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28 жовтня 2016

Merger Control 2017. Ukraine


Автор: Ігор Свечкар, Олексій Пустовіт, Олександр Вознюк
Джерело: Getting the Deal Through – Merger Control 2017. – p.409-414

Статтю можна прочитати нижче мовою оригіналу.

Legislation and jurisdiction

1 What is the relevant legislation and who enforces it?

The Ukrainian merger control legislation includes:

• the Law of Ukraine on Protection of Economic Competition 2001 (the Competition Law);

• the Law on the Antimonopoly Committee of Ukraine 1993 (Law on the AMC);

• the Resolution Approving the Regulation on the Procedure for Filing Applications with the Antimonopoly Committee of Ukraine for Obtaining its Prior Approval of the Concentration of Undertakings 2002 (the Concentrations Regulation);

• the Methodology for Establishment of the Monopoly (Dominant) Position of the Undertakings on the Market 2002;

• the Methodology for Establishment of Control Relations 2002; and

• Guidelines on Calculation of Fines for Violation of Ukrainian Competition Law 2016 (the Guidelines on Fines).

The Antimonopoly Committee of Ukraine (AMC) is the primary state authority entrusted with ensuring protection of competition; it has powers to investigate and grant or refuse clearances for mergers (concentrations) as well as to investigate and penalise violations of the merger control regime. If the AMC refuses to approve a concentration, the Cabinet of Ministers of Ukraine (CMU) may overrule such decision.

2 What kinds of mergers are caught?

The Competition Law refers to the term 'concentration', which is defined quite broadly to cover the following transactions:

• the merger of two or more previously independent undertakings, or the takeover of one undertaking by another;

• the acquisition of direct or indirect control over an undertaking, including through:

• acquisition or lease of a significant part of the assets of an undertaking (including in the process of its liquidation); or

• appointments to certain positions (eg, chairperson, deputy chairper­son or more than half of members of decision-making or supervisory corporate bodies), etc if the same persons already hold the said posi­tions in other undertakings (ie, cross-directorship);

• the establishment by two or more undertakings of a new undertak­ing that will independently pursue business activity on a lasting basis, while its establishment does not result in coordination of competitive behaviour either of its parents or of the new undertaking, on the one hand, and its parents, on the other; and

• the direct or indirect acquisition of participation interests (shares, equity) whereby certain thresholds (25 per cent or 50 per cent of the votes in the highest governing body of the undertaking concerned) are reached or exceeded.

With regard to (ii), although it provides only a couple of examples of notifi­able transactions, it is in fact a catch-all provision intended to cover acquisi­tions with respect to any kind of control.

The Ukrainian approach to qualification of transactions is highly for-malistic; the AMC concentrates on the form of a transaction rather than its substance. For instance, in case of multi-stage transactions the AMC requires separate steps formally qualifying as a concentration to be notified separately; for example, an acquisition of joint control by two independent undertakings through a special purpose vehicle (SPV) would normally require two separate clearances - one for joint establishment of a purely technical SPV and one for the acquisition of a target. Depending on the structure of a deal, it may involve other triggering events requiring addi­tional clearances.

The same complexity is in place with multiple acquisitions; for exam­ple, in asset deals involving (among other assets) acquisition of shares in a number of directly acquired entities, where one undertaking simultane­ously acquires from the same seller a number of direct targets, each of such acquisitions shall technically be cleared by the AMC through issuing a sep­arate clearance decision. It should be noted, however, that this approach has become the prevailing practice of the AMC since 2011. Before 2011 most 'multi-target' deals were cleared by a single decision.

The Competition Law also provides for a number of exemptions from the filing obligation; in particular, the following transactions do not qualify as concentrations meaning that no merger clearance is required irrespec­tive of parties' turnover or asset value figures:

• the establishment ofa new undertaking that aims at, or results in, coor­dination of competitive behaviour either of its parents or of the new undertaking, on the one hand, and its parents on the other (such estab­lishment is generally regarded as concerted practices and may require antitrust clearance);

• the acquisition of participation interests (shares, equity) qualifying as a financial buyer transaction (ie, the shares are acquired by a financial institution for the purposes of further resale within one year (may be extended), provided that the acquirer does not exercise voting rights attached to the acquired shares);

• the acquisition of control over an undertaking or part thereof by a receiver or a representative of a state authority (eg, in an insolvency procedure); and

• intra-group transactions, provided that control relations within the group were established in compliance with the Ukrainian merger con­trol rules.

