Dominance & Monopolies in Ukraine 2024

The Law of Ukraine on Protection of Economic Competition (the Competition Law) is the primary source of regulation of market dominance and its abuse in Ukraine. It also sets the general framework for investigations of competition law infringements and specifies sanctions applicable to violators.

The Antimonopoly Committee of Ukraine (AMCU) is the only body responsible for the prevention, investigation and punishment of abuse of dominance, and is the sole body empowered by the Competition Law to determine whether an undertaking holds a dominant position in the market. While exercising its powers, the AMCU may: (1) request undertakings, state bodies and private individuals to provide information of any type (including confidential information); (2) issue guidance on various competition law matters; and (3) conduct searches.

There is no formal guidance, as such, on competition compliance for undertakings, except for certain block exemptions and other internal acts of the AMCU, which mostly focus on concerted practices. There is also the Methodology for Determining the Monopoly (Dominant) Position of Undertakings in the Market (the Dominance Methodology), adopted by the AMCU in 2002, which remains in effect today. Based on criteria and rules provided in the Dominance Methodology, the AMCU can define whether an undertaking holds a dominant position in the market.

The Competition Law provides for equal treatment of both private and public undertakings, including state bodies and state-owned enterprises, which can be found to be in abuse of market power and brought to justice, accordingly.

There is a specific regime applicable to certain markets of significant state interest in Ukraine, in which natural monopolies exist. For instance, natural monopolies are present in the oil and gas transportation, centralised water supply and drainage markets. The main legislative act that governs natural monopolies is the Law of Ukraine on Natural Monopolies.

The ongoing full-scale war, which began in February 2022, continues to impact the ability of all state authorities, including the AMCU, to perform their functions. This is due to extensive shelling of cities and damage to thermal power plants, leading to widespread blackouts and frequent air raids. Despite these challenges, the AMCU has maintained its activities, including those related to investigations of violations and actions indicative of abuse of dominance.

Throughout 2023, the AMCU considered cases on the abuse of dominance, mainly focusing on the energy, natural gas, and various services markets. The AMCU’s guidelines on the application of abuse of dominance rules, which were published in 2022, have provided in-house counsels with more precise guidance on identifying such abuses and their adverse impact on competition. However, unresolved issues persist for in-house lawyers when determining specific actions that constitute abuse of dominance in particular cases, particularly in the IT and other hi-tech industries.

Significant AMCU decisions in 2023

Under the Competition Law, an undertaking is deemed to hold a dominant position in the following two cases:

1. an undertaking has no competitors in the market; or
2. an undertaking faces no significant competition in the market as a result of the other market players' limited access to raw materials, distribution channels, the existence of entry barriers, certain benefits or other circumstances.

By default, an undertaking is considered to enjoy a dominant position if it holds more than a 35 per cent share in the market. This rule, however, will not apply if the undertaking proves that it faces significant competition in the relevant market.

The Competition Law also contains a notion of 'collective dominance'. In particular, if the combined market share of (1) three or fewer undertakings is more than 50 per cent, or (2) five or fewer undertakings is more than 70 per cent, each of those undertakings is deemed to be a holder of a dominant position in the market. This rule will not apply if it is proved that such undertakings face significant competition in the market.

There is no explicit concept of 'relative dominance' provided in the Competition Law. However, the state of economic dependence of suppliers or customers from one undertaking may indicate the absence of substantial competition in the market, and, therefore, the dominant position of the respective undertaking may be established under the general rule.

While determining the dominant position, the AMCU is guided by the self-developed economics-based dominance methodology, which provides a detailed procedure for market position assessment, including a list of actions and factors that should be performed or considered while deciding on whether an undertaking holds a dominant position in the market. Within the dominance assessment procedure, the AMCU defines various factors, including the commodity and territorial borders of the market, its major players and potential competitors, the volume of goods circulating on the market and the entry barriers.

At the same time, the AMCU is not limited to the methodologies and techniques it may use for determining dominant position, and it has recently started applying the small but significant and non-transitory increase in price (SSNIP) test to define markets' commodity borders.

The approaches to market definition are similar to those taken in other jurisdictions, including the European Union and the United States. The crucial difference, however, relates to the size of a market share that serves as an indicator of potential market power. As a matter of existing practice, it is sufficient in Ukraine for an undertaking to hold a market share of just over 35 per cent to be recognised as having market power. At the same time, the practice of both the EU and the US shows that a 35 per cent market share is unlikely to signify the existence of a dominant position in the relevant market.

