Ukraine: Antimonopoly Committee of Ukraine
Ukraine
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Ukraine: Antimonopoly Committee of Ukraine

Ukraine: Antimonopoly Committee of Ukraine

Ukraine

Ukraine: from the enforcer

Address: 45, LypkivskohoVasyliaMytropolyta str, 03035 Kyiv, Ukraine
Tel: +38 44 251 6262
Fax: +38 44 520 0325
Email: [email protected]
Web: www.amcu.gov.ua

How long is the head of the agency’s term of Office?

The term of Office of the Сhair of the AMCU is seven years, according to article 9 (2) of the Law on Antimonopoly Committee of Ukraine (AMCU Law).

When is he or she due for reappointment?

The Сhair of the AMCU may be reappointed upon the expiry of the seven-year term of Office. However, the Chair shall not be appointed for more than two consecutive terms (article 9 (2) of the AMCU Law).

Which posts within the organisation are political appointments?

The positions of the Chair, the First Deputy Chair, the Deputy Chair and State Commissioners are political appointments.

The Ukrainian Parliament appoints the Chair upon the submission of the Prime Minister. The President sets deputies and state commissioners at the recommendation of the Prime Minister who is submitted upon the proposal made by the AMCU Chair.

What is the agency’s annual budget?

The annual AMCU budget for 2020 is 221 hryvna,97 million (US$8.59 million on the date of budget approval).

How many staff is employed by the agency?

There are 761 members of staff (including 363 staff members in the Central Office and 398 in regional offices).

To whom does the head of the agency report?

The Сhair annually reports on the AMCU activities to theparliament (article 9 of the AMCU Law).

Do any industry-specific regulators have competition powers? If so, how do these relate to your agency's role?

No. Although there is a law regulating natural monopolies. It is AMCU that monitors the compliance of the natural monopolies’ activities with the legislation on protection of economic competition. 

May politicians overrule or disregard authority's decisions? If they have ever exercised this right, describe the most recent example.

In general, there is no such possibility. At the same time, the Cabinet of Ministers of Ukraine may authorisemergers (article 25(2) of the Law on Protection of Economic Competition (LPEC)) or concerted actions (article 10(3) LPEC) that were prohibited by the AMCU (due to a threat of monopolisation or substantial restriction of competition) if the participants of such concentrations or concerted actions prove that a positive effect of the merger (concerted actions) in question on the public interests outweighs their anticompetitive effects.

However, there have been no such cases recently.

Does the law allow non-competition aims to be considered when your agency takes decisions?

Yes, the AMCU can take into account such aims when authorising concerted actions. In particular, concerted actions may be authorised by the AMCU if their participants prove that the concerted actions in question facilitate efficiencies:

  • the improvement of the production, purchase or sale of a product;
  • technical, technological and economic development;
  •  the development of small- or medium-sized enterprises;
  •  the optimisation of the export or import of products;
  • the elaboration and application of unified technical conditions or standards for products; and
  • the rationalisation of production.

Beside this, as mentioned above, mergers or concerted actions that are capable of leading to monopolisation or significant restriction of competition and on this ground were not authorised by the AMCU, may nevertheless be authorised by the Cabinet of Ministers of Ukraine if positive effects of the concentration (concerted actions) on the public interests outweighs its anticompetitive effects.

Which body hears appeals against the agency's decisions? Is there any form of judicial review beyond that mentioned above? If so, which body conducts this? Has any competition decision by the agency been overturned?

The Commercial Court considers most appeals against the AMCU’s decisions. Decisions of the AMCU have been overturned in numerous cases.

One of the main problems in this context is a judiciary’s limited expertise in the field of competition law and economics basics that prevents courts from making well-founded decisions in cases.

The judicial system of Ukraine consists of local courts (courts of first instance); appellate courts (courts of the second instance); and the Supreme Court (its Cassation Commercial Court, the court of the third instance).At the Supreme Court, the cases related to antimonopoly and competition laws are considered by the specialist panel of the Cassation Commercial Court.

Has the authority ever blocked a proposed merger? If yes, please provide the most recent instances.

There have not been any recent cases where the AMCU has blocked a proposed merger.

Has the authority ever imposed conditions on a proposed merger? If yes, please provide the most recent instances.

There have been cases where the AMCU imposed commitments on the participants of a merger as a condition for authorisation of the mergers. For instance, in 2019–2020, such commitments were defined in four cases (see below).

Notably, according to the 2016 amendments to the LPEC, the parties were granted the right to propose such remedies to AMCU as a condition for a merger permit.

Has the authority conducted a Phase II investigation in any of its merger filings? If yes, please provide the most recent instances.

