditions on the supply of goods;
- the restriction or establishment of control over the production, goods markets, technical and technological development, or investments;
- the allocation of markets or sources of supply depending on territories, range of goods, sales or purchase volume, type of sellers, buyers or consumers, or on any other basis;
- the distortion of the outcomes of auctions and tenders;
- the elimination of competitors from the market or the limitation of their access to it;
- the application of different conditions in equivalent agreements with undertakings, that result in advantages for one or more undertakings and disadvantages for others;
- the imposition of additional contractual obligations unrelated to the subject of the agreement; and
- an unjustifiable substantial limitation of the competitiveness of undertakings on the market.
The parties to contemplated concerted practices may request the Antimonopoly Committee of Ukraine (AMCU) to provide a preliminary conclusion as to whether such concerted actions require the respective permit of the AMCU.
14. Can a company exchange information with its competitors?
Due to the absence of a specific regulation on information exchange, a company is entitled to exchange information with its competitors to the extent that complies with the Competition Law. The risk of collusion arises when exchanging strategic or sensitive information (eg, data on prices, discounts, rebates, volume of sales and marketing plans).
When assessing the risk of collusion between competitors, the frequency of exchange, the period to which collected data refers, and the form of data distribution between competitors are taken into account. The exchange of information on future periods, revealing the undertaking’s plans, is deemed to involve the most significant risk of collusion. Similarly, anticompetitive risks are triggered by exchanging information in individualised forms, thereby allowing the identity of each exchange participant to be known.
The actions of undertakings participating in the information exchange that might entail anticompetitive risks will be qualified by the AMCU as anticompetitive concerted practices.
15. What form must behaviour take to constitute a cartel?
As a matter of both the law and practice established in the field, a cartel is a group of independent undertakings that join together to fix prices, limit production, or share markets or customers between them. The key feature of a cartel is that its participants eliminate competition between them either fully or partly. The cartel may be based on the written or verbal agreement between competitors (a formal agreement is not required), however, the AMCU does not have to prove the existence of such agreement to identify the cartel. The mere fact of conduct of similar actions by the undertakings may evidence the existence of a cartel, provided such actions resulted or may result in the prevention, elimination or restriction of competition, and the situation on the market does not provide for objective incentives to take such actions. As a matter of existing practice, the AMCU establishes the damage inflicted to the competition on the market in its decisions on cartel behaviour.
16. What precautions can be taken to manage competition law risk when the company enters into an arrangement with a competitor?
To prevent the risk of non-compliance, an undertaking should carefully evaluate the provisions of a potential agreement or decision to identify whether it falls under the list of highly risky anticompetitive practices. If yes, an undertaking should assess whether such an agreement or any other practice needs the approval of the AMCU. An undertaking may use the AMCU’s model requirements or request the AMCU provide formal guidance on the matter to obtain approval.
To reduce the risks during the interactions with competitors, an undertaking may avoid the discussion of pricing strategies, commercial plans or the collusion about the joint actions having any potential harm for consumers’ interests. Similarly, it should not discuss bids for public procurement with the competitors or agree not to approach each other’s customers.
Exemptions and defences
17. What exemptions, defences or other circumstances will allow otherwise anticompetitive agreements with competitors to escape sanction?
The AMCU may allow the anticompetitive concerted actions if the undertakings provide any evidence of the fact that their actions encourage manufacturing, technological or economic development, or other efficiencies and do not lead to a substantial restriction of competition. There are also the following block exemptions.
If no party holds a dominant position on the market and the parties’ total market share is less than 15 per cent, the undertakings are exempt from requiring AMCU approval for concerted practices, save for the cases of setting prices, market allocation and tender collusion.
Exemption for small and medium-sized enterprises’ joint purchasing agreements
This is generally applicable when the parties have a total market share of less than 20 per cent. Also, if there is a seller with a market share of less than 35 per cent in the purchase market, such an exemption may be applied to parties with a total market share of up to 35 per cent.
Exemption for economic associations establishment
The parties should cooperate only in the organisational, educational or informational fields and should not receive direct commercial benefits from the association’s activities, along with meeting all of the criteria outlined in the Model Requirements for a general exemption from obtaining prior approval of the AMCU for the establishment of economic associations.
