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Lexology Getting The Deal Through – Merger Control 2020 – Ukraine
Author: Igor Svechkar, Alexey Pustovit, Oleksandr Voznyuk
Source: Lexology Getting The Deal Through – Merger Control 2020 – Ukraine
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LEGISLATION AND JURISDICTION

Relevant legislation and regulators

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 (the 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;

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

• Guidelines on the Assessment of Horizontal Mergers 2016;

• Guidelines on the Assessment of Non-Horizontal Mergers 2018; and

• Guidelines on Definition of Control 2018.

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 the decision.

Scope of legislation

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:

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

(ii) 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 the members of decision-making or supervisory corporate bodies), etc if the same persons already hold the said positions in other undertakings (ie, cross-directorship);

(iii) 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 (iv) 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 quite formalistic and the AMC usually 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 these acquisitions shall technically be cleared by the AMC through issuing a separate clearance 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 of a 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.

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 co-ordination 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 is entitled to receive at least 50 per cent of the profits of another undertaking;

• ownership to or right to use (eg, lease) of all (or major part of) assets 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).

In 2018, the AMC adopted Guidelines on Definition of Control, which closely follow the lines of the Commission Consolidated Jurisdictional Notice. This document provides further guidance as to the concept of control, in particular:

• distinguishes between negative and positive sole control. Negative control arises where a shareholder has veto rights for strategic decisions, but cannot adopt such decisions independently;

• recognises the difference between de jure and de facto types of sole control. It is explained that, in contrast to de jure control, de facto control may arise because of specific case-by-case circumstances (for instance, a minority shareholder may have decisive influence at the general meeting level, relying on prospective assessment of past shareholder participation and voting patterns);

• clarifies that veto rights over budget, business plan, strategic investments, appointment of senior management, or activity on certain markets will generally be regarded as giving rise to control.

The Guidelines further clarify that change in the quality of control occurs in situations where there is (i) a change from sole to joint control or vice versa, or (ii) an increase in the number or a change in the identity of controlling shareholders. No changes in the quality of control arise in case of a switch from negative to positive sole control, or changes in the level of shareholdings of the same controlling shareholders, provided powers they have remain the same.

Standard minority shareholder protection rights are generally not regarded as conferring control over the undertaking.

5. Thresholds, triggers and approvals

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

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; or

• Ukrainian value of assets or turnover in Ukraine of the target 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.

All figures shall be taken for 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 controlling seller should still be counted towards the target.

The concentrations falling below these thresholds do not require merger clearance by the AMC. However, the parties may voluntarily file such concentrations.

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 or nexus 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.

However, pursuant to general provisions of the Competition Law, an argument can be made that application of the turnover or asset thresholds should be qualified by the effects doctrine. Under this interpretation, it may be argued that clearance is not required as the transaction lacks reasonable local nexus and cannot have any anti­competitive effect. Still, this argument runs contrary to the current approach of the AMC in application of merger control rules. The AMC has on several occasions expressed its unofficial position on the issue: it claimed that such transactions are subject to clearance as the AMC has exclusive authority to determine whether a particular transaction may or may not impact competition in Ukraine, and verification of such impact is in fact conducted while reviewing a merger case and granting the clearance.

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

In connection with the conflict with Russia, Ukraine introduced sanc­tions against certain companies. The list includes companies mainly from the Russian Federation and Ukraine, including Crimea, as well as several companies from other jurisdictions. The AMC will reject merger control notifications or drop their review (if such notifications have already progressed into Phase I or II) if (i) any of the parties to the concentration (or any individuals or entities connected to them by rela­tions of control) is on the Ukrainian sanctions list, and (ii) a particular type of sanctions applies to a given individual or entity (eg, prohibition on disposal of assets, equity, etc).

Also, special rules apply to review of the notifications that concern capitalisation and reorganisation of banks - the AMC will review them and grant clearances within 10 days after receipt of the complete set of documents.

NOTIFICATION AND CLEARANCE TIMETABLE

9. Filing formalities

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. The Guidelines on Fines (last revised in 2016) sets basic amounts of fines for violation of competition laws, including for merger cases. Under the Guidelines of Fines, the basic fines in merger cases are:

• 10 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;

• between 510,000 hryvnas (approximately €17,400) and 5 per cent of the 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 have impact on Ukrainian product markets; and

• between 170,000 hryvnas (approximately €5,800) and 510,000 hryvnas (approximately €17,400) for failure to notify a concentration in case the parties are active on non-overlapping and non-adjacent markets in Ukraine.

When defining the basic fine, the AMC may apply coefficients depending on the effect of violation on competition, social importance of the prod­ucts, profitability of economic activity connected with violation, which may increase or decrease the fine. Also, in each case, the above basic amounts are subject to possible further adjustment for aggravating or mitigating circumstances.

Although the statutory ceiling for a 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:

• third-party damages claims (double the amount of actual damages sustained);

• reputational issues (information about the imposed fine, identity of the parties and non-confidential version of decision are published by the AMC on its website);

• possible complications with Ukrainian clearance of future transac­tions, as the AMC may scrutinise these more actively; or

• invalidation of the transaction.