Also, a special exemption from the filing obligation has been introduced in the banking sector. Transactions involving capital injections into or acquisition of shares (material interest) in a distressed Ukrainian bank by its existing non-resident shareholder(s) are exempt from the AMC merger clearance. The exemption applies only to capital injections or acquisition of shares (material interest) made by banks (groups of banks) - non-res­idents of Ukraine and, unless further extended, will remain in force till 1 January 2017.

3 What types of joint ventures are caught?

Any establishment by two or more undertakings of a new undertaking that will independently pursue business activity on a lasting basis qualifies as a concentration, unless such establishment results in coordination of com­petitive behaviour either of its parents or of the new undertaking, on the one hand, and its parents, on the other. In the latter case, it may require an antitrust (as opposed to a merger) clearance.

A joint venture is deemed to be established once it is registered in the commercial register or the like. Preparatory stages of a joint venture often need to be passed for the joint venture to become a full-function undertak­ing, which also amounts to a notifiable concentration and, if not cleared by the AMC, can attract sanctions.

4 Is there a definition of 'control' and are minority and other interests less than control caught?

The Competition Law provides for a very broad definition of control referring to the ability to exercise decisive influence (including via block­ing rights) on the strategic decisions related to the business activity of an undertaking. In particular, control is deemed to exist if an undertaking:

• directly or indirectly holds or manages more than 50 per cent of shares, participation interest, votes or assets, or is entitled to receive at least 50 per cent of the profits of another undertaking;

• has more than 50 per cent of the votes in the highest corporate bodies of another undertaking;

• is authorised to appoint the CEO, vice CEO or more than 50 per cent of the members of the supervisory board (the board of directors), the management board or the audit committee (or if the same persons hold positions of CEO, vice CEO, the chairman, the vice chairman or more than 50 per cent of the members of said boards or committee, etc, in two undertakings); or

• otherwise controls another undertaking (eg, through contractual (management) arrangements, etc), which also covers joint and nega­tive control.

Ukrainian competition law does not differentiate between sole and joint control. In practice, however, the AMC has on several occasions qualified a change from joint to sole control as a concentration. Notwithstanding this, examples to the contrary are also known - the AMC referred to the intra-group exemption from the clearance requirement saying that where a jointly controlling parent acquires sole control over the jointly con­trolled entity, the transaction is considered intra-group, as control rela­tions already existed between such parent and the controlled entity (this is potentially possible where such controlling parent already holds more than 50 per cent of the shares, interest, votes or assets).

As regards negative control, there is little guidance on what consti­tutes negative control save for some quite confusing tests contained in the Concentrations Regulation, namely the ability to block decisions of a com­pany relating to its commercial activity, for example, veto on budget, busi­ness plan (either at shareholder level or top management or supervisory bodies level). Consequently, in practice it may be difficult to distinguish negative control from standard minority protection.

Interests below the 25 per cent threshold (see question 2) with no kind of control attached thereto are not caught.

5 What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?

On 18 May 2016 the new law reforming the merger control regime came into force. Under the new law a transaction qualifying as a concentration requires merger clearance by the AMC if it satisfies the following criteria:

• the combined worldwide value of assets or turnover of the parties to the concentration exceeds €30 million and the value of Ukrainian assets or turnover of each of at least two parties exceeds €4 million -both in the last financial year immediately preceding the year of the concentration; or

• Ukrainian value of assets or turnover in Ukraine of the target, or of the seller of the assets, or of at least one of the founders of a new entity exceeds €8 million and worldwide turnover of at least one other party exceeds €150 million - both in the last financial year immediately pre­ceding the year of the concentration.

In either case, the parties to a concentration should be considered at their group level. That means that the assets or turnover of the controlling share­holder or seller should still be counted towards the target.