Exemption for technology transfer
This applies to competitors with a total market share of less than 20 per cent or non-competitors with a total market share of less than 30 per cent. However, if an agreement between the mentioned parties includes hardcore restrictions (such as limitation of output, allocations of markets or customers, or restrictions on research and development), it still requires AMCU approval.
Exemption for joint R&D agreements
This applies to parties with a total market share of less than 25 per cent, which meet other specific criteria (eg, the clause about equal access to results).
Exemption for specialisation agreements
This is generally applied to the agreements aimed at the improvement of goods production, purchase or distribution unless:
- one or more of the participants hold(s) a dominant position in the relevant market;
- the total market share of participants is more than 25 per cent;
- the agreement results in manufacturing limitations, market sharing or similar restrictive arrangements; or
- the agreement’s term exceeds five years.
18. How does competition law govern vertical arrangements with commercial partners?
Vertical arrangements, including agreements or any other concerted actions, which result or may result in the prevention, elimination or restriction of competition are deemed to be anticompetitive and prohibited. The ‘hardcore’ restrictions falling within the scope of potentially anticompetitive vertical restrictions include, for example:
- resale price maintenance;
- restriction of a buyer by territory or by the client;
- restriction of active and passive sales to end consumers in a selective distribution system operating in the retail market;
- restrictions of cross-supplies between buyers-participants within a selective distribution system; and
- restrictions for any of the participants of the joint purchases in the territory of purchases, the range of purchases or volumes of purchases.
Furthermore, vertical concerted practices on the supply or use of goods may be considered anticompetitive where the market share of the supplier or the buyer exceeds 30 per cent.
The applicable guidelines on vertical restraints include:
- Typical Requirements for Concerted Practices of Small and Medium-Sized Enterprises on Joint Purchase (covering vertical restraints if such occur) (2019);
- Typical Requirements for Vertical Concerted Practices on Supply and Use of Goods (2017); and
- Typical Requirements for Concerted Practices on Technology Transfer (2018).
- A notable case is Novo Nordisk (2020), where the AMCU imposed a fine in the amount of 188 million hryvnias on the international medicine manufacturer and its distributors in Ukraine for anticompetitive concerted practices in the form of price-fixing.
Exemptions and defences
19. What exemptions, defences or other circumstances will allow otherwise anticompetitive vertical agreements or restrictions to escape sanction?
Although anticompetitive vertical restraints are subject to a general prohibition, parties may apply to the AMCU for clearance (an individual exemption) if they can prove that vertical concerted practices encourage production, technical development, economic development or the development of small or medium-sized entrepreneurs etc, and such practices do not substantially restrict competition in the market. The applicants should, among other things, justify that the positive effects of the concerted practices outweigh the negative impact on the competition.
If the concerted practices are not cleared by the AMCU, the Cabinet of Ministers of Ukraine may provide a clearance unless the parties apply restrictions that are not necessary for the implementation of the concerted practices, or the resulting competition restriction threatens the market economy system.
Subject to some conditions and exceptions, the Competition Law provides exemptions for certain types of vertical concerted practices, including those relating to:
- joint purchase of small or medium-sized enterprises (the general exemption, which is also relevant to the vertical restraints if such occur with regard thereto);
- goods supply and use (eg, restrictions on the use of goods supplied by other participants to the concerted practices or goods of other suppliers, restrictions on the purchase of goods from other undertakings or sale of such goods to other undertakings or consumers); and
- transfer of intellectual property rights or use of intellectual property (to the extent not exceeding the limits of the legitimate rights of the IP’s owner (eg, restrictions on the period and territory of validity of the permission to use the IP)).
Determining dominant market position
20. Which factors does your jurisdiction apply to determine whether a company holds a dominant market position?
As a matter of law, an undertaking is deemed to be the one holding a dominant position in the market if it does not have any competitors in the market at all or it is not subject to a substantial competition due to other undertakings’ limited access to raw materials or goods distribution, barriers to market entry, the existence of privileges, or other circumstances. By default, an undertaking enjoys a dominant market position if its market share exceeds 35 per cent. However, such a rule is not absolute. If the undertaking holding a market share of more than 35 per cent proves that it faces significant competition in the market, it will not be considered as a monopoly. Furthermore, the undertaking with a market share of 35 per cent or less might hold the dominant position if there is no significant competition in the market, among other things, due to the small market shares of the competitors.
