New merger control regime in force: one year review

 August 17, 2016 

It has been a little over a year now since the appointment of the new leadership to the Antimonopoly Committee of Ukraine (the "AMC") and it turned out to be a very eventful year for the development of merger control laws and practice. The recent increase of the filing thresholds and other legislative changes that entered into force in May 2016 clearly show the intention of Ukraine to align the merger control regime with the best practices of other European countries. To support the new legislation, the AMC revised its procedural merger control regulation and these amendments will enter into force on August 19, 2016.

1. September 2015: Amnesty for Merger Control Violations and New Fining Guidelines

Following several rounds of public debates, on September 15, 2015 the AMC approved and published the Recommendations on Calculation of Fines for Violation of Ukrainian Competition Law, which outline the methodology used by the AMC to calculate fines and introduce a one year amnesty period for past merger control violations. The application of this methodology has already resulted in the general increase of the level of fines, but their amount became more predictable and consistent. Those companies that do not want to face higher fines for the past merger control violations have a grace period of one year to report these violations in return for a fixed fine (this option is commonly referred to as the "amnesty procedure").

Under the amnesty procedure, in case an undertaking discovers that it failed to seek a merger clearance approval from the AMC for one of its past M&A transactions completed prior to September 15, 2015, such undertaking may apply to the AMC to obtain the approval post factum. In this case, the AMC undertakes to impose a relatively small fine of UAH 102,000 (approx. EUR 3,650). This amnesty procedure with a fixed fine is available for all applicants who voluntarily report their past violations to the AMC prior to September 15, 2016.

The amnesty procedure proved to be popular both among local businesses and multinational corporations. The AMC has clearly demonstrated its willingness to encourage amnesty filings by waiving some of the burden some formalistic requirements that were not material for its substantive review. All these factors clearly create an unique opportunity for companies to clean up historical risks arising out of the far-reaching requirements of Ukrainian merger control laws and this opportunity is available until September 15, 2016.

2. March 2016: Publication of Decisions

According to the new law on transparency of the AMC’s activity, the regulator is obliged to publish full decisions on its website, while preserving proper treatment of confidential information of the respective undertakings. This law has confirmed the AMC’s practice on publishing extracts from its decisions started from July 2015.

3. May 2016: New Merger Filing Thresholds, Fast-Track Review and Filing Fee Increase 

Financial Thresholds

Merger clearance, in the form of approval of the AMC for concentration, is now required if at least one of the two alternative tests is met:

Test 1: At least two parties are active in Ukraine

• combined worldwide turnover or value of assets of all parties exceeds EUR 30 million, and
• turnover or value of assets in Ukraine of each of at least two parties exceeds EUR 4 million.

Test 2: Target or founder has significant operations in Ukraine

• target in an acquisition, seller of assets or one of the joint venture founders have turnover or value of assets in Ukraine exceeding EUR 8 million, and
• turnover of at least one other party exceeds EUR 150 million worldwide.

All thresholds are calculated for the previous financial year on a group-wide basis, which means that the turnover and value of assets for all undertakings connected by a control relationship must be added together, including for the seller that controls the target. 

Fast-Track Review Option

The AMC introduced the expedited review procedure, according to which the AMC will review a merger filing and grant the approval for concentration within 25 calendar days (reduced from the usual 45 days) in any of the following cases

• only one party is active in Ukraine, or
• combined market share of the parties does not exceed 15 per cent on an overlapping Ukrainian market or 20 per cent on a vertically related Ukrainian market.

Filing Fee Increase

Filing fee to be paid for the review of a merger filing application by the AMC was increased by four times to UAH 20,400 (approximately EUR 730).

4. August 2016: Procedural Changes

As a logical continuation of the reform of merger control regulations, the AMC adopted changes to its main procedural merger control document entitled the Regulation on Concentration, which will come into effect on 19 August 2016. The main achievement of these amendments is the abolishment of some formalistic requirements and significant reduction of the list of documents and information to be submitted by applicants, especially for transactions that have no impact on competition in Ukraine. Instead, the main focus is shifted to more thorough economic analysis of market information and the expected consequences of the concentration.

• Economic justification/Market analysis. The AMC fundamentally changed its approach to the market analysis and will require profound and substantial market study of the relevant markets. In particular, parties are required to provide competitors’ market shares on relevant markets, description of barriers for entrance on relevant markets, benefits for consumers, detailed description of supply and demand structure of relevant markets, etc. The parties are no longer obliged to provide detailed information on non-relevant markets, even if they are active on these markets.
• Corporate information. The AMC abolished the requirement to submit corporate information, which has no impact on the market analysis, including the full list of controlled entities, information on officers, etc., and will pay more attention to the disclosure of the beneficiary owners.
• Documents. The AMC abolished the requirement to submit a number of documents for certain types of transactions, for example articles of association, and will no longer require provision of specially produced files for the electronic database.

Implementing the requirements of the law, the revised Regulation on Concentration specifies the procedure for expedited review by the AMC within 25 calendar daysof thosefilings that raise no significant competition concerns. For such fast-track review, a short form of the filing is introduced, without detailed market report.

Fast-track review will greatly benefit the amnesty program described above, as many filings that had to be made under the previously existing financial thresholds do not have any impact on competition in Ukraine.

For additional information please contact Vladimir Sayenko and Maksym Nazarenko.