Despite understaffing, critical gaps in the work of the Antimonopoly Committee of Ukraine were avoided in 2014. If such an extraordinary situation is not resolved in the foreseeable future, it will take quite long to return the Committee’s work to normal
Last year the Antimonopoly Committee of Ukraine (AMCU) carried out its activities in quite extreme conditions: in addition to the well-known economic and political situation, the agency was understaffed and lacked the appropriate management: in accordance with the resolution of March 26, the Verkhovna Rada of Ukraine (Parliament) dismissed Vasyl Tsushko from the post of AMCU Chairman, and the Committee was composed of only five (out of eight) state commissioners. Mykola Barash has been acting Chairman all of this time.
The Cabinet of Ministers of Ukraine considered Antonina Yagolnyk, Partner at AstapovLawyers ILG, as Chairman of the AMCU. The appropriate draft resolution was registered in Parliament on April 7, 2014. However, a little more than six months passed and such an important appointment had still not been made. Apparently, the draft resolution “got stuck” in the sectoral parliamentary committee.
Surely, understaffing at the Committee affected its work. Oleksiy Kot, Managing Partner at Antika Law Firm, believes that, in actual fact, half of the composition of the AMCU cannot be expected to consider cases thoroughly and quickly. After all, with the exception of those meetings where decisions are made, a considerable amount of work is carried out by state commissioners and staff of the Committee whilst preparing for the meetings. Mr. Kot further emphasizes that critical gaps in the work of the AMCU in 2014 were avoided. In general, despite a slight decline in the rate of regular investigative procedures, the Committee observed the statutory terms of procedures, and business entities, as a rule, did not experience any problems in the work of the Committee.
At the beginning of the year the AMCU identified the spheres that deserve special attention. These are the construction and construction materials markets, connecting town planning objects to engineering networks, retail trade in non-specialist stores (predominantly the range of food) and retail trade in medicines. The agency has not changed its priorities despite changes in personnel.
Taking into account the difficult economic situation in 2014 and devaluation of the hryvnia, which certainly affected the price of goods, the Committee traditionally paid attention to so-called social markets. Oleksiy Kot notes that investigations regarding rises in the price of petrol and petroleum products were carried out once again, with special attention being paid to the medicines market. An investigation into potential collusion involving a number of large food retail chains (supermarkets) in Ukraine is pending. The results of the investigation can most likely be expected next year.
Responding to a significant increase in food prices, the Committee recommended that the main retail chains operating on the market of retail sales of food items (Bimarket LLC, Fozzy-Food LLC, Novus Ukraine LLC, ATB-market LLC, Auchan Hypermarket Ukraine LLC, EKO LLC, etc.) take measures to prevent unreasonable increases in retail prices.
Furthermore, Mr. Kot said that the Committee’s activity in other areas fell slightly. For example, in 2014 the AMCU monitored less closely cases of false advertising and dissemination of misleading information.
Another important trend in 2014 was the absence of new high-profile and controversial cases. “It is quite difficult to say if this resulted from understaffing of the Committee, or a wish to not get involved in cases with a potential political overtone during the crisis”, Oleksiy Kot says summing up and notes the success of the AMCU’s representatives in commercial courts, which often support the position of the agency rather than that of entrepreneurs.
This year a scandal about procurement in the defence and pharmaceutical fields flared up again. However, the AMCU was involved in it only indirectly. The fact is that the Antimonopoly Committee is a body of appeal in public procurement. It is empowered, in particular, to suspend the procurement procedure when considering a relevant petition.
A reminder that in late June representatives of public organizations picketed the Lviv territorial office of the AMCU demanding “the immediately unblock the purchase of bulletproof vests for the Ukrainian army”. As for blocking procurement of medicines by the Ministry of Health, it could be a matter of life or death for thousands of Ukrainians.
Victoria Ptashnyk, lawyer and parliamentary candidate, explains that suspension of the trading procedure is used to enable the client to eliminate violations revealed by the AMCU, and amend the tender documents during the bidding process. The revelations of violations by the AMCU after the opening of bids may result in the cancellation of the bidding process and, accordingly, the need to hold them again (meeting all deadlines).