The Ukrainian law also defines the ‘collective dominance’, which may occur if the combined market share of three or fewer undertakings holding the largest shares in the same market exceeds 50 per cent or the combined market share of five or fewer exceeds 70 per cent.
While determining the dominant position, the AMCU is guided by the self-developed Monopoly Methodology, which provides for the detailed procedure for market position assessment.
Abuse of dominance
21. If the company holds a dominant market position, what forms of behaviour constitute abuse of market dominance?
As a matter of law, a list of abuses of dominance is not exhaustive and might include the following:
- setting prices or conditions being impossible on the highly competitive market;
- applying different prices or conditions to identical agreements on an unjustifiable basis;
- imposing additional contractual obligations unrelated to the subject of the agreement;
- limitation of production, markets or technological development in a manner that causes or may cause harm to other market players or customers;
- partial or complete refusal to purchase or sell goods while there are no alternative sources of sale or purchase;
- substantial restriction of other undertakings’ competitiveness on an unjustifiable basis;
- creation of market barriers for other undertakings; or
- the elimination of other undertakings from the market.
Exemptions and defences
22. What exemptions, defences or other circumstances will allow a dominant company’s otherwise abusive conduct to escape sanction?
The abuse of a dominant position is fully prohibited. There is no possibility to avoid or reduce the penalty. Moreover, there is no notification procedure in relation to such conduct. Still, an undertaking holding the dominant position can request non-binding guidance from the AMCU on whether its actions may be considered competition infringement.
Competition authority approval
23. Does the company need to obtain approval from the competition authority for mergers and acquisitions? Is it mandatory or voluntary to obtain approval before completion?
Pre-merger notification is mandatory in Ukraine. The following types of transactions are caught under this rule:
- the merger or affiliation of undertakings;
- the acquisition of control, directly or indirectly, over an undertaking or parts thereof by other undertaking(s);
- the establishment of a joint venture by two or more undertakings being independently engaged in business activities for an extended period of time provided that the establishment of such joint venture will not result in the coordination of competitive behaviour of its founders, or of the joint venture and its founders; and
- the direct or indirect acquisition, obtaining ownership of or management over, the shares (participation interests) in an undertaking, if such acquisition results in obtaining at least 25 per cent or 50 per cent of the target company’s voting rights.
Prior merger clearance is required if the parties to the above transactions reach the following thresholds:
- the aggregate worldwide value of assets or worldwide volume of sales, of all participants over the previous financial year exceeds €30 million; and
- the aggregate value of assets or aggregate volume of sales, of at least two participants over the last financial year in Ukraine exceeds €4 million; or
- the aggregate value of assets, or aggregate volume of sales, by the target company, or at least one of the joint venture’s founders, during the previous financial year in Ukraine, exceeds €8 million; and
- the worldwide volume of sales of at least one other participant (usually the purchaser) exceeds €150 million.
Specific rules for calculating the value of assets and volume of sales are applicable for banks (10 per cent of the bank’s assets for both the assets and sales volumes), and for insurance companies (10 per cent of its net assets, and all profit obtained from insurance activities for the sales amount).
By default, the parties to a transaction apply for merger clearance jointly.
24. How long does it normally take to obtain approval?
Usually, the Ukrainian merger clearance procedure (Phase I) takes up to 45 days. This process involves:
- the undertakings filing a notification with the AMCU;
- the AMCU accepting the notification, which must be done within 15 calendar days after the date of filing; and
- the AMCU issuing its decision (which must be done within 30 days of it accepting the notification).
- only one party operates in Ukraine;
- the aggregate parties’ share in any market is less than 15 per cent; or
- the aggregate parties’ share in any adjacent markets is less than 20 per cent.
In practice, the AMCU would normally issue approval within 30 calendar days from the date of accepting notification (or 25 calendar days from notification filing in the case of a fast-track procedure). If the AMCU does not issue a decision within this period, the transaction is considered to be approved.