The market share-based (35 per cent) notifiability test was eliminated.

For the purposes of qualification of a transaction and calculation of thresholds Ukrainian merger control rules refer to the term 'undertaking'. An 'undertaking' is defined as:

• a legal entity;

• a natural person; or

• a group of undertakings connected by control relationship, including via natural persons.

The Concentrations Regulation has no definitive concept of an 'undertak­ing concerned'. In each case the whole group qualifying as an undertak­ing shall be taken into account irrespective of its role in the transaction.

Practically this means that the turnover and asset value of the entire group acting as a seller - and not only of the target - should be used when checking company's figures against the Ukrainian merger control thresholds.

6 Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

Filing is mandatory; there are no exceptions.

7 Do foreign-to-foreign mergers have to be notified and is there a local effects test?

An obligation to notify arises if the parties hit the Ukrainian filing thresh­olds irrespective of the overall effect of the transaction in Ukraine. Thus, even foreign-to-foreign deals having no reasonable nexus to Ukraine and its competitive environment may be caught.

8 Are there also rules on foreign investment, special sectors or other relevant approvals?

There are no specific rules. Notification and clearance timetable

9 What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

There are no deadlines for filing a notification in Ukraine. The only require­ment is that the AMC clearance is obtained before the implementation of the concentration. It is possible to notify transactions at their early stages where no definitive agreement is reached.

Failure to notify can lead to a fine of up to 5 per cent of the consoli­dated turnover in the year immediately preceding the year when the fine is imposed, but in practice the fines in merger cases are considerably lower. In September 2015 the AMC adopted Guidelines on Fines that were further revised in February and May 2016. The document sets basic amounts of fines for violation of competition laws, including for merger cases, that can be increased or decreased by up to 50 per cent depending on aggravating or mitigating circumstances. Under the Guidelines of Fines the basic fines in merger cases are:

• 30 per cent of the turnover on the relevant (and adjacent) Ukrainian markets - for failure to notify a concentration that results in monopoli­sation or substantial restriction of competition, or for failure to imple­ment the remedies in a conditional merger clearance;

• between 510,000 hryvnas and 5 per cent of the acquirer's turnover on the relevant (and adjacent) Ukrainian markets - for failure to notify a concentration that does not lead to monopolisation or significant restriction of competition or raise competition concerns; and

• between 170,000 hryvnas and 510,000 hryvnas for failure to notify a concentration in case the parties are active on non-overlapping and non-adjacent markets in Ukraine.

Although the statutory ceiling of fine of 5 per cent of the turnover in the year preceding the fining decision remains in force, the authority clarified that the maximum theoretical fine can be imposed only in exceptional cir­cumstances to ensure deterrence. The Guidelines on Fines have a recom­mendatory nature and are non-binding. However, the AMC has publicly committed to follow its rules on setting fines strictly.

The fine may be imposed on the entire corporate group of the offender whose actions or omissions have led to violation of the Competition Law (in practice: on the acquiring party, the founding partners in case of establish­ment of a joint venture or the merging entities).

In addition to the financial penalties, parties may potentially be subject to any or all of the following sanctions:

• Ban on the companies' cross-border activities with Ukraine, if the parties refuse to pay the imposed fine. A ban can be imposed by the Ministry of Economy of Ukraine at the AMC's request. We are not aware of any precedents of imposing such a ban, so practical risk is remote.

• Third-party damages claims (double the amount of actual dam­ages sustained).

• Reputational issues (the non-confidential information about the imposed fine is published by the AMC on its website).

• Additionally, the parties can face possible complications with Ukrainian clearance of future transactions, as the AMC may scrutinise them more closely.

10 Who is responsible for filing and are filing fees required?

The filing is a joint obligation of the participating undertakings, which can mean (i) the acquirer and the target; the controlling seller can also be the applicant on the target's side in a share deal or generally in an assets deal; (ii) the founding partners with respect to joint ventures; or (iii) the merg­ing entities.

Starting from 18 May 2016 the filing fee is 20,400 hryvnas per one noti­fiable event (a transaction may require multiple notifications depending on its structure).

