Timur Bondaryev,
Managing Partner at Arzinger Law Office

Lana Sinichkina,
Partner at Arzinger Law Office

Contact Job

The activity of the Antimonopoly Committee of Ukraine in the investigations field will increase. Business must work out communication strategies that are turned towards all instances of "interest" by the Committee. The presence of specially-developed compliance procedures can correctly build communication with the office and significantly reduce the risk of negative results in an investigation.

Ukrainian business has already experienced several waves of activity on the part of the Antimonopoly Committee of Ukraine, starting with the traditional gasoline matters and ending with the pharmaceutical market. Also, the Committee carried out probes into a number of high-profile cases, such as the so-called “furniture-makers’ case” and the recent “retailers’ case.”

This experience is surely not enough to speak about  readily established approaches, which are consistently manifested in the authority’s work and allow the study of everything about a case, from А to Z. However, they are sufficient for companies to be prepared just in case the Committee turns on to them. This issue shall be on the current agenda, as all the grounds exist to believe that the AMCU’s activity will intensify, along with the powers vested in it for conducting investigations and obtaining evidence. After all, it is a Europe-wide trend, which is apparently unavoidable. In our opinion, it is worthwhile keeping an ear open to the AMCU’s steps regarding the markets of dairy  products, construction materials and, traditionally, pharmaceuticals, as well as energy resources and the retail sector.

In this article we will elaborate on the stages of antimonopoly investigations, the functions of particular units at companies as well as on importance of the evidence base and its constituent parts.


The course of investigation.

The Committee may start an investigation “unexpectedly” or “with a symbolic introduction.” In the first case, the “client” receives an order on commencement of proceedings in a case of violation of legislation on the protection of economic competition immediately; in the second one – a company receives the said order after requests for obtaining information within a market study procedure. For its part, the AMCU may start an investigation at its own initiative or upon application by third parties, such as clients, competitors, consumers, as well as upon submissions of state authorities or local authorities. In compliance with the term set by the law, a copy of the order is sent to the respondent in the case within 3 days of its adoption.

Having received a notice from the Committee on an initiated investigation, one should bear in mind that compliance with procedural requirements during the investigation allows, in many cases, to avoid or substantially reduce the fine. By the way, last September the Committee officially explained its methods of determining the fines. However, the legal regulation on the maximum possible fine has not been canceled. In other words, for monopoly abuse, anticompetitive concerted practices or incompliance with decisions of the AMCU companies may still be punished by a fine of 10% of their revenue for the previous fiscal year. The AMCU has a sufficiently broad mandate to establish the facts of cases, in particular, to require companies to provide classified information, if the latter is relevant to the investigation, to carry out raids at dawn, to seize evidence and to conduct employee surveys.

In most cases, the information is collected by sending written requests for information and documents in support thereof to the parties involved as well as to other persons. Such requests are obligatory for the parties and should be responded to within the term set by the Committee. Non-compliance with such requests constitutes a violation and entails a fine, which may be up to 1% of revenue from product sales for the previous fiscal year. Apart from that, failure to provide the requested information is grounds for a raid at dawn. Furthermore, non-provision of information or provision of incomplete or false information is an aggravating circumstance in accordance with the established practice of the Committee for the purposes of fine calculation. It is important to note that companies should not sit back after  receiving a request for information from the AMCU, as the Committee may apply other methods of collecting evidence, in particular, initiate a dawn raid and obtain access, among other things, to your employees’ personal computers.

In some cases, the AMCU may initiate advisory hearings with the participation of the relevant parties’ representatives and conduct an in-depth market study.

At the final stage of investigation a representation is made with a preliminary conclusion summing up the evidence, and a decision on the merits is announced. Even if the proposed decision does not look rosy – it is not a reason to give up, as only upon receipt of the mentioned document does the respondent obtain access to the investigation files and, therefore, may find grounds to object to the stated findings by proposing additional pieces of proof in support of its standpoint.

Investigative proceedings are completed when a violation of competition legislation is established. The relevant decision may contain recommendations for its elimination, the fine and the mandatory requirements in the context of further behavior on the market.

In this case, recommendations are often the most favorable outcome and may relate to action required for bringing the company’s commercial practices into line with the law. An even better result for a company that is subject to an investigation is to establish the absence of elements of violation and the closure of the case.

Whatever the input data are, two pieces of advice are universal. The first one is to be realistic about the prospects and to strive for the best result possible, i.e. to develop an adequate strategy. This means that, for instance, if there is direct evidence of a cartel, it would be wrong to continue denying the violation and hope for an exemption from the Committee. The second one is to provide all of the requested information: not more and not less. Provision of redundant information may entail additional risks for your company.


Involved company units and their functions.

As mentioned before, there must be a clear-cut strategy on conduct, which is case-specific. Such a strategy should be implemented by specially trained employees appointed by the management. Of course, there should be a center for managing all the processes, information and people involved in the actions that we referred to above. Specially-developed compliance procedures are of great help in the proper administration of such processes and minimize the spread of information that may affect the results of an investigation.

It should also be emphasized that the mentioned center should not be the sales department, the financial department or the director’s personal press secretary, but the legal department or a  counsel. This is necessary а) to prepare all information on time; b) to find out what the company’s standpoint may be justified by; c) to explain why particular data is collected (this is when it will be prepared appropriately and in the required scope).

From the very first day and till the last letter, telephone call or conversation – the legal function should be involved. The first step to be taken on the start of  an investigation is to find out what actions may be taken by the Committee (dawn raid, discovery of documents, employee survey) and who will be directly involved in such actions as well as, of course, to instruct the parties involved on how to behave. Such basic things alone may guarantee a more predictable course of investigation and observance of the agreed strategy.


Evidence and economic analysis.

In most investigations central stage is given to economic arguments, which require appropriate confirmation and, last but not least, accessible presentation. There are issues the company may prepare on its own, with the assistance of the relevant production units and relevant specialists (e.g. some issues of the company’s operations, commercial strategy and product portfolio). However, there are also issues requiring profound economic specialization, such as market determination, modeling and reasoning by means of econometrics. It is not advisable to “try” to handle the matter independently. To be successful in defending your standpoint and to incur no harm, it would be advisable to retain professional economists, who, in tandem with antitrust lawyers, will be able to adequately justify the company’s standpoint.

Based on our experience of handling such cases, we may assert that companies make most mistakes at the stage of working with information requests from the AMCU and due to ineffective or, in some cases, the careless communication of their representatives with the Committee’s officers.