If the AMCU finds grounds to prohibit the concentration, Phase II starts. A Phase II review must be completed within 135 calendar days from the date the AMCU notifies the parties it has been initiated.
Impact of merger clearance
25. Does merger clearance by the authority constitute confirmation that the terms in the documents comply with competition law?
By default, the AMCU only provides clearance for a contemplated transaction. Normally, the merger control does not cover ancillary restraints (eg, non-competition provisions) for which additional clearance for concerted actions is usually required.
Exchanging information before completion
26. Are there limits on the information that can be exchanged with the other party before completion of a merger?
Information exchanges between competitors may be qualified as anticompetitive concerted practices. Therefore, parties to the merger should avoid sharing strategic information (eg, information on prices, customer lists, production costs, quantities, turnovers, sales, capacities, qualities, marketing plans, risks or investments).
Notifying the AMCU is carried out on a counsel-to-counsel basis: each participant to a contemplated concentration discloses information to its counsel, who discloses the information to the counterparties’ counsel, but not the counterparties themselves. This allows an application to be filed with the AMCU, without the risk associated with the information exchanges.
Failure to file
27. What are the consequences for failure to file, delay in filing and incomplete filing? Have there been any notable recent cases?
If the AMCU detects the parties’ failure to file when required, the negative consequences may be as follows:
- fines of up to 5 per cent of the parties’ worldwide turnover in the year preceding enforcement of the fine (this does not exempt them from receiving post-closing approval, which is common practice);
- invalidation of the transaction by a court, if the AMCU proves that the respective transaction harmed competition in Ukraine (a rather theoretical risk);
- recovery of double damages, if any, incurred by any third party as a result of the unauthorised transaction (relatively infrequently); or
- publication of information on the defaulting parties on the AMCU’s official website (a common practice).
By default, the clearance should be obtained prior to the merger completion. Otherwise, delay in filing will have the same negative consequence as the failure to file.
Ukrainian law provides no special sanctions for incomplete filings. But if the filing is incomplete, the AMCU may return the filing without considering it. At the same time, if the AMCU discovers that a filing contains false information it may punish the applicant by imposing a fine of up to 1 per cent of an undertaking’s worldwide turnover preceding the year in which the fine is imposed.
Over the previous two years, the AMCU imposed its two highest fines: 58 million hryvnias on Senalior Investments Ltd and 55 million hryvnias on TAS, for concentration (acquisition of a controlling stake) without prior clearance. However, both fines were dismissed in court.
Competition authority approval
28. Are joint ventures required to seek clearance from the competition authority?
Depending on the level of coordination of competitive behaviour between its founders, a joint venture may be treated under the Competition Law either as a concentration or a concerted practice.
By default, the establishment of a fully functional joint venture is regarded as a concentration, and therefore, requires obtaining a merger clearance, provided the financial threshold is met. Setting up a nonfully functional joint venture is treated as a concerted practice and, therefore, may require a permit for concerted actions, unless it falls within the scope of block exemption regulation applicable to horizontal cooperation agreements of undertakings. Under the said block exemption, a joint venture does not require an AMCU permit for concerted actions if none of the founders holds a dominant position in the market, and the common market share of the joint venture’s founders does not exceed 15 per cent.
Joint venture arrangements
29. When will joint venture arrangements fall within the scope of competition law?
A joint venture does not raise a concern, provided that, if it is deemed to be a concentration, it does not lead to the monopolisation of the market and it does not result in the prevention, elimination or restriction of competition nor entail the risk thereof if considered as a concerted practice. To mitigate the risks of anticompetitive foreclosure the joint venture founders should not allocate the markets, fix prices, exchange strategic and sensitive commercial information between them. Also, the actions which are subject to the measures provided by Law of Ukraine No. 1644–VII ‘On Sanctions’ of 14/08/2014 will not be cleared (eg, if the ultimate beneficial owner of the concentration party is subjected to the mentioned measures, the AMCU approval will not be granted).
30. Is a leniency programme available to companies or individuals who participate in a cartel or other anticompetitive conduct in your jurisdiction?
An undertaking that committed the anticompetitive concerted practices may be released from liability if it notifies the AMCU of committing the same before the mentioned actions have been revealed by the AMCU.