11 What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

The parties are subject to a standstill obligation. Closing prior to clearance constitutes a violation of Ukrainian merger control rules. The suspension requirement applies globally and Ukrainian merger control rules do not provide for any possibilities to obtain individual derogation or avoid sanc­tions by carving out Ukraine.

12 What are the possible sanctions involved in closing before clearance and are they applied in practice?

The maximum fine for closing without respective clearance can be up to 5 per cent of the consolidated turnover in the year immediately preceding the year the fine is imposed (see question 9 for more details). There have been many cases where fines were imposed for closing before clearance; the highest known fine for a transaction reasonably raising no competition concerns was around €58,000 (in 2011); the average amount for non-prob­lematic deals is around €5,000-8,000. However, since not all of the AMC's decisions are publicly available (the authority started publishing full non-confidential versions of its decisions only from mid-July 2015), the AMC's fining practices cannot be comprehensively reviewed.

13 Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

Yes, the highest known fine was imposed on a foreign-to-foreign merger with no competition concerns.

14 What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

There are no such solutions. Still, a hold-separate or carve-out arrangement is likely to be treated by the AMC as a mitigating factor when deciding on the amount of a fine.

15 Are there any special merger control rules applicable to public takeover bids?

No.

16 What is the level of detail required in the preparation of a filing?

The form for the notification is set by the Concentrations Regulation. Certain data must also be submitted in electronic form using software spe­cially developed by the AMC for that purpose. The notification shall include the following:

• copies of the corporate documents of the applicants (ie, articles of association, by-laws and certificate of registration or the like) and cop­ies or drafts of transactional documents;

• detailed outline of the transaction structure, indicating transaction stages, financial aspects of the transaction (including the acquirer's bal­ance sheet for the previous financial year), and the applicable timeline;

• respective groups' composition and brief outline of the world­wide activities;

• composition of the governing bodies of the applicants;

• detailed information on activities of the parties in the Ukrainian markets for the two years preceding the concentration, including the details of the companies that are active in (selling to) Ukraine, supply volumes per market, market shares (calculations, if available, or at least estimates), names and contact details of the customers, competi­tors and suppliers in all the markets where the respective parties are active in Ukraine (including those which may be not relevant to the transaction at all); and

• a detailed description of the Ukrainian markets and anticipated effect of the transaction in Ukraine (though as a matter of practice, it may be possible to negotiate certain limitation of information on non-relevant markets), etc.

Documents to be submitted to the AMC should be duly certified and trans­lated into Ukrainian. Confidential information should be properly marked in the notification so that the AMC treats it accordingly.

The AMC has recently announced about its intention to shorten the extensive list of documents and information which filing parties are now required to submit. Also, the draft Concentrations Regulation shared by the AMC on its website does not envisage requirements for submit­ting the information prepared with the special software. Changes to the Concentrations Regulation are expected soon (see 'Update and trends').

17 What is the statutory timetable for clearance? Can it be speeded up?

A merger case review timetable is as follows:

• Preview period: 15 calendar days;

• Phase I review period: standard review period is up to 30 calendar days (it is possible to request a faster review, although there is no formalised procedure for this); and

• Phase II review period: three months which may be extended if addi­tional documents, information or expert opinion are required but shall not exceed 135 calendar days starting on the day that Phase II notice is sent to the parties (see question 18 for more details).

Also, on 18 May 2016 a specific fast-track 25-day review procedure was introduced for transactions reasonably raising no competition concerns (see question 18 for more details).

18 What are the typical steps and different phases of the investigation?

The merger review process includes the following steps:

• Preview period. The AMC has 15 calendar days to decide whether the notification is complete and can be accepted for the substantive review (Phase I). If the AMC considers the notification as incomplete, it can be rejected without review. In such case, the parties would need to file a supplemented notification anew restarting the process.

• Phase I review. This stage involves a substantive review and assess­ment by the AMC of whether the concentration can be approved or whether there are potential grounds to prohibit the concentration, in which case Phase II is initiated. The Phase I review period is up to 30 calendar days during which the AMC will either grant clearance or ini­tiate Phase II.