Under the Competition Law, 'abuse' is regarded as any action or omission of an undertaking that holds a monopoly (dominant) position in the market, which resulted or may result in prevention, elimination or restriction of competition or infringement of the interests of other undertakings or consumers that would be impossible with significant competition in the market.

The list of practices that may qualify as abuse of dominance is non-exhaustive. There are some practices that constitute abuse per se (e.g., excessive pricing, refusal to deal, discriminatory treatment). Other practices may also constitute abuse, provided that the AMCU establishes by means of the 'effects-based analysis' that such practices resulted or may result in the prevention, elimination or restriction of competition or infringement of the interests of other undertakings or consumers that would be impossible with significant competition in the market.

The actions of an undertaking holding a dominant position in the market may constitute abuse regardless of its intent. However, the AMCU considers the intent of a wrongdoer while determining the amount of fine to be imposed. Under the AMCU's Guidelines for Calculation of Fines for Violation of the Ukrainian Competition Law (the Guidelines on Fines), initiating or leading a violation is deemed to be an aggravating circumstance that increases the fine. At the same time, the presence of a fault on the part of the wrongdoer is one of four cumulative conditions that must be satisfied to obtain compensation during the private enforcement.

To the best of our knowledge, the Ukrainian approach to defining and qualifying abuse is largely similar to that of the EU, while it differs from the US regime. For instance, US antitrust regulation allows the actions of both potential and actual monopolists to be declared as abuse, while Ukrainian law deals only with actual monopolists.

The Competition Law mentions the refusal to purchase or sell goods in the absence of other sources or distribution channels as a practice that constitutes the abuse of dominance. The infringement consists of two main components, namely (1) the presence of a refusal and (2) the absence of alternative sources of supply. The refusal, however, shall not be regarded as unlawful if it is objectively justified. For instance, the omission of an undertaking holding a dominant position to supply goods to a customer that has failed to make an agreed prepayment shall not be considered unlawful.

Another practice that falls within the scope of exclusionary abuse is the imposition of contractual conditions that have no connection to the subject matter of the agreement. Investigations of this type of abuse always include extensive legal and economic analyses of the agreement in question to determine whether a disputed condition falls outside the subject matter of the respective arrangement. Recent practice refers to the case of a Ukrainian bank that was the sole supplier of municipal preferential cards for certain categories of the population and decided on the conditions of their opening. It abused its market power by forcing the customers to download the SMS notification system as a necessary condition for opening the card.

The Competition Law also treats the substantial limitation of competitiveness of other undertakings without justifiable grounds as another type of dominance abuse. An illustrative example of this abuse was the case where 18 regional gas suppliers abused their market power by setting an unfair and unreasonable condition for undertakings participating in public procurement – to provide a confirmation document that was not necessary for procurement purposes.

Applying different prices or conditions to identical agreements without justifiable grounds is another abuse of dominance listed in the Competition Law. One of the examples of this type of abuse was the case of Artemsil, a major Ukrainian salt manufacturer, which set different prices to de facto identical agreements without any justification. In particular, the enterprise established a distribution system that awarded a 5 per cent discount to authorised dealers that satisfied a volume purchase criterion during a certain period. In practice, however, the enterprise granted the 5 per cent discount to dealers that failed to meet this criterion and to direct purchasers that did not have dealer status. Following its investigation, the AMCU found the practice to be an abuse of dominance by applying different prices to identical agreements without justifiable grounds.

The AMCU decided similarly on the Interstarch Group, a Ukrainian producer of starch corn molasses and glucose syrups. In particular, the prices for different customers with similar contracts varied up to 24 per cent.

We are not aware of the cases where the AMCU has  applied the as-efficient competitor test in its investigations yet.

Pursuant to the Competition Law, setting prices or conditions that an undertaking would not be able to set, if the market was competitive and it was acting reasonably, is an abuse of dominance. The investigation of this type of case involves an in-depth market assessment, including analysing practices applied by the other market players.

One of the most notable examples of this kind of abuse of dominance was considered by the AMCU in the Zeonbud case. The case concerned the pricing behaviour of Zeonbud LLC, one of the major Ukrainian TV broadcasting providers, in setting tariffs for the supply of telecommunication services. The unique feature of this case is that the AMCU's investigation lasted almost eight years. During the investigation, it was established that the company raised tariffs in the absence of any economic substantiation for doing so. The AMCU also concluded that Zeonbud would not have made these price increases if it had faced significant competition in the market. As of 2023, the aforesaid decision is still under review by the courts.