In 2019, the Antimonopoly Committee of Ukraine completed consideration of the Phase II investigation in the form of an acquisition by limited liability company DTEK Naftogas (DTEK Group) of shares in the private joint-stock company Kyivoblenergo (PJSCKyivoblenergo) and joint-stock company Odesaoblenergo (JSC Odesaoblenergo).

PJSCKyivoblenergo and JSC Odesaoblenergo are operators of electricity distribution systems within the Kyiv and Odesa regions, respectively. 

During the proceedings, the Committee investigated the impact of the DTEK Group’s acquisition of two distribution system operators on the electricity markets and conducted a survey of electricity market participants, relevant associations, the Ministry of Energy and Coal Industry and the National Commission for State Regulation of Energy and Utilities (NERC).

Following the proceedings, the Committee concluded that:

  • PJSCKyivoblenergo and JSC Odesaoblenergo complied with the requirements of Part 2 of article 47 of the Law of Ukraine On the Electricity Market regarding the separation of functions of the electricity supplier (ie, DTEK Group only purchases electricity distribution system operators);
  • the market in which the merger is carried out is the market of electricity distribution within the location of the electricity distribution system, which is owned or managed by PJSCKyivoblenergo and JSC Odesaoblenergo. At the same time, according to article 5 of the Law of Ukraine On Natural Monopolies, this market is the object of a natural monopoly within local power grids;
  • related markets affected during the merger proceedings are electricity generation and supply markets, as the entities related to the Buyer carry out economic activities in such markets, and such markets are defined as related to the electricity distribution market energy in accordance with article 6 of the Law of Ukraine On Natural Monopolies;

as a result of the implementation of mergers there is no negative impact:

  • to the electricity distribution market, since the distribution system operator is a natural monopoly subject to mandatory licensing, due to the merger there is no change in the state of competition in the electricity distribution market within the location of electricity distribution systems owned or managed by PJSC Kyivoblenergo and JSC Odesaoblenergo, there is also no change in the state of competition in the electricity distribution market in other regional electricity distribution markets, where other participants in the merger operate;
  • to the electricity supply market, as, in accordance with the current legislation, the distribution system operator has no right to deny access for any suppliers, producers and consumers to the electricity supply networks. The conditions of such access are defined by a standard accession agreement, are the same and are not discriminatory. Therefore, since the acquisition is exclusively for electricity distribution system operators, this merger will not lead to an increase in electricity supply by the DTEK Group and will not lead to monopolisation or significant restriction of competition in the electricity supply market. At the same time, in the new model of the full-scale electricity market, despite the state regulation of distribution system operators by the NERC, under certain conditions, the creating barriers by PJSC Kyivoblenergo and JSC Odesaoblenergo to access to their networks by other electricity suppliers that are not related to them by control relations is not precluded.

Also,according to a survey of the Ministry of Energy and Coal Industry, the NERC, market participants and relevant associations, the majority of respondents did not express warnings about this merger. 

However, some interviewees confirmed the Committee’s concerns about the potential negative impact of the merger, both in the current market model and in the full-scale electricity market model, which is operational from July 2019, namely, following the consideration of the case by the Committee, was found the existence of a potentially negative influence of mergers:

  • in the current model of the wholesale electricity market (WEM), as a result of merger, the share of economic entities connected by control relations with the DTEK Group of companies from the class of suppliers and distribution system operators may become sufficient to create situations in which:
    • in the absence of representatives of electricity suppliers and distribution system operators of the DTEK Group, there will be no quorum at the General Meeting of WEM members (one of the governing bodies of the wholesale electricity market of Ukraine);
    • an increase in the number of votes of the DTEK Group of Companies at the General Meeting of the WEM can ensure the possibility of including more than two candidates from the enterprises of the DTEK Group of companies in the WEM Council from suppliers and operators of the distribution system,
    • that, under certain conditions, may lead to the DTEK Group of Companies being able to decisively influence decision-making by the General Meeting of the WEM Members and the Meeting of the WEM Council, which affects the functioning of both the generation market and the electricity supply market;
  • in the model of a full-scale electricity market, due to the merger of PJSCKyivoblenergo and JSC Odesaoblenergo, under certain conditions, they will be able to provide unreasonable advantages to economic entities associated with them by control relations when purchasing electricity to compensate for technological losses. However, despite the insignificant amount of electricity distribution system purchases by operators, the potential impact of distribution system operators on the state of competition in the electricity generation market is minimal. It cannot significantly affect the level of competition.

At the same time, a such risk of a potentially negative impact in the current model and the model of a full-scale market can be fully mitigated by assigning DTEK Group behavioural obligations.

Taking into account the above, the Antimonopoly Committee of Ukraine decided to grant appropriate permits to DTEK Group due to the provision of binding obligations, to neutralisethe potentially negative impact on the electricity markets, in the current model and after the introduction of a full-scale electricity market.