It is worth noting that not all participants of anticompetitive concerted practices can apply for leniency. For instance, initiators of anticompetitive concerted practices and undertakings which have already filed applications for exemptions but have not fulfilled their obligations (in particular, to stop the violation or to cooperate with the AMCU) cannot be released from liability. In the interests of the investigation, the AMCU ensures the confidentiality of the applicant’s information.
Beneficiaries of leniency
31. Can the company apply for leniency for itself and its individual officers and employees?
Only an undertaking that committed a violation may apply for leniency.
Commencement of investigation
32. How is an investigation into a suspected breach of competition law started?
Antimonopoly Committee of Ukraine (AMCU) investigations are initiated in one of three ways:
- upon a third party’s complaint of a violation of their rights as a result of competition infringement;
- upon a submission of a public body on violations of the competition law; or
- on the AMCU’s initiative.
Besides, if the complainant submits information on potential negative consequences resulting from the filing made, the investigation shall be initiated by the AMCU.
As a general rule, if the AMCU detects the potential breach of competition law along with its negative consequences, it starts the investigation. However, if the potential infringement does not have a significant impact on the competition, the AMCU may refuse to launch the investigation.
33. What are the limitation periods for investigation of competition infringements?
As a general rule, the limitation period for investigating an alleged infringement of competition is five years from the date of its occurrence or five years from the date of its termination for a continuing violation.
A shortened limitation period of three years applies to the following types of infringements:
- failure to submit information to the AMCU;
- submission of incomplete information to the AMCU;
- submission of false information to the AMCU; and
- obstruction of the AMCU’s inspections, seizures or arresting of evidence.
34. What powers does the competition authority have to gather information?
The AMCU is entitled to gather information during the market study, investigations and dawn raids in a number of ways. In particular, the AMCU has authority to:
- require information from undertakings, public authorities and third parties, including those with restricted access;
- ask for expert opinions;
- enter and search premises and vehicles of the undertakings;
- interview officials and employees of undertakings, and obtain explanations from third parties;
- seize or arrest property, documents, things or other evidence; and
- engage the police, customs and other law enforcement agencies.
35. For what types of infringement will the competition authority launch a dawn raid? Are there any specific procedural rules for dawn raids?
A common ground for launching a dawn raid by the AMCU is an alleged competition infringement without any particular details or specifics to justify such a revision. Consequently, any violation of competition law can be a driving force for an unannounced visit by the AMCU. Moreover, a dawn raid may be also initiated in other cases (eg, detection of inaccuracy of data in the documents provided at the AMCU’s request).
Procedural rules for dawn raids are stipulated in AMCU’s self-adopted Regulations on the Procedure for Conducting Inspections of Compliance with the Competition Law Regulation (2001). During 2019, 22 dawn raids were carried out by the AMCU.
During a dawn raid, the AMCU is empowered to inspect premises and vehicles of undertakings. However, a draft law that is currently being finalised, proposes authorising the AMCU to inspect private premises, provided it obtains authorisation by a court.
Dawn raids – rights and obligations
36. What are the company’s rights and obligations during a dawn raid?
Company’s rights during a dawn raid can be summarised as follows:
- to require the dawn raid to be carried out within the competence of the AMCU’s officials;
- to request certified copies of evidence being seized by the AMCU in their original forms;
- to receive a report on the dawn raid; and
- to file complaints about the actions of the officials conducting the dawn raid.
Refusal to cooperate
37. What are the penalties and other consequences for refusing to cooperate with the authorities during an investigation?
There are several negative consequences for refusal to cooperate with the AMCU during a dawn raid.
The refusal to cooperate with the AMCU by creating obstacles during the inspections, seizure or arrest of evidence may result in a fine of up to 1 per cent of the total worldwide turnover of the undertaking in the year preceding enforcement of the fine and nominal administrative fines for the undertakings’ employees.
When setting the amount of a fine, the AMCU considers aggravating and mitigating circumstances specified in the Guidelines on Fines. Under the Guidelines on Fines, interfering in an investigation or refusing to cooperate with the AMCU will result in the basic fine being increased. Alternatively, cooperating with the AMCU during an investigation is a mitigating circumstance that reduces the amount of the fine.