In case of purchase of medicines, along with the identified discriminatory conditions of the tender documents, according to Ms. Ptashnyk, there were numerous petitions from “unscrupulous complainants”. “Some business entities file petitions with the sole aim of dragging out the bidding process and do so, as a rule, a few days before the disclosure of bids”, the lawyer explained. There were cases when in the process of procurement of medicines petitions were filed by companies that do not have the appropriate license for wholesale trade in medicines, which means that such companies would not be able to provide the supplies if they were to win the tender. Ms. Ptashnyk believes that in the current situation with purchase of medicines the issue here is not just about competition, but primarily about health and patients’ lives. Therefore, law-enforcement agencies must resolve this issue.
Ms. Ptashnyk considers e-procurement to be oneof the most effectivemeasures to affect thetransparencyof public procurement.“We needto minimize the possibility of communication between the bidders and the client anddisclose procurement informationfor everybody.The public needs tosee what ispurchased, from whom, at what price, and what were the bids made by the successful bidder andotherbidders, etc. This will resolve many issuesin the future”, Victoria Ptashnyk asserts.
In January-September 2014 the Higher Commercial Court of Ukraine considered 133 cassation appeals in cases involving disputes related to the application of antitrust laws, of which 101 cases were to do with invalidation of the AMCU’s decisions, 23 petitions on recovery of penalties imposed by a decision of the AMCU, and 9 cases were on protection against unfair competition. For the same period last year 110 cassation appeals of the relevant category were considered, which is 17% less than in 2014. As pointed out by Igor Benedysyuk, Secretary of the Fourth Judicial Chamber of the HCCU, statistics show a rise in cases on invalidation of decisions made by the AMCU (by 32%) and a decrease in cases on protection against unfair competition (by 44%).
He specifies that among disputes relating to application of antitrust laws prevail disputes on appealing against the AMCU’s decisions on violation of legislation on protection of economic competition in the form of anticompetitive concerted actions (in January-September 2013, the number of cassation appeals in this category was 19 compared with 35 appeals for the same period in 2014) and abuse of monopoly (dominant) position (37 petitions in January-September 2013 and 51 petitions in January-September 2014). The majority of cases related to protection against unfair competition were disputes on dissemination of misleading information in terms of supplying false information to certain people by a business entity, which may affect the intentions of individuals to purchase goods from a particular business entity (in January-September 2013, 13 cassation appeals in this category were filed compared with 8 appeals for the same period in 2014).
AN INVESTIGATION IS UNDER WAY…
Summing up the annual results on application of antitrust legislation, it is worth mentioning trade investigations. Anna Gladshtein, advisor at Sergii Koziakov & Partners, says that as of October 2014 two anti-dumping investigations (regarding import into Ukraine of electric filament lamps originating from the Kyrgyz Republic and seamless stainless steel tubes originating from China) and one (initiated in Ukraine for the first time) anti-subsidy investigation regarding import into Ukraine of vehicles originating from Russia, are pending in Ukraine. Furthermore, effective anti-dumping measures in relation to imports of turnouts, float glass and special protective measures with relation to imports of steel pipes into Ukraine are being reviewed.
Ms. Gladshtein draws attention to the fact that during tradeinvestigations Ukraine tends to either apply trade protection measures(tariffs or quotas) or to terminatethe investigationwithout applying any measures. At the same time, a mechanism such as price undertakings by the exporter, is not applied.Whileduties are intended, as a rule,to “punish” the dumping exporters by charging additionaldutyto the existing one, price undertakingshave a more “friendly” nature, as they usually allowexportersto raise pricesand ceteris paribus receive higher profits.
It is worth remembering that trade protection measures in foreign markets are also applied against Ukrainian producers. To mitigate the risks of trade investigations being initiated Anna Gladshtein recommends that Ukrainian exporters enlist specialists to develop export strategy. “I mean not just economic experts, who form pricing policy, but also specialists in trade law. Taking into account the fact that 95% of world trade is governed by the rules of the World Trade Organization, including having separate agreements on the procedure and conditions for the application of trade protection measures, such specialists will be able to say which factors should be taken into account when entering an export market and operating on it continuously”, the analyst specifies.
Practice Leaders. Antitrust/Competition
|3||Vasil Kisil & Partners|
|OTHER NOTABLE PRACTITIONERS*|
(Gide Loyrette Nouel)
(ANTIKA Law Firm)
(CMS Cameron McKenna)
(Droit Law Firm)
(DLA Piper Ukraine)
* — Listed in alphabetical order.
Practice Leaders (by Ukrainian Law Firms 2014)