10. Which parties are responsible for filing and are filing fees required?

The filing is a joint obligation of the participating undertakings, which can mean 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, the founding partners with respect to joint ventures or the merging entities.

The filing fee is 20,400 hryvnas (approximately €690) 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.

The only exception concerns tender and bid process where a notifi­able concentration should be filed within 30 days after the winner of a tender or bid is announced. However, this provision was originally designed for local privatisation procedures and may not be adaptable to public bids abroad.

12. Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

The same sanctions apply in case of closing or integrating the activities of the merging businesses (even partly) before clearance, as outlined in question 9. However, in practice, closing a non-problematic transaction before clearance but after the filing was made is likely to receive a more favourable treatment by the AMC than an omission to file.

The fining decisions are publicly available from mid July 2015. Since then the AMC has imposed more than 100 fines for failure to notify, closing or integrating activities before clearance. In almost all such cases, the amount of fine did not exceed 510,000 hryvnas (approxi­mately €17,400) and these were likely imposed for implementing non-problematic transactions. The authority publishes only redacted versions of decisions on its website and it is not possible to comprehen­sively analyse the reasons behind the calculation of a fine.

One of the largest fines for closing before clearance amounted to approximately 3 million hryvnas (approximately €100,000). According to publicly available information, the closing occurred by means of inter­locking directorship, which was discovered during the Phase II review. Otherwise, the transaction was found non-problematic and was cleared without conditions.

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

Yes.

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. Public takeovers

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

In a tender or bid process, a notifiable concentration should be filed within 30 days after the winner of a tender or bid is announced. However, this rule was designed for local privatisation procedures and may not be adaptable to public bids abroad.

16. Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

The notification shall include the following, in particular:

• Simplified procedure:

• description of the transaction structure, indicating transaction stages, and the timeline for their implementation along with the draft or copy of transactional documents; information if the clearance is sought or granted in other jurisdictions;

• description of the source of financing, indicating terms and conditions and submitting documents to confirm availability of own funds (eg, balance sheet, excerpt from bank account) or to evidence that a financial institution lending funds does not acquire control over the borrower in the result of the financing arrangement (eg, loan agreement);

• parties' asset and turnover data - globally and in Ukraine for the previous financial year;

• for all markets - general outline of the parties' activities glob­ally and in Ukraine, indicating Ukrainian subsidiaries and companies active in Ukraine; and

• for the relevant markets - value and volume-based sales and market share data; indicating competitors and their estimated market shares on overlapping markets.

• Standard procedure (in addition to the above list applicable to simplified procedure):

• detailed economic analysis of the transaction's effect on the Ukrainian market;

• information regarding membership in associations; and

• parties' excerpts from the trade register or similar (notarised and apostilled or legalised).

Furthermore, along with the hard copy of the notification, parties are required to provide a CD with an electronic version (PDF/Word, etc) of the notification and all documents attached to it.

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.

As regards the missing information in the notification, there may be the following scenarios:

• If the required information is missing from the start: the authority may either request it during the review or issue a declaration of incompleteness within the 15-day preview period and the parties will have to file anew, adding the missing information. In such scenario, no sanctions are imposed on the notifying parties.

• If the parties fail to submit information upon request within Phase II review: the authority may close a merger case without ruling on the essence. If so, the parties may submit a repetitive application.

Also, failure to provide information to the AMC within the specified period or provision of wrong, inauthentic or untrue information may result in a fine in the amount of up to 1 per cent of the respective party's turnover in the year immediately preceding the year when the fine is imposed.

However, the Guidelines on Fines clarify that the fine for such viola­tion is capped at 136,000 hryvnas (approximately €4,600). This amount is also subject to possible adjustment for aggravating or attenuating circumstances.

Finally, the AMC may reconsider its decision if it was based on materially incomplete or inauthentic information.

17. Investigation phases and timetable

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

The law does not provide for formal consultations with the authority before notifying a merger, although informal consultations are usually possible. After notifying a merger, the standard review process will include 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 on the substance. 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. In practice, the Phase II review period is limited 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.

A fast-track simplified 25-day review procedure is available for transac­tions where only one party is active in Ukraine or parties' combined shares do not exceed 15 per cent on the overlapping markets or 20 per cent on vertically related markets. The AMC tends to interpret the 15 or 20 per cent threshold quite restrictively and irrespective of whether an overlap occurs on a relevant or non-relevant market.

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

A standard merger review timetable is as follows:

• Preview period: 15 calendar days;

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

• Phase II review period: three months (extendable, if additional documents, information or expert opinion are required), but, in practice, shall not exceed 135 calendar days starting from the day that Phase II notice is sent to the parties (see question 17).

Also, a fast-track, simplified 25-day review procedure is available for transactions reasonably raising no competition concerns (see question 17).

The authority usually takes the whole of the Phase I and Phase II review period for review of transactions and adopts the relevant deci­sions during the last week before the respective deadline.

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 in practice the AMC tends to issue formal clearances.

SUBSTANTIVE ASSESSMENT

Substantive test

19. What is the substantive test for clearance?

Pursuant to the Competition Law, 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

