Bringing Ukrainian competition law into line with European norms and practices, including the reform of state aid, is the task of the Antimonopoly Committee of Ukraine over the next few years. Formation of a new practice of the Supreme Court in competition cases and adoption of a clear approach by the Supreme Court in tender collusion cases are a new reality for those lawyers working in the area of competition defense.
REGULATION ON STATE AID
In 2018, the Antimonopoly Committee of Ukraine (the AMCU, Committee) continued to develop legislation on state aid. The adoption of such legislation contributes to the fulfillment of international obligations of Ukraine provided for by the Association Agreement signed between Ukraine and the EU. The Cabinet of Ministers of Ukraine has already adopted the criteria developed by the AMCU for assessing the admissibility of state aid for professional training of employees, employment, restoration of solvency and restructuring of business entities, ensuring regional development and support for small and medium-sized businesses, research and innovative activities.
Today, the draft Criteria for assessing the admissibility of state aid to economic entities operating in the coal industry has also been developed and published for further discussion; draft amendments to the Customs and Tax Codes of Ukraine have been published with a view to bringing them in line with the Law of Ukraine "On State Aid to Economic Entities", as well as changing the procedure for the provision of information on current state aid and submitting notifications about new aid.
In terms of issues regarding application of the law in the area of state aid, the AMCU provided advisory explanations, dated August 16, 2018, and September 13, 2018, on the topics of local taxes and fees and financing of educational institutions.
In the future, the Committee promises to introduce a publicly available unified register of state aid, which will contain information on the recipient of aid, on the body providing it, as well as a description of the preferences provided. The Committee expects that increased control over state aid will lead to a decrease in its size. In Ukraine, state aid payments amount to 6 % of GDP (according to the latest survey, in 2013); in Europe over the last years — no more than 1 %.
Regulation of issues regarding state aid issues will remain in the focus of the AMCU, since the lack of a transparent control mechanism is still a "gray zone" of the Ukrainian economy. The Committee plans to move towards bringing Ukrainian legislation into line with European norms and practices: implementation of reform of state aid, according to the plan, shall be completed before 2022. The emphasis seems to be placed on ensuring the transparency and qualitative monitoring of the provision and use of state aid.
"COMPETITION" practice of the Supreme Court
Most of the disputes considered by the Supreme Court (SC) this year were related to business entities challenging the rulings on cases related to anti-competitive concerted actions. The Supreme Court put an end to the case on collusion between retail chains. As early as in 2015, the AMCU fined retail chains for collusion, including Fozzy, METRO Cash & Carry Ukraine, Furshet, and BILLA totaling more than UAH 200 million. The Supreme Court took the side of business entities, justifying its ruling by the fact that the AMCU did not prove the circumstances to which it referred and did not sufficiently investigate the circumstances of the case. The court noted that the Committee did not carry out relevant economic market research and its findings were based on assumptions and were not documented.
The Supreme Court, supporting the Committee’s findings in most cases, managed to formulate an approach on the cases over distortion of trading results. The court calls the arguments of the bidders about the lack of direct evidence of collusion in the investigation materials as declarative and asserts that only the actual absence of competition because of the collusion of competitive bidders has legal bearing. Thus, it is sufficient to establish the intention of business entities to coordinate their competitive behavior, in particular, by exchanging information during the preparation of competitive bids, for the AMCU to admit the fact of violation of the law on protection of economic competition. In this category of cases, we drew attention to the dispute over the appeal against the decision of the AMCU lodged by Construction Mechanization Management Office No. 23. Indicating the need to cancel the Committee’s decision, the court noted that there was competition amongst bidders and the AMCU did not refute the existence of other factors affecting the behavior of bidders when forming their proposals; the AMCU did not carry out a comprehensive economic analysis of bids mechanisms.
The Supreme Court considered the dispute in the high-profile "petrol case" as well. In 2016, the AMCU held large networks of gas stations liable for collusion on the oil products market: the WOG, OKKO, SHELL, AMIC, SOCAR, and Parallel gas station chains. Referring to the declarative nature of the findings of courts of first and second instances related to the illegality of the AMCU's decisions, the court overrode their decisions and announced new proceeding in the case. The court stated that minor courts did not give a proper legal assessment to the arguments and evidence of the Committee as to the lack of objective reasons of gas station chains for carrying out similar actions; it was not established whether the objective factors indicated by the gas stations themselves could have led to the establishment of similar prices.
The practice of the Supreme Court in monopoly abuse cases is also worth noting. In the "tobacco case" challenging a fine amounting to over UAH 430 million imposed on TEDIS Ukraine for the abuse of monopoly in the cigarette distribution market, the court supported the Committee in the TEDIS Ukraine. It is almost a pure 100% monopolist on the cigarette distribution market and committed violations, in particular, when establishing the same retail and wholesale prices for wholesalers and retailers and the same prices for cigarettes sold in its own network and for retailers. At the same time, the court of cassation overrode the decision of the AMCU in respect of placing the obligation upon the monopolist to establish the pricing mechanism based on an analysis of the profitability and expenses ratio in each area of activity. The court points out that the AMCU went beyond its remit. The Committee, acting within the framework of the law, had the right to bind TEDIS Ukraine to eliminate violations, but the latter shall determine the way (mechanism) for its elimination independently.
This year, proceedings in a long-playing monopoly abuse case against Lukoil Aviation (now Amik Aviation) was completed. The great thing in this case, which ended in the Committee’s victory, was that the court called for an expert opinion on matters that traditionally fall within the competence of the AMCU: determining the commodity-based boundaries of the market and the monopoly position on it. The Committee has voiced its concerns that with the change of legislation the practice of calling for an expert opinion on issues previously related to the exclusive competence of the AMCU became common in courts, which leads to the replacement of the AMCU's findings with expert opinions.