The Competition Law establishes a five-year statute of limitations for abuse of dominance cases. The maximum level of fine that may be imposed on an undertaking for abuse of dominance constitutes 10 per cent of the undertaking's worldwide turnover. By default, the fine is applied to the undertaking that committed the infringement. However, if the undertaking committed the infringement as a result of actions of its affiliates, the AMCU may also impose a fine on the respective affiliates or persons that benefited from the infringement (e.g., the ultimate beneficial owners).

While determining the exact amount of fine that shall be applied in each case, the AMCU is guided by the Procedure for Determining the Amount of a Fine Imposed for Violation of Economic Competition Law (the Procedure) approved on 14 December 2023. This new Procedure was adopted to fulfil the requirements to change the Competition Law introduced by the Law of Ukraine on Amendments to Certain Legislative Acts of Ukraine on Improving the Legislation on Protection of Economic Competition and Activities of the Antimonopoly Committee of Ukraine No. 3295-IX dated 9 August 2023 (Law No. 3295). The Procedure replaced the Guidelines on Fines, which had more advisory character. The new Procedure provides for a three-step process for calculating the fine.

During the first stage, the AMCU defines the basic amount of fine, which is calculated with consideration of the need to seize the income (proceeds) received as a result of the violation (if available and calculable in monetary terms) and ensures a deterrent effect.

Once the basic amount of fine is determined, the AMCU enters the second stage, adjusting the fine based on relevant circumstances. The new procedure updates the impact assessment approach and expands the list of aggravating and mitigating factors.

The Procedure defines a list of reasons that may affect the increase of the fine, such as:

1. the initiation and coordination of anti-competitive concerted actions;
2. the violation covering two or more regions of Ukraine;
3. repeated violation during the established period; and
4. monopolisation or substantial restriction of competition covering more than two regions of Ukraine.

The basic amount of the fine is reduced if there is one of the following grounds:

1. termination of actions (inaction) by the defendant before the date of submission of the preliminary findings by the AMCU's bodies;
2. compensation for damage caused or elimination of the consequences of the violation before the AMCU’s decision;
3. non-compliance by the participant with the terms of agreed actions and evidence of competition in the market during the period of the violation;
4. co-operation with AMCU bodies during the proceedings;
5. violations due to incitement by a government or local government body;
6. application for merger clearance before the commencement of proceedings on the violation if the concentration had no necessary clearance; and
7. actions aimed at mitigating the negative consequences of the violation for economic competition, the interests of business entities, and consumers.

In addition, in cases of force majeure or the possibility of bankruptcy or liquidation of undertaking as a result of a fine imposed on it, the AMCU’s bodies shall apply and justify in their decision a reduction in the amount of the fine as compared to the amount already applied on the basis of the application of limiting or aggravating circumstances.

The third and final step in determining the acceptable amount is to determine the maximum amount, which shall not exceed the maximum amount of the fine provided for by the Competition Law, namely 10 per cent of the worldwide turnover of the wrongdoers for the year preceding the year of the imposition of the fine.

Upon consideration of the case, the AMCU may issue recommendations to the undertaking whose behaviour was investigated. This undertaking is then compelled by virtue of the Competition Law to consider the recommendations and report to the AMCU on the results of this within 10 days of the receipt of the recommendations. In its recommendations, the AMCU usually asks the undertaking to adjust its market behaviour, including, but not limited to, the terms of the contracts. As a matter of existing practice, if the undertaking fails to implement the AMCU’s recommendations, the latter will resume its investigation of the Competition Law violation.For example, the AMCU issued recommendations to JSC Prozorro. Prodazhi to eliminate additional (marketing) contractual terms and conditions and unreasonable fees for access to the trading system, which, in the view of the AMCU, contained signs of the dominance abuse. The AMCU closed the case once JSC Prozorro. Prodazhi had implemented the recommendations.

Moreover, even before a decision is made, the potential wrongdoers may be obliged to take, or refrain from taking, certain actions (preliminary decision). This is only applicable if another undertaking submits an application to the AMCU indicating that these measures are necessary to avoid negative and irreversible consequences. However, this remedy is almost never applied in practice.

The Competition Law also stipulates a compulsory split-up as an additional sanction that may be applied towards an undertaking that abuses its dominant position. However, there is no explicit procedure for the implementation of this type of sanction, which, in turn, creates a situation in which the dominant undertaking must determine how to split-up by itself. Due to the complexity of implementation of this kind of sanction, the AMCU has not applied it in the past two decades, except for in the 2019 Ostchem case in which the AMCU subjected the Ostchem Group, comprising four major Ukrainian nitrogen fertiliser producers, to a compulsory split-up, for inflated and economically unreasonable pricing for the sale of nitrogen fertilisers, and a limitation on their production. However, the Supreme Court annulled this decision, and split-up was never applied in practice.

