Clear the bar
The Anti-Monopoly Committee of Ukraine is proceeding with the review of its approaches to law-enforcement, taking into account the latest world trends, with priority given to quality rather than the number of cases. The year 2018 will, in many respects, be indicative of the subsequent transformation of the Committee. The bar has already been raised high.
When signing the Association Agreement with the EU, Ukraine assumed responsibility for carrying out reforms that also touched upon competition issues. In November, the Ukrainian Parliament considered several important innovations: draft law No. 4287 was adopted in its final reading on the procedure for considering the concentration of applications from the sanctions list, while draft laws No. 6723 and No. 6746 were approved in principle with regard to certain matters of procedure (a simplified procedure for considering the concentrations, the procedure for enforcement of decisions of the Anti-Monopoly Committee of Ukraine) and procedural safeguards for participants in antitrust proceedings. Draft law No. 2431 regarding the determination by the AMCU authorities of the size of penalties, which was adopted in the first reading, is still relevant. A similar internal document of the AMCU was not used in all cases by the authority itself.
In general terms, the AMCU’s activities have become more transparent and open for business. Reform processes were the reason and the result of further deepening of cooperation between the AMCU and the competition authorities of other countries and international organizations. Not without the influence of the latter, the AMCU continues to reconsider its approaches to law-enforcement, giving priority to quality rather than the number of cases.
However, the reverse of the coin of anti-monopoly regulation liberalization is toughening the severity of punishment for violations. The sizes of AMCU fines are showing their further exponential growth, and the "indexation" of fines amid the general economic decline becoming more tangible for business.
CONTROL OF MERGERS
Last March, a fine concentration amnesty carried out without the AMCU's permission was completed, which allowed business to clear its corporate history and FOR the Committee to see the actual structures of business groups.
Revision of financial thresholds and simplification of the procedure for considering concentration applications continue to bear fruit. The Committee carefully examines the essence of announced concentrations and the markets involved.
There is a more European approach to the consideration of transactions, the subject of which is individual assets or changes in the nature of control over business. Current legislation is not flexible enough in the application of such innovative concepts and, therefore, it needs urgent improvement.
On the other hand, the AMCU's approval of an agreement now requires much greater resources and professional support, for example, in preparing a complex market economic analysis by the parties.
FOCUS ON INVESTIGATIONS
Last year was remembered for the completion of a number of high-profile antitrust investigations and trials. The Committee was traditionally active in the markets of socially important products – petrol and pharmaceuticals, and the result was solutions with fines running to several millions.
While in the "petrol" case the authority's arguments about illegal price increase by market operators completely duplicate the AMCU’s previous practice, expressed in the fact that simultaneous price increases are a sign of market collusion, then in the "pharmaceuticals" case the AMCU focused, for the first time, on the analysis of relations between drug manufacturers and their distributors.
As a matter of our experience in such cases, we can conclude that the Committee does not yet have a thorough economic analysis of the market and proper investigation of consequences for competition of certain distribution practices, which was already confirmed by the Supreme Court in one such case.
It is worth mentioning that the decision to impose record-breaking in the history of Ukraine fines for abuse of market power, for example, with respect to Russian energy supplier Gazprom. The AMCU defended in courts an unprecedented fine imposed on the Russian gas monopolist (together with a penalty, the fine was about 172 billion hryvnias). The subsequent change by the court of the procedure for collecting the specified fine by means of not only cash, but all of Gazprom's assets owned by the company, including those overseas, opens up new opportunities for the Committee: there are no untouchables for the AMCU now.
Last year was also notable for the imposition of penalties for unfair competition: Lifecell was fined 19.5 million hryvnias for reporting per-second call billing, which, according to AMCU, was not true to the fact. The AMCU leaves in abeyance what kind of unlawful advantages this operator has acquired over the competitors using similar practices.
The transition to using the ProZorro public procurement system has significantly burdened the AMCU with work on monitoring irregularities in the procurement sector, and there has been an increase in coordination between the Committee and law-enforcement agencies. It is often the AMCU that acts as an engine in investigating cases of tender collusions running into many millions, and the findings of such proceedings subsequently form the basis for the arguments of law-enforcement officers in related matters.
On August 2, 2017, the law regulating the procedure for providing state aid came into force. The AMCU will now carefully monitor any state aid that distorts competition. Illegal state aid (which, besides direct cash injections, can have various forms) shall be fully returned to the state.
Nevertheless, the adoption of laws on state aid is not always harmonized with ongoing reforms in individual industries (for example, the energy sector), which leaves market participants asking questions.
In addition, market participants expect specific procedural tools to protect their interests from state intervention and protectionism in favor of individual market participants, whose "success" is, historically, to a large extent based on a variety of forms of state aid and support.
TRENDS AND RECOMMENDATIONS
Further trends are easily visible to the naked eye: the imposing discretion of the authority, record-breaking penalties and strengthening of coordination of the authority with other regulatory agencies in the country indicate that the AMCU should not be ignored, and its "appetite" for resonant investigations and accompanying fines will continue to increase.
It is expected that the AMCU will proceed with initiated reforms this year. In particular, business is counting on the coming into force of a document approved by the Committee, which should resolve issues related to the evaluation of anti-monopoly bans and restrictions in distribution. Business also expects a new version of the methodology for determining markets adapted to European practice.
It is important to note that due to the lack of well-developed law-enforcement practice in Ukraine, the legislation and practice of the EU are increasingly applied in anti-monopoly cases and investigations (including courts), and lawyers with experience in applying European law will be the main agents for the implementation of European experience.
In terms of law-enforcement social markets will, with a high degree of probability, remain in the focus of the Committee. At the same time, we expect a shift of emphasis towards more complex cases, such as cartels with an international component. International companies with businesses in Ukraine should take into account the fact that if anti-monopoly investigations are conducted against their group abroad, the AMCU has every reason to use foreign precedents to initiate similar proceedings in Ukraine.
Thus, the key task of the business wishing to seal itself off from the AMCU is the introduction of corporate anti-monopoly compliance. The role of internal corporate compliance is not only to perform the function of quality management of anti-monopoly risks, but this is also a good boost and ready position in case of possible proceedings involving the AMCU. At the same time, the efficiency of compliance is increasing in the process of building constructive dialog with the AMCU.
In many respects, 2018 will be indicative for the subsequent transformation of the AMCU. The bar has already been raised high, and plans to further strengthen the regulatory role of the AMCU are ambitious enough to warm up the expectations of society and encourage the authority to intensify its activities even more. Judging by the latest results, the AMCU is ready for the role of antitrust watchdog.