LAW FIRM DIRECTORY

Competition

Realization flow

The main challenge both for the country in general and for the Anti-Monopoly Committee of Ukraine in particular was the introduction of a system for monitoring state aid provided to business entities. However, the market has not yet realized the seriousness of this new institution. The Committee is working on changing its role: from a reactive response to violations to active early interventions

KHRYSTYNA POSHELIUZHNA

The Anti-Monopoly Committee of Ukraine (AMCU)  defined its priorities for 2017 in advance, namely electric power, gas, thermal energy, aviation fuel, pharmaceutics, external advertising, and social goods. But that doesn’t mean that the regulator ignored the other markets. No. The Committee has been working on transformation of its approaches: from the reactive response (post factum — on violations of  legislation) to active (early interventions).

2017 is characterized by employee loyalty in the management personnel of the AMCU’s central office, though we can still observe the personnel shortfall in the system. In February of last year, Oleksandr Zavada, the first head of the department in 1992 — 2002, headed the Public Council at the Anti-Monopoly Committee of Ukraine.

But this year was neither quiet nor ordinary or the Committee. In particular, the concept of the department’s structural reorganization (so-called reform of local branches), published in August of this year, caused quite active discussions.

 

INTERDEPARTMENTAL INTERACTION

The Committee handled state agencies without mittens regarding observance of competition. For example, at the beginning of last year, the AMCU recommended the National Commission for State Regulation of Energy and Public Utilities that it stop actions that have signs of violation of legislation on economic competition protection. In particular, the Committee recommended to revoke the Commission's protocol decision on the definition of four leading audit companies (Deloitte, Pricewaterhouse Coopers, Ernst & Young, KPMG), which should be involved for carrying out an independent assessment of the assets of licensees. It is interesting that the AMCU stated execution of the recommendation by the Commission in May 2017.

The regulator is developing interdepartmental cooperation. Thus, during the formation of the evidence base with regard to a case on the anti-competitive coordinated actions of a number of companies, which caused erroneous results of trades for dredging operations, a significant part of the materials attached to the case was provided to the NABU. By the way, participants in tenders were fined more than 80 billion UAH. Quite recently, the AMCU fined Sanofi-Aventis Ukraine LLC for coordinated anti-competitive actions to the tune of 69 million UAH, as well as two large pharmaceutical distributors of Ukraine (BaDM LLC — for more than 28 million UAH and Optima-Farm LTD, LLC — for more than 40 million UAH). But these aren’t all the large fines.

 

MAIN CHALLENGE

The main challenge, not only for the Committee, but for the whole of Ukraine too, was the introduction of a system for monitoring state aid (the law on state aid provided to business entities came into force fully in August 2017). The AMCU even held a number of regional seminars on the basic principles of monitoring state aid. "It is a massive layer of legal relations and quite complicated legal regulation, — Oleksandr Voznyuk, partner at Asters Law Firm, comments. — It is the sphere of large interests for business, which has also become the sphere of high financial risks and, respectively, gave more work to lawyers. The market seems to not have yet realized the seriousness of this new direction. And not only in the context of the AMCU’s activities, but also from the perspective of the legal basis against the creation of unequal conditions by state authorities and bodies of self-government for business, special provision or use of the state or municipal resources, grants, etc.".

Mr. Voznyuk also pays attention to the fact that the AMCU recalled the issue on the forbidden vertical restrictions, and now the market is waiting for registration of the AMCU’s new regulatory act by the Ministry of Justice. "Since that moment, we have been expecting formal fixing of bans on a number of the severe restrictions that are quite often used in relations with contractors, such as, for example, fixing the resale prices, absolute exclusivity, where passive sales are limited, online sales and some others", — he comments. Business will have to revise many of its approaches, but consumers will benefit, for example, as they will be able to choose the necessary goods in different online stores at competing prices, but not to observe a single price on them.

What are the problems frequently encountered by business? The head of legal department, officer for observance of corporate standards at the Henkel Ukraine Group of Companies, Olga Lukyanova, says that they are spending more­ time on so-called competitors on the "vertical". "If the market game rules are transparent and clear with competitors on the level, then it becomes more difficult to negotiate with retailers that have increased their volumes significantly in recent years, and the generally applicable international practice of resolving disputable issues is not available to them yet", — Mrs. Lukyanova explains.

According to Olga Lukyanova, there are several constant debatable areas working with such "whales". The following practices are applied to obtain an "undeniable" competitive advantage at the conclusion of long-term agreements: attempts to dictate the conditions of  cooperation, dubious for the purpose of antitrust legislation — the contract will be concluded anyway, the requirement on transferring the rights to the supplier's TM, attempt to lock in the promo-price for promotions, imitation of a product of a well-known FMCG brand — the supplier will not argue anyway, the requirement of absolute filling overestimated orders to receive additional leverage, penalties for each trivial "offense", long tests for launching new products and so on.

"All of this prevent the healthy competitive practices from developing normally, and just artificially delays the moment of conclusion of an ordinary contract for sale/delivery of consumer products. I think this problem will disappear over time, since introduction of antitrust and compliance programs is more covered and practiced in Ukraine", — Olga Lukyanova believes.

 

LEGISLATIVE AND JUDICIAL TRENDS

One of the most important legislative initiatives for business is draft law No. 6746 on ensuring the principles of procedural justice and increase in efficiency of proceedings in cases on violation of legislation on protection of economic competition. The draft law was adopted in the first reading. Oleksandr Voznyuk believed that, in general, the initiative would be adopted before the end of the year. "The draft law should improve antitrust investigations and efficiency of protecting competition, and this is in the interest of all consumers", — Mr. Voznyuk notes.