• Phase II review. In case the AMC sees any grounds to prohibit the concentration it can initiate Phase II review, which involves a close analysis of the transaction and the associated competition concerns, examination of expert opinions and other additional information. Although the review period is limited by the Competition Law to three months from its initiation, in practice it may take longer if additional documents, information or expert evidence are required (the relevant AMC requests may stop or even restart the clock). Since July 2015 the AMC - by amending the Concentrations Regulation - limited Phase II review period to 135 calendar days, which starts on the day Phase II notice is sent to the parties. The parties, however, can request exten­sion of the review period, if necessary. During this period the AMC will either issue the clearance (either conditional or unconditional) or adopt a decision prohibiting the concentration.

Separately, the recent changes to the Competition Law that came into force in May 2016 introduce a specific fast-track 25-day review procedure for transactions where: (i) only one party is active in Ukraine; or (ii) parties' combined shares do not exceed 15 per cent on the overlapping markets or 20 per cent on vertically related markets.

If prior to or on the date when the Phase I or Phase II period expires the AMC has failed to adopt any decision on the concentration, clearance by tacit consent is deemed to have been granted, although the AMC does not normally clear by tacit consent.

Substantive assessment

19 What is the substantive test for clearance?

The AMC approves the concentration if it does not lead to monopolisation (achievement or strengthening of a dominant position in the market) or a substantial restriction of competition in the Ukrainian market or a signifi­cant part of it. Otherwise, the transaction will be prohibited unless the par­ties offer sufficient remedies (see question 25). The test for dominance is as follows:

• above 35 per cent market share if held individually;

• above 50 per cent if held collectively by two or three undertakings with the largest market shares; and

• 70 per cent if held collectively by four or five undertakings with the largest market shares.

However, no further guidance is provided on, among other things, how effects of the maintenance of dominance should be assessed or the bor­derline beyond which restriction of competition becomes substantial. Therefore, each transaction is assessed on a case-by-case basis.

In practice, the market share threshold often applies to any market where the parties are active in Ukraine, not just the markets concerned by the concentration.

20 Is there a special substantive test for joint ventures?

No.

21 What are the 'theories of harm' that the authorities will investigate?

The AMC approves the concentration if it does not lead to monopolisation (achievement or strengthening of a dominant position in the market) or a substantial restriction of competition in the Ukrainian market or a signifi­cant part of it (see question 19).

Generally, the AMC is more concerned about horizontal mergers resulting in market share increases. However, it also tends to take potential vertical effects into account, especially in transactions involving establish­ment of a joint venture.

22 To what extent are non-competition issues relevant in the review process?

The CMU may overrule the AMC's prohibition decision when the posi­tive effects of the transaction on the public interest outweigh the negative impact of the restriction of competition caused by the transaction (see question 23).

23 To what extent does the authority take into account economic efficiencies in the review process?

The AMC may take into account economic efficiencies when reviewing the notification, although in cases posing serious competition concerns, ade­quate remedies would nevertheless be required.

However, economic or other efficiencies will be taken into account by the CMU, which may still authorise a transaction that has been prohibited by the AMC. Such decision is possible if the positive effects of the trans­action on the public interest outweigh the negative impact of the restric­tion of competition caused by the transaction, unless such restriction is not necessary for attaining the purpose of the concentration or jeopardises the market economy system.

Remedies and ancillary restraints

24 What powers do the authorities have to prohibit or otherwise interfere with a transaction?

The AMC can prohibit a concentration if it leads to monopolisation or a substantial restriction of competition in the Ukrainian market or a signifi­cant part of it.

25 Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?

The AMC clearance decision can be made conditional on the parties under­taking to perform, or refrain from performing, certain actions aiming at removing or mitigating the negative impact of the concentration on the market competition. Remedies and the relevant procedures are not com­prehensively regulated by the Ukrainian laws and are usually negotiated with the AMC on a case-by-case basis. In practice, remedies are usually offered and discussed during Phase II and in most of cases are behavioural. Conditional clearances often contain reporting requirements allowing the authority to monitor compliance; usually it is twice a year for three con­secutive years.