So, the Antimonopoly Committee of Ukraine allowed the limited liability company DTEK Naftogaz (DTEK Group) to acquire shares of the PJSCKyivoblenergo and JSC Odesaoblenergo, provided that the DTEK group fulfilled the relevant obligations.

Has the authority ever pursued a company based outside your jurisdiction for a cartel offence? If yes, please provide the most recent instances.

The AMCU has recently passed a decision in a bid-rigging case involving two foreign respondents, UK and Seychelles companies. The respondents rigged bids at the 2015 tender of a Ukrainian state enterprise UkrGasVydobuvannya for the purchase of a block-modular complex of a coiled tubing installation. Both companies were fined for this infringement (and now are effectively barred for three years from participating in other public procurement tenders).

Do you operate an immunity and leniency programme? Whom should potential applicants contact? What discounts are available to companies that cooperate with cartel investigations?

Under article 6(5) LPEC, if a person who has committed anticompetitive concerted actions, but voluntarily informed the Antimonopoly Committee of Ukraine or its territorial office of the fact before the remaining participants in the actions, and submitted essential information to taking a decision on the case must be relieved ofliability for committing anticompetitive concerted practices as provided for by article 52 of the present law. The LPEC obliges the AMCU to ensure the confidentiality of all information about such individual.

Current leniency provisions provide an exemption for the first applicant only, with no relief for subsequent applicants. However, the 2019 amendments to LPEC (which were passed by the Ukrainian parliament but have not yet been signed into law by the President), extend the leniency programme to subsequent applicants. They will have significant reductions of a fine (50 per cent, 30 per cent, 20 per cent). The leniency programme amendments are generally based on the EU model.

Is there a criminal enforcement track? If so, who is responsible for it? Does the authority conduct criminal investigations and prosecutions for cartel activity? If not, is there another authority in the country that does?

Ukrainian law provides no criminal liability for violations of competition laws. 

Are there any plans to reform the competition law?

Currently, the AMCU is in the middle of a comprehensive process of numerous reforms. Some of them have been already implemented, while several significant reforms are still ongoing.

Most of the AMCU’s initiatives in the field of future reforms of competition legislation will focus on the following:

  • increasing AMCU discretion in prioritising cases for investigation;
  • introducing a procedure for imposing commitments in dominance abuse cases;
  • clarifying the scope of application of merger rules;
  • clarifying and strengthening AMCU investigation powers (dawn raids, seizure of evidence, among others);
  • improving procedures for handling merger applications;
  • improving and simplifying procedures for enforcement of AMCU decisions;
  • establishing a fully operational EU-model state aid office; and
  • development and refinement of the procedure of leniency.

When did the last review of the law occur?

The Law of Ukraine of 19 September 2019 amended the Law of Ukraine On Protection of Economic Competition in terms of improving the procedure for financial restructuring, in particular, regarding the definition of a single property complex, and cases that are not considered a concentration.

Draft Law No. 2730 on the reform of competition law and alternatives to it is currently registered in the Parliament. Since March, the Committee has been working to improve and strengthen the bill with European and American counterparts. The goal is to fill the existing gaps in Ukrainian legislation with the European one (established within the framework of the European Twinning project in 2016–2019) and to bring the norms as close as possible to the current needs of the Ukrainian economy and the best European and American practices.

Do you have a separate economics team? If so, please give details.

Yes, the Economic Analysis Department is an autonomous unit. The department consists of nine economists (as of 31 August 2020). The department consists of Economic Analysis unit and Planning and Reporting unit.

The main responsibilities are:

  • economic analysis in antitrust, mergers and state aid cases;
  • economic impact assessment of AMCU’s activities;
  • participation in methodological documents development;
  • analysis and planning of the AMCU’s activity; and
  • the AMCU’s annual reports preparation.

Has the authority conducted a dawn raid?

Yes, to some extent. Under article 7(7) of the AMCU Law, the AMCU has the power to inspect the premises and vehicles of undertakings as well as seize and arrest evidence (assets, documents or other data media).

However, the inspections procedure differs from searches conducted by law enforcement agencies in criminal cases. For example, during AMCU inspections, an undertaking may refuse to grant access or to provide the necessary documents or information. In this case, the AMCU may qualify such actions as creating impediments in the investigation and may only impose a fine (up to 1 per cent of the annual income of the undertaking).

Has the authorityimposed penalties on officers or directors of companies for offences committed by the company? If yes, please provide the most recent instances.

Formally, the LPEC authorises the AMCU to impose administrative fines on officers public authorities for a refusal to provide information upon the AMCU request, comply with the AMCU decision as well as for the creation of impediments in the investigation (in the latter case, such a fine may also be imposed on officers of undertakings). However, numerous inconsistencies with other laws (first of all with the obsolete rules of the Code of Ukraine on Administrative Offences) and the insignificant amounts of these fines render imposition of the penalties either impossible or ineffective.