There are, however, exceptions provided by the Competition Law for cases in which compulsory split-up cannot be imposed on undertakings by the AMCU. Pursuant to these exceptions, compulsory split-up shall not be applied if: (1) in terms of organisation or territory it is impossible to separate enterprises, structural subdivisions or structural units; or (2) there is a close technological connection between enterprises, structural subdivisions or structural units (if the volume of output of the economic entity exceeds 30 per cent of the volume of gross output of the enterprise, the structural subdivision or structural unit).

The AMCU is obliged by virtue of the Competition Law to grant an undertaking at least six months to carry out a split-up.

An AMCU investigation into Competition Law violations may be initiated in one of four ways:

1. upon third parties' complaints of violation of their rights as a result of an alleged Competition Law infringement;
2. upon an appeal submitted by a public body to the AMCU;
3. at the AMCU's own initiative; or
4. inclusion of a person, who owns, controls or benefits from a media outlet that has a significant impact on the broadcasting market in the Register of Oligarchs.

If the AMCU, upon consideration of the respective complaint or public authority submission, detects a potential breach of the Competition Law, it will launch an investigation and inform the complainant of this. However, if the AMCU does not establish potential signs of a Competition Law infringement or finds that the impact on competition is immaterial, it will refuse to launch an investigation, which it also notifies the complainant of.

During the investigation, the AMCU is entitled to gather information and collect evidence in a number of ways, including:

1. requesting information from undertakings, public authorities and third parties;
2. asking for expert opinions;
3. entering and searching undertakings' premises and vehicles;
4. interviewing officials and employees of undertakings, and obtaining explanations from third parties;
5. seizing or arresting property, documents, or other evidence; and
6. engaging the police, customs, and other law enforcement agencies.

Failure to provide information at the AMCU's request, or the submission of incomplete or unreliable information, is a Competition Law infringement, which may result in a fine of up to 1 per cent of the total worldwide turnover of the violator.

The AMCU is also entitled to conduct dawn raids. The grounds and procedure for conducting dawn raids have changed somewhat with the entry into force of Law No. 3295. The AMCU conducts dawn raids based on an order of the AMCU's body or the head of the territorial branch of the AMCU adopted in accordance with a commercial court decision.

Dawn raids may also be initiated on the following grounds:

1. consideration of reports (from citizens, business entities, associations, institutions, organisations) of violations of their rights as a result of actions or inactions defined as violations of the Competition Law;
2. consideration submissions (applications) of authorities;
3. the direct detection by the AMCU’s bodies of signs of violation of the Competition Law;
4. consideration of cases of violation of the Competition Law; and
5. the need for verification of information.

Procedural rules for dawn raids are stipulated in the AMCU’s self-adopted Regulations on the procedure for inspection of business entities, associations, authorities, local self-government bodies, administrative and economic bodies management and control of the AMCU and its territorial branches (2023).

During dawn raids, the AMCU has the right to have unhindered access to premises, other possessions and other places of information storage, and it has the right to receive copies of, or extracts from, documents, to seize property, objects, documents and other media, to inspect possessions, to use inspection objects and to demand explanations.

A company’s rights during a dawn raid can be summarised as follows:

1. to use the services of a lawyer;
2. to request the return of the originals of written evidence and unsealing of the premises (and other property);
3. to provide oral and written explanations (objections) and proposals regarding the content of the dawn raid report;
4. to receive a dawn raid report; and
5. to file complaints about the actions of the officials conducting the dawn raid.

At the same time, the company should refrain from obstructing the inspection, seizure or arrest of the evidence, and obey the legitimate demands of the AMCU during the dawn raid.

With the entry into force of Law No. 3295, a settlement procedure was launched in Ukraine. The settlement procedure is a way for an undertaking to settle antitrust investigations with the AMCU. In exchange for admitting to and agreeing to stop the violation, the undertaking can get a 15 per cent reduction in its fine. The procedure can be used in most antitrust cases, but there are some exceptions.

The settlement procedure is regulated by the AMCU's Order on Approval of the Settlement Procedure dated 30 November 2023, and the AMCU has approved guidelines for the execution of settlement agreements.

