Concentration of influence
The Anti-Monopoly Committee of Ukraine is one of the most noticeable state authorities focused on reforming the relevant legislation and changing approaches to its work. News from the Committee reaches the market on a regular basis, both in respect of cases considered by the Committee and the sanctions applied by it, and in respect of adoption of new regulations and the methods used by the authority
Before and after the amnesty
Extension of the so-called punitive amnesty for business entities that have not informed the Anti-Monopoly Committee of Ukraine (AMCU) of concentration became one of the most important news items in the fall of 2016. Initially, the amnesty had been declared by the Committee for the period from September 15, 2015 to September 15, 2016. In late September of 2016, the Anti-Monopoly Committee of Ukraine issued a notification on extending the amnesty for six months. Just a year ago, the functioning of this procedure prompted a lot of questions in many companies, which stopped them making a decision to take up the amnesty at least until the first interested persons take it and confirm its functioning. Today, it can be said that the amnesty procedure works successfully in practice.
Over the course of the last year of the Committee's work everyone could convince themselves that there were no cases when applicants submitted appeals according to the amnesty procedure and received a bigger fine than the fine declared by the Anti-Monopoly Committee of Ukraine for amnesty cases. Within the confines of processing an application in accordance with the amnesty procedure, the Committee often meets applicants half way in terms of satisfaction of petitions for reducing the amount of information provided, which is not a key to assessing the effect of the transaction on competition. Indeed, theamnestyprocedurehasbecomea formalnotificationbytheCommitteeonpreviouslyundeclaredconcentrations, forwhicharatherloyalpenaltyinthefixedamountof 102,000 UAHisapplied.
In fact, the amnesty procedure guarantees certain opportunities to all entities that voluntarily go to the Anti-Monopoly Committee of Ukraine and inform it about concentration carried out without permission (that took place up to September 15, 2015). Firstly, to receive permission for the transaction declared in the Committee. Secondly, to foresee the fixed amount of the penalty, which the Anti-Monopoly Committee of Ukraine will apply. Third, "to clean" their corporate structure from any risks connected with detection of concentrations, not declared in the Committee and, as a result, to avoid the application of penalties that will be even significantly higher than the amnesty provides for.
Since the fall of 2015, the Committee has adopted a number of important regulations affecting consideration of applications on concentration. Among these instruments, special mention should go to the new Regulation on Concentration and Recommendatory Explanations on Penalties Application Procedure, which has already been clarified and improved several times. The key changes for regulation of M&A transactions were also amendments in 2016 to the Law of Ukraine "On Economic Competition Protection", providing a significant increase in threshold indicators, the attainment of which cause the need to turn to the Anti-Monopoly Committee of Ukraine to get permission for concentration.
The latter document has assisted in contribution to a reduction in the number of transactions requiring permission for concentration. It is most likely that after expiry of the amnesty, the Committee will be able to increase focus on the identification of historical violations, especially as an opportunity to declare them voluntarily has been provided by the Committee for the last year and a half. In case of such historical violations after the declared amnesty has ended, the regulator will have all the grounds to apply significant penalties, reasoning that all business entities had an opportunity to correct past mistakes.
In the spotlight
The regulator has been also active in the investigation of cases, previously initiated by it, on violation of competitive legislation. Battles continue on all the main fronts — the priority markets determined by the Anti-Monopoly Committee of Ukraine. This is evidenced both by decisions on specific cases, and active hiring by the Anti-Monopoly Committee of Ukraine of specialists in the relevant units of the authority, including persons specializing in lawsuits.
Despite regular statements by representatives of the Committee that the main objective of the department is not the application of penalties, but the long-term solving of a problem that has arisen in a particular market, recent investigations in the oil products and pharmaceuticals markets have been ended with quite significant penalties. The main complaint by the Committee is anti-competitive coordinated actions of market participants which have a direct effect on pricing issues.
In addition to the imposition of penalties, the Committee accepted recommendations regarding the further conduct of participants on the markets and/or joint development with participants of rules of conduct in such markets so as avoid repetition of events that are negative for competition. Implementation of the recommendations and developed rules is intended to provide business entities with confidence that their conduct in the market will not result in new claims from the Committee on similar issues, and the practice that has developed over the years of opening cases on the same facts of conduct of participants on the market, will be terminated.
The Committee’s current activities with regard to requests for information and market studies show that its gaze in the near future may fall on the markets of pharmaceuticals, veterinary drugs, financial services, liquefied gas, tobacco products, mineral fertilizers, telecommunications, non-food retail, as well as on public procurement activities. Certainly, this list can be extended depending on the priorities of the activities of the Anti-Monopoly Committee of Ukraine and dynamics of receipt by the regulator of notices on violations of rights from market participants.
Among the key innovations of 2017, special mention should go, first of all, to the full entry into force of the Law of Ukraine "On State Aid to Business Entities". From August 2017, the Anti-Monopoly Committee of Ukraine will be the main authorized body responsible for creating and maintaining the register on state aid, as well as for monitoring state aid. The powers of the Committee will include the tracking, evaluation and oversight over the expediency of providing business entities with state aid. State aid will be provided after adoption of the relevant decision by the Committee. At the same time, one of the possible consequences of recognition of state aid as inadmissible for the competition is the obligation of its full return by the entity that was provided with such assistance.
Expected reforms also include the adoption of a document regulating the issues of vertical coordinated actions, including questions about distribution. Adoption of this document has been on agenda of the Anti-Monopoly Committee of Ukraine for a long time. It is expected that with its coming into force light will finally be poured on the previously imperfect interpretation of certain provisions of current legislation regulating the process of goods movement from the producer to final consumer. The existence of well-defined and clear rules of assessment of vertically-coordinated actions, including issues of recommended, minimum and maximum prices, would allow many market participants to build their own compliance programs not only on the basis of European legislation and practice, but also taking into account specific Ukrainian realities.
In the area of concentration, a document regulating the procedure of evaluation of horizontal concentration, is at the final stage of development; and its adoption was one of the requirements of the Association Agreement between Ukraine and the EU. The main objective of this act is to establish clear procedures and approaches on the part of the regulator during consideration of complicated concentration, the result of which can affect the situation regarding competition on the markets.
Thus, market players have every reason to believe that the activities of the Anti-Monopoly Committee of Ukraine will bring even more news both in legislation, and in its practical application. We can only hope that practical approaches in the activities of the Anti-Monopoly Committee of Ukraine will correspond to declared reforms and progressive work standards of the best competitive authorities of the world, and that the quality of the regulator's decisions will permit the passing of difficult tests in the procedures of judicial appeal that are widely practiced by market players.