The law does not provide specific instructions as to the stage of the notification review when the filing parties may start negotiations on rem­edies, so in theory those may be offered at any time after submission of the relevant merger clearance application. However, the recent changes to the Competition Law are expected to bring more procedural clarity. Under the new rules, in case the AMC sees any grounds for a merger to be prohib­ited, it shall inform the parties of these grounds and the parties, in turn, can propose remedies to the AMC within a 30-day period (extendable upon the parties' request). Practically, this means that discussions on remedies start at Phase II. Still, offering remedies at Phase I is not prohibited; however, it will most probably automatically bring the case to Phase II, as Phase I review implies the absence of any substantive competition concerns. So ini­tiation of discussions on remedies with the authority is very unlikely to help avoid Phase II investigation.

26 What are the basic conditions and timing issues applicable to a divestment or other remedy?

There are no uniform conditions; the AMC's approach should be analysed on a case-by-case basis. The main AMC requirement is that the remedies proposed by the parties are removing or mitigating the negative impact of the concentration on the market.

27 What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?

During 2015 remedies were applied in 45 cases (less than 6 per cent of the overall number of merger applications submitted to the AMC), in particu­lar to companies active in chemical, pharmaceutical, and food production industries. As not all of the AMC's decisions are publicly available (the AMC started publishing its decisions only since mid-July 2015), its practices in this regard cannot be comprehensively reviewed.

28 In what circumstances will the clearance decision cover related arrangements?

Ancillary restraints are not covered by merger clearance and may require a separate clearance, for example antitrust clearance with respect to non-compete clauses.

Involvement of other parties or authorities

29 Are customers and competitors involved in the review process and what rights do complainants have?

The AMC may involve third parties (competitors, suppliers and consumers, experts, etc) in the merger case review process if the AMC's decision on the notified transaction may significantly affect rights and interests in competi­tion. Some of the parties may be involved during Phase I and all at Phase II. The AMC acts in its full discretion when deciding on the issue; the respec­tive decision is then communicated to the notifying parties.

Third parties can submit their observations, in particular, relating to the notified transaction and its impact on the market. Such observations are then attached to the case as evidence and must be taken into account when the AMC decides on the case. The AMC may request information, documents or opinions from the third parties if it considers such data rel­evant and necessary for the case assessment. Normally, when issuing such an information or documents request, the authority will indicate the dead­lines for provision of the requested data. Non-compliance with a request may result in sanctions for a third party.

30 What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?

Automatic confidentiality does not apply to any information. Confidentiality may be available to the parties on their request. The parties shall provide a grounded justification when applying for the confidentiality, as well as a non-confidential version of the information. If not satisfactorily justified, the parties' confidentiality request will be rejected by the AMC.

Recent changes to the law ensure more transparency of the AMC's activity. Starting from March 2016 the AMC is required to publish (i) short notes regarding its resolutions on the initiation of Phase II in merger or con­certed practice cases; and (ii) non-confidential versions of its decisions in merger and concerted practice applications or cases, as well as decisions in cases on competition law violations within 10 working days of the adoption of the resolution or decision. Currently, the AMC publishes on its website a short note of the resolution or decision made (with the identity of the par­ties and the essence of the resolution or decision); notes on decisions are then followed by publication of their non-confidential versions.

31 Do the authorities cooperate with antitrust authorities in other jurisdictions?

Cooperation of the AMC with other competition authorities is usually based on bilateral treaties (Ukraine has entered into cooperation agree­ments with Bulgaria, Hungary, Latvia, Lithuania and Slovakia).

The AMC also cooperates with international organisations, such as the Organisation for Economic Co-operation and Development, the United Nations Conference on Trade and Development and the International Competition Network.

Judicial review

32 What are the opportunities for appeal or judicial review?

If the AMC prohibits the concentration, the CMU may still grant a clear­ance if its positive effects for the public interest outweigh the negative impact of the restriction of competition, unless that restriction is not neces­sary for achieving the purpose of the concentration or jeopardises the mar­ket economy system.

The AMC's decisions can also be challenged in commercial courts. The relevant statement of claim indicating the grounds for invalidation of the AMC decision should be filed to a commercial court within two months from the date of receipt of the decision.