38. Is there any mechanism to settle, or to make commitments to regulators, during an investigation?
A settlement procedure is not available in Ukraine and its introduction is a topical issue. The draft law is intended to establish such a procedure in the field of competition law.
Commitments may take place when the AMCU establishes grounds to reject the clearance of concerted actions or a concentration. In such circumstances, the AMCU establishes a 30-day period for parties to submit proposals for commitments aimed at mitigating or eliminating the negative impact of their proposed relationship on competition. This period may be extended at the request of the parties. In order for the clearance to be granted, commitments undertaken by the parties should be proportionate to the justified threats of adverse effects on competition and be agreed with the AMCU through consultations.
Impact of compliance programme
39. What weight will the authorities place on companies implementing or amending a compliance programme in settlement negotiations?
A settlement procedure is not available in Ukraine.
40. Are corporate monitorships used in your jurisdiction?
Corporate monitorships are not used in Ukraine. Internal monitoring can be implemented by an undertaking as a precautionary approach. However, as clearance for a merger may be conditional, the parties to a transaction may be required to provide certain reports to the AMCU after the merger’s completion. Thus, the AMCU exercises monitoring powers.
Statements of facts
41. Are agreed statements of facts in a settlement with the authorities automatically admissible as evidence in actions for private damages, including class actions or representative claims?
A settlement procedure is not available in Ukraine. However, in actions for private damages, an injured party does not have to prove the existence of a competition law infringement. It is sufficient to refer to the respective decision by the AMCU, provided it has come into force.
UPDATE AND TRENDS
Recent developments and future reforms
42. What were the key cases, decisions, judgments and policy and legislative developments of the past year? Are there any proposals for competition law reform in your jurisdiction?
The main focus of the Antimonopoly Committee of Ukraine (AMCU) in 2020 was the identification and suppression of:
- unfair practices (particularly, in medicines advertising);
- anticompetitive practices on the markets of air and local transportations, pharmaceuticals, consumer goods, and oil and gas supply;
- abuse of dominance in gas and electricity markets; and
- consideration of complaints related to breaches in public procurement laws.
- The AMCU’s directions were reflected in a number of noteworthy cases, where the AMCU imposed fines of:
- 275 million hryvnias on the DTEK Group for abuse of dominance through inflated and economically unreasonable pricing for the sale of electricity;
- 188 million hryvnias on medicine manufacturer Novo Nordisk and its Ukrainian distributors for anticompetitive concerted practices in the form of price-fixing;
- 69 million hryvnias on the Interpipe Group for concerted practices in the form of collusive tendering on public procurement of railway equipment; and
- 528,000 hryvnia on Yuriya–Pharm LLC for unfair competition (ie, misleading consumers by advertising its drugs as the cure for the coronavirus).
There are also a pending court proceedings with respect to the 2019 Ostchem case, in which the AMCU imposed a fine of 107 million hryvnias on the Ostchem Group for abuse of dominance through inflated and economically unreasonable pricing for the sale of nitrogen fertilisers and limiting their production. Furthermore, the AMCU ordered the Ostchem Group to be split up. This was the first time in 20 years the AMCU has applied this sanction on an undertaking.
Moreover, in the previous year, a new draft law was submitted to the Ukrainian legislative body, aimed at:
- introducing a settlement mechanism, which allows a 15 per cent penalty reduction for signing a plea agreement;
- making leniency available not only to the first applicant, but also to the further ones, and
- extending the AMCU’s authority to conduct dawn raids in private premises, as well as to have access to information and evidence of former and existing criminal investigations and information held by notary secrets.
43. What emergency legislation, relief programmes and other initiatives specific to your practice area has your jurisdiction implemented to address the pandemic? Have any existing government programmes, laws or regulations been amended to address these concerns? What best practices are advisable for clients?
In view of the covid-19 pandemic, the AMCU has taken several steps to address related concerns, including issuing obligatory guidelines recommending undertakings:
- refrain from setting unreasonable prices for farm products and essential goods;
- terminate disseminating information that covid-19 express tests may be used by non-medical personnel; and
- not to spread unconfirmed information about the properties of the product, in particular, its ability to struggle with the coronavirus.
by the Cabinet of Ministers of Ukraine.