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18 March 2014

What to expect from the Antimonopoly Committee of Ukraine in 2014?

On 14 March 2014, the Antimonopoly Committee of Ukraine (AMC) released the annual report on its activities in 2013. Traditionally, the reports sheds some light on the priorities in the enforcement efforts of the AMC, provides details on the most interesting cases handled by the AMC and outlines the most important trends that we tried to highlight below.

  • During the last year, the AMC fulfilled its promise to increase considerably the fines for antitrust law violations. As a result, in 2013 the total amount of the fines imposed by the AMC grew by approximately 1.8 times (EUR 74.4 million against EUR 40.4 million in 2012), while the number of violations investigated by the AMC last year grew by 1.3 times. The amount of fines imposed by the regulator does not necessarily demonstrate its effectiveness, but it certainly creates the deterrent effect that is of great importance to the AMC.
  • Despite the declared intension to concentrate on cartels and other hard core violations of competition law, abuses of dominance (monopoly position) continue to be the most common violations and their number increased from 2540 in 2012 to 3228, in particular, due to the AMC's increased attention to state and municipally-owned monopolists on a number of socially important markets. For example, the AMC imposed several fines about EUR 15 million in total on the state railroad companies.
  • However, the highest fines in 2013 were imposed for concerted practices (that include cartels, bid rigging and similar anticompetitive behaviour) and such fines constitute about 51% from the total amount of all fines imposed by the AMC. The most common violation is bid rigging (distortion of a public tender). The highest fines in this area were EUR 21 million in the fuel supply industry and EUR 7.7 million in the cargo vehicles supply industry.  For cartels, in the absence of leniency applications most prosecutions in 2013 were based on circumstantial evidence.
  • The number of investigations of unfair business practices increased in 2013 quite significantly (1259 cases against 779 back in 2012). Approximately 85% of these violations (1070 cases) were classified as "gaining competitive advantage by disseminating inaccurate information". This trend is also likely to continue in 2014.
  • 2013 has seen an increase in the number of merger filings submitted to the AMC for clearance of concentrations to 962, with the biggest increase attributed to foreign applicants and companies with foreign investment. This trend can be explained by the public statements of the AMC mentioning the intention to increase the fines, coupled with active monitoring by the AMC of M&A transactions reported by mass media and numerous examples when multinational companies were contacted to remind about the merger filing requirement immediately after the M&A transaction is announced and prosecuted for failure to seek merger clearance.  This trend may continue until the relevant law is amended by the Ukrainian Parliament to increase the merger notification thresholds, which is expected to eliminate the currently existing obligation to notify transactions that have minimal nexus to Ukraine.  
  • The priority industry sectors for the AMC in 2013 were the pharmaceutical sector, the retail industry, housing and utilities, as well as fuel and energy and agriculture sectors. These socially important industries are likely to continue being in the AMC's focus for 2014 as well.
  • Interesting observations can be made from looking at the statistics of court cases to which the AMC was a party. In 2013 the AMC won 461 law suit that it initiated (83.2%) and lost only 16 (2.9%). There were 335 lawsuits brought against the AMC in an attempt to challenge its decisions, including decisions to impose fines, of which only 47 were fully or partially satisfied by courts.

While we do not expect revolutionary changes in the competition policy or the activities of the AMC in 2014, the recent political changes in Ukraine are likely to have an impact on the practices of the AMC that will depend on its new leadership. A number of the existing commissioners of the AMC have resigned. The new chairman and commissioners of the AMC are expected to be appointed shortly. They will have an opportunity to transform the AMC into a modern European competition regulator and to respond to the criticism expressed by the Organization for Economic Cooperation and Development and by the International Competition Network in the past. This may not decrease the amount of fines imposed by the AMC, but should make the calculation of these fines more transparent and predictable. Instead of reporting thousands of investigated violations, the AMC will concentrate on those major violations that clearly distort competition in Ukraine. We hope that the new leadership of the AMC will have the political will to steer the AMC through this transformation process.  

For more information please contact Dmitry Taranyk.

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