Courts' decisions may further be appealed to the competent appellate instance within 10 days period. Further, if the second appeal is unsuccess­ful, the claimant may go to higher cassation courts - the Higher Commercial Court ofUkraine for commercial proceedings. Finally, the cassation court's award may be challenged in the Supreme Court ofUkraine if there is a good reason for that (eg, if the decision is not in the line with the usual court prac­tice for such disputes).

33 What is the usual time frame for appeal or judicial review?

Decisions of the AMC can be appealed to the commercial courts follow­ing two months upon the receipt of the decision. The applicable Ukrainian procedural codes establish a two-month term for consideration of cases in the first instance. Review on appeal should not exceed a two-month term after the claim has been accepted by the court for review; the review on cas­sation should not exceed one month after the claim has been accepted by the court for review. Review of the case by the Supreme Court of Ukraine should not exceed one month from the date the proceeding was initiated.

However, from a practical perspective, such terms are rarely met due to the courts' heavy workload, insufficient personnel, the necessity of con­ducting additional investigations, collection of documents and informa­tion, etc. Thus, the review on appeal may last up to several years. Expedited review is not available.

Enforcement practice and future developments

34 What is the recent enforcement record and what are the current enforcement concerns of the authorities?

Following the appointment of the new Chairman and reshuffle of the State Commissioners team in mid-2015, a new phase in the development of the Ukrainian merger control regime has begun. The renewed AMC manage­ment team has already taken a number of long-awaited steps towards a bet­ter competition enforcement practice and cooperation with the business community, for example, through the implementation of transparency to the AMC's activity and better predictability in merger control. The AMC has publicly announced its intention to further simplify and streamline the merger review procedures, which includes limitation of the disclosure requirements, possibility of tracking the status of review online, etc.

Based on the AMC's statistics for 2015, the number of merger applica­tions submitted in 2015 has not essentially changed from the previous year and totalled 774 (as compared with 781 in 2014). (However, it should be mentioned that the AMC tends to issue separate clearances for different steps of a multi-stage transaction, thus the actual number of cleared trans­actions may in fact be considerably smaller.) Similarly to previous years, most of the applications filed with the AMC have been foreign-to-foreign transactions with no or minimal nexus to Ukraine.

Out of these applications, 658 (85 per cent) were cleared and 116 were rejected by the AMC or withdrawn by the parties. The vast majority of applications did not raise compaction concerns and were cleared within Phase I; Phase II investigations were initiated in 72 cases (which is less than 10 per cent of the overall number of applications submitted to the AMC). Remedies were applied in 45 cases, in particular to companies active in chemical, pharmaceutical and food production industries.

35 Are there current proposals to change the legislation?

Current proposals for merger control reform primarily concern the calcula­tion of fines in merger cases. In addition to the Guidelines on Fines intro­duced by the AMC, on 26 January 2016 a draft law reforming regulation of imposition by the AMC of fines for violation of legislation in the sphere of protection of economic competition was forwarded for the repeated sec­ond reading by the Parliament. The draft law aims to make the Guidelines on Fines binding upon the AMC and empower courts to annul the AMC's decisions on fines or obligations imposed on the parties, and to order the AMC to reconsider cases in this regard.

Besides that, the following issues may be raised in the near future:

• composition of the target group (currently, the target is required to dis­close detailed information on the controlling shareholder or seller in the notification, although control link may be lost post-closing; such an approach often places an enormous unjustified burden on the notifying parties);

• calculation of the target assets or turnover (similarly to the above, cur­rently the assets or turnover of the controlling shareholder or seller need to be counted towards the target, although control link may be lost after closing; thus, local filing threshold is often met only formally: for example, by the exiting seller rather than by the target);

• sole or joint control issues (current merger control regime does not dif­ferentiate clearly between sole and joint control, which often causes uncertainty as regards turnover allocation and qualification in 'change of control' cases);

• treatment of horizontal mergers (the Ukraine-EU Association Agreement directly requires that the document explaining the principles used in the assessment of horizontal mergers shall be adopted); and

• ancillary restraints (currently, ancillary restraints such as non-compete obligations accompanying a merger are often formalistically regarded as anticompetitive concerted practices requiring a separate clearance), etc.