The settlement procedure includes the following steps: 

1. submission of an application by a wrongdoing undertaking with all the necessary details to the AMCU; 
2. consideration of the application by the AMCU; and
3. if the AMCU agrees to initiate the settlement procedure, the approval of the draft settlement agreement and its conclusion.

The Competition Law does not provide any clearance or notification procedure for abuse of dominance. Nevertheless, undertakings holding a dominant position can request guidance from the AMCU (not binding in nature) on whether their actions may be considered as a Competition Law infringement.

Any undertaking that has been fined for abuse of dominance may appeal the AMCU's decision to the commercial court within 60 days of receipt of the decision.

According to the Competition Law, persons who have suffered damage because of abuse of dominance by an undertaking may apply to the court for compensation. If the court finds the plaintiff's evidence proving the existence of damage and its size to be sufficient, it will satisfy the claim without the need to re-establish the Competition Law infringement. Under the Competition Law, the violating undertaking must provide the plaintiff with twice the amount of the actual damages. Collective actions are possible, but there is no established case law in this regard.

Generally, damages are defined as the difference between the costs actually incurred by the plaintiff as a result and during the period of the defendant's violation, and the costs that the plaintiff would have reasonably incurred in the absence of the violation.

Pursuant to the Supreme Court case law established to date, the repayment of damages is subject to four cumulative elements that must be proved by the plaintiff, namely:

1. the wrongful conduct of the violator confirmed by the respective decision of the AMCU;
2. the presence of harm;
3. the causal link between the wrongful conduct and the harm; and
4. the fault of the violator.

Private antitrust cases have become more common in Ukraine, with an increasing number of cases being resolved in this area. Ukrainian courts tend to apply a similar approach to dispute resolution, mirroring practices of the previous years, such as the case involving Ukraine International Airlines (UIA) against AMIC Aviation Ukraine (AMIC), and the case of Nibulon LLC against Ukrzaliznytsia PJSC.

Among recent noteworthy cases there were a few concerning compensation recovery from the municipal enterprise Kyivtransparkservis, which holds a monopoly in the market for selling rights to operate parking lots (as it has no competitors in this market). The AMCU determined that Kyivtransparkservis violated the Competition Law by abusing its dominance in the relevant market in the form of setting purchase terms that would not have been possible under significant market competition. The abuse involved imposing conditions on the winners of electronic auctions for parking lot operation rights in Kyiv. These conditions included the obligation to pay a one-time fee for the right to sign an agreement for the transfer of parking lots into operation, a security deposit and fines for refusal to conclude the said agreement or to sign acceptance and transfer acts for such lots. The Ukrainian courts have already upheld several claims for payment of the compensation caused by such an abuse of dominance.

Another significant case in this category of disputes involves a claim for damages against Ukrzaliznytsia for abusing its monopoly position in the rail freight transportation market, where it holds a 100 per cent market share. In 2023, several court decisions awarded compensation for damages caused by violations of the Competition Law based on decisions by the AMCU. The specific offence included identifying low-performing freight stations and introducing a service called ‘delivery and collection of rail cars and containers for loading or unloading at low-performing stations, for commercial operations, as well as work related to acceptance, delivery, loading and unloading’, along with setting its cost. As a result, more than 250,000 hryvnas in damages were recovered from Ukrzaliznytsia. Additionally, another case regarding the same violation of the Competition Law, involving a compensation amount exceeding 20 million hryvnas, is currently pending in court.

Among recent developments, on 23 May 2024, the AMCU approved draft methodologies for determining market boundaries in the media sector, also aligning Ukrainian legislation with EU law, particularly in digital markets. These methodologies specify the regulation subject, purpose, media-specific terminology and mechanisms for applying competition protection laws in the media sector. The draft Methodology for Determining Market Boundaries in the Media Sector allows for various methodologies based on the specifics of goods and details the methods for defining market boundaries. The draft Methodology for Determining Market Boundaries for Advertising Information includes sections on market volume, market share calculation and market concentration levels. The draft methodologies define market boundaries based on the commodity properties and legal status of media entities, in line with the Law of Ukraine on Media and other relevant regulations.

As Ukraine became a candidate for EU membership in 2022, the AMCU took active steps to harmonise the current antitrust legislation with the EU rules. The reform of antitrust legislation and enforcement in Ukraine is a part of EU membership requirements.

In August 2023, the Law No. 3295 was adopted to aim Ukrainian competition law in line with EU standards. Law No. 3295, among other things, introduced a leniency and settlement procedure as well as expanded the AMCU's powers to conduct inspections and seize evidence. Law No. 3295 entered into force on 1 January 2024.