What are the pre-merger notification thresholds, if any, for the buyer and seller involved in a merger?

According to article 24 of the Law on Protection of Economic Competition, mergers may be carried out only after economic entities have attained a prior authorisation granted by the AMCU if the cost parameters of the participants exceed the following thresholds:

  • the total cost of assets or the total product sales of the participants in the merger, with relations of control being taken into account, in the past financial year, including those abroad, exceed the sum equivalent to €30 million, defined in accordance with the official exchange rate to be established by the National Bank of Ukraine and to be effective on the last day of the financial year while the assets (total assets) or sales (total sales) of products in Ukraine, of at least two participants in the merger, with relations of control being taken into account, exceed the sum equivalent to €4 million, defined in accordance with the exchange rate to be established by the National Bank of Ukraine and to be effective on the last day of the financial year; or
  • the equivalent to €8 million must not be exceeded by:
    total cost of assets or the total product sales of market participant in Ukraine, for which control is acquired, or the participants whose assets (stocks, shares) are caught in the property or control or received in use, or minimum one of the founders of producing subject, with relations of power being taken into account, in the past financial year. These include those abroad, defined in accordance with the official exchange rate to be established by the National Bank of Ukraine. They must be effective on the last day of the financial year. Meanwhile, the assets (total assets) or sales (total sales) of products, including those abroad, from at least one of the other participants of in the merger, with relationship of control being taken into account, in the last financial year exceed the equivalent of €150 million. This is defined in accordance with the exchange rate to be established by the National Bank of Ukraine and is to be effective on the last day of the financial year.          

Are there any restrictions on investments that involve less than a majority stake in the business?

All cases where it is necessary to apply to the AMCU for the authorisation of a merger are defined by articles 22 and 24 LPEC. There are also different ways of acquiring control than the acquisition of a majority stake (for example, the purchase of the right to veto). The LPEC also defines such cases.


Ukraine: from the enforcer's competition economists

Address: 45, LypkivskohoVasyliaMytropolyta str, 03035 Kyiv, Ukraine
Tel: +38 44 251 6262
Fax: +38 44 520 0325
Email: [email protected]
Web: www.amcu.gov.ua

Contacts

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OlhaPishchanska
Chair

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OlhaMuzychenko
First Deputy Chair and State Commissioner

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Dar'yaCherednichenko
Deputy Chair and State Commissioner

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Natalia Buromenska
Deputy Chair and State Commissioner   

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OlhaNechytailo
State Commissioner 

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Maria Protsyshen
State Commissioner

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IrynaKopayhora
State Commissioner

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SerhiiTyshchyk
State Commissioner

Questions and answers

How many economists do you employ?

The structure of the Antimonopoly Committee of Ukraine (AMCU) consists of the Central Office and six cross-regional offices after a reform of AMCU 2019–2020. As at 13 August 2020, 38 per cent of the total Central Office’s staff and 44 per cent of the total Regional Offices’ staff have bachelors, master’s or PhDs in economics. 

Do you have a separate economics unit?

Yes, the Economic Analysis Departmentis an autonomous unit. The department consists of nine economists (as at 31 August 2020). The department consists of Economic Analysis unit and Planning and Reporting unit.

The main responsibilities are:

  • economic analysis in antitrust, mergers and state aid cases;
  • economic impact assessment of AMCU’s activities;
  • participation in methodological documents development;
  • analysis and planning of the AMCU’s activity; and
  • the AMCU’s annual reports preparation.

 Do you have a chief economist?

No, since former chief economist Dar’yaCherednichenko has been appointed to Deputy Chair – State Commissioner position in October 2019, there has not yet been an official appointment to this position. Currently, acting chief economistis VladyslavKryzhniy, the head of Planning and Reporting unit of the Economic Analysis Department.

To whom does the chief economist report?

The chief economist directly reports to the chair of AMCU and the head of staff (on administrative questions). 

Does the chief economist have the power to hire his or her own staff?

New employees of the AMCU are hired according to Ukrainian legislation, which dictates a competitive procedure that the chief economist may take part in.

How many of your economists have a PhD in industrial economics? 

The Economic Analysis Department has nine employees with economic education, and three people in the AMCU have a PhD in economics. There are severalPhD students in economics. 

Does the agency include a specialist economist on every case team? If not, why not?

Case teams consider the most notable cases with participation of the Economic Analysis Departmentemployee, an employee of the legal department and the respective industrial or investigations department. Economists can also be involved in the investigation process, committee meetings and court hearings.

Is the economist unit a ‘second pair of eyes’ during cases – is it one of the agency's checks and balances? If not, why not?

Yes, it is.

How much work is outsourced? What type of work is outsourced?

Some market studies are outsourced to the AMCU's Complex Research Centre.

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