Talking about trends in court competition proceedings, Mr. Voznyuk attracts attention to the fact that qualitative, practice-forming decisions are rarely taken for now, disputes are delayed, and judges are short of time to understand the economic and legal matter and circumstances of disputes in competition law. "This is a trend, actually. Unfortunately, a bad one", — the partner at Asters Law Firm emphasizes.

Oleksandr Voznyuk is convinced that the courts should have the opportunity for professional and effective judicial control over the AMCU's decisions, and it is necessary to provide specialization of judges to consider such disputes, then there will be positive trends, and the practice of private-law disputes in this area will develop more actively. As for cases then, according to him, the most significant for the current year was the SECU's decision on the notorious case of retailers — on the claim by AC Nielsen Ukraine LLC, in which the court outlined approaches to assessment of exchange of information, having brought them closer to approaches in EU practice in many respects. "This decision became very important for the development of many markets", — Mr. Voznyuk says, summing up.

What challenges will the Committee face in 2018? We pose this question to Chairman of the AMCU, Yury Terentyev. He primarily draws attention to increase in the department's overall performance in conditions of limitations on financial and personnel resources. "The initiatives aimed at optimizing the organizational structure (both at the head office and in regions), changing approaches to the process of individual financial remuneration of employees, forming increased budgetary requests, draft laws aimed at expanding the powers of the department are our retaliatory measures to the problem that has arisen", — Yury Terentyev commented.

According to the Chairman of the AMCU, there is still not quite the correct understanding of functions of the AMCU Permanent Board on consideration of complaints on violation of legislation in public procurement (permanent board) by the public, as the AMCU allegedly blocks the procurement. "Unfortunately, due to this, there is a huge number of manipulations and insubstantial accusations against us. That is why, since October of last year, we have been preparing a monthly public report of the permanent board on the work results with the opportunity to view it online, where we describe in detail the reasons for accepting and rejecting complaints about the results of specific trades, as well as providing the most typical mistakes made by participants in tenders", — Yury Terentyev said.

According to Mr. Terentyev, most representatives of the authorities do not fully understand their role in the development of a competitive environment in the areas entrusted to them, despite the fact that it is an explicit provision in the law. "Responding to such cases, we work actively on advocating pro-competitive approaches to the process of implementing the functions and policy by departments", — the head of the AMCU emphasized, having announced that the process will be formalized from next year, a national competition strategy will be developed, which provides full participation of all central and regional executive authorities in the development of a competitive environment at state level.

YURY TERENTYEV,

Chairman of the Anti-Monopoly Committee of Ukraine

 

In 2017, we continued to act as planned. First of all, the issue is the cases opened last year or in previous years, work on which is still being conducted. We are engaged in investigating violations on the markets of energy, telecommunications, transport, liquefied gas, pharmaceutics, sale of food and tobacco products. Special attention should be given to the investigation of numerous conspiracies during the public procurement process.

At the same time, the Committee seeks to provide appropriate guarantees of the procedural rights of the defendants and fair, impartial consideration of cases. We try to conduct active dialog with business on various platforms. We take preventive actions, informing entrepreneurs systematically of the Committee's practice in order to avoid their committing potential offenses. We create  relations of trust with law-abiding business, expecting to obtain on a regular basis relevant information on the problems connected, in particular, with our sectoral work, namely anti-competitive actions. Today, the Committee has departments that analyze a situation in the most significant markets on a permanent basis, the economic analysis division was created, the legal department was strengthened, and the Committee has the function of planning and coordinating the work of regional offices. We improve our work on investigations, actively using interdepartmental cooperation with other law-enforcement agencies.

Permanent work on increasing efficiency of control over economic concentration is in process: the assessment criteria of horizontal mergers are being approved; the methodology on requirements for the vertical coordinated actions is developed, coordinated and represented to business; the process of preparing the methodology for determining the market is being completed; draft laws aimed at solving problem issues are being developed.

The new institution of monitoring state aid appeared in Ukrainian competition law in 2017. Today, a significant part of auxiliary legislation is adopted and work on the approval of assessment criteria on the admissibility of state aid in separate branches is coming  to an end.

Practice Leaders. Antitrust/Competition

Authorities

 

Olexander Martinenko (CMS Cameron McKenna)

Leading INDIVIDUALS

 

1

Igor Svechkar (Asters)

2

Antonina Yaholnyk (CLACIS)

3

Vladimir Sayenko (Sayenko Kharenko)

4

Oleksandr Voznyuk (Asters)

5

Galyna Zagorodniuk (DLA Piper Ukraine)

Other Notable Practitioners

Listed in alphabetical order

Olga Belyakova (CMS Cameron McKenna)

Timur Bondaryev (Arzinger)

Sergey Denisenko (AEQUO)

Oleksandr Fefelov (Ilyashev & Partners)

Andrii Gorbatenko (Legal Alliance Company)

Alexey Kot (ANTIKA)

Denis Lysenko (AEQUO)

Maksym Nazarenko (Sayenko Kharenko)

Alexey Pustovit (Asters)

Serhiy Shershun(Integrites)

Oksana Simonova (Baker McKenzie)

Lana Sinichkina (Arzinger)

Kateryna Tkachenko (CLACIS)

Leading Firms

 

1

Asters

2

Sayenko Kharenko

3

AEQUO

4

CLACIS

5

DLA Piper Ukraine

Other Established Practices

Listed in alphabetical order

Arzinger

Avellum

Baker McKenzie

CMS Cameron McKenna

Dentons

Ilyashev & Partners

Integrites