Update and trends

The key policy developments concern the following. Merger control

On 18 May 2016 the new law reforming the merger control regime came into force. The most notable changes introduced by the new law include:

• remodelling of notifiability thresholds. Under the new law, a transaction qualifying as a concentration requires merger clearance by the AMC if it satisfies the following criteria:

• the combined worldwide value of assets or turnover of the parties to the concentration exceeds €30 million and the value of Ukrainian assets or turnover of each of at least two parties exceeds €4 million - both in the last financial year immediately preceding the year of the concentration; or

• Ukrainian value of assets or turnover in Ukraine of the target, or of the seller of the assets, or of at least one of the founders of a new entity exceeds €8 million and worldwide turnover of at least one other party exceeds €150 million - both in the last financial year immediately preceding the year of the concentration.

In both cases, the parties to a concentration should be considered at their group level. That means that the assets or turnover of the control­ling shareholder or seller should still be counted towards the target.

The ineffective market share-based (35 per cent) notifiability test was eliminated.

A fast-track review procedure was introduced for transactions reasonably raising no competition concerns. The new law introduces a fast-track 25-day review procedure for transactions where (i) only one party is active in Ukraine; or (ii) parties' combined shares do not exceed 15 per cent on overlapping markets, or 20 per cent on vertically related markets.

Clarification of rules applicable to remedies

Under the new law, if the AMC sees any grounds for the merger to be prohibited, it must inform the parties about the substance of those grounds. The parties, in turn, can propose remedies to the AMC within a 30-day period (extendable upon the request of the parties).

Other notable amendments include the introduction of pre-filing consultations, clarification of consultations during the 15-day preview stage, and increase of the filing fees (from 5,100 to 20,400 hryvnas).

Concentrations Regulation

In April 2016 the AMC initiated public discussion on the revision of the Concentrations Regulation. The draft revised Concentrations Regulation recently published by the AMC shortens the extensive list of documents and information which filing parties are now required to submit and introduces a short-form notification for concentrations rais­ing no competition concerns. The revised version of the Concentrations Regulation is expected to become effective in August 2016.

Transparency

On 3 March 2016, the law on ensuring transparency of the AMC's activ­ity came into force. The law provides for the publication of (i) short notes regarding its resolutions on the initiation of Phase II in merger or concerted practice cases; and (ii) non-confidential versions of its deci­sions in merger and concerted practice applications or cases, as well as decisions in cases on competition laws violations within 10 working days of the adoption of the resolution or decision.

Review of filing policy

In September 2015 the AMC adopted Guidelines on the calculation of fines that were further revised in February and May 2016. The document sets basic amounts of fines for violation of competition laws, including for merger cases. The Guideline sets the below basic fines in merger cases, which can be increased or decreased by up to 50 per cent depend­ing on aggravating or mitigating circumstances:

• 30 per cent of the turnover on the relevant (and adjacent) Ukrainian markets - for failure to notify a concentration that results in monopolisation or substantial restriction of competition, or for failure to implement the remedies in a conditional merger clearance;

• between 510,000 hryvnas and 5 per cent of the acquirer's turnover on the relevant (and adjacent) Ukrainian markets - for failure

to notify a concentration that does not lead to monopolisation or significant restriction of competition or raise competition concerns; and

• between 170,000 and 510,000 hryvnas for failure to notify a concentration in case the parties are active on non-overlapping and non-adjacent markets in Ukraine.

Although the statutory ceiling of fine of 5 per cent of the turnover in the year preceding the fining decision remains in force, the authority clari­fied that the maximum theoretical fine can be imposed only in excep­tional circumstances to ensure deterrence. The Guidelines on Fines have a recommendatory nature and are non-binding. However, the AMC has publicly committed to follow its rules on setting fines strictly.

The Guidelines on fines also provide for quasi-amnesty for 'correc­tive' merger filings. The fine for failure to have a past merger cleared is limited to 102,000 hryvnas and applies only to 'corrective' filings made before 15 September 2016. Under the Guidelines on fines, only mergers closed before 15 September 2015 can benefit from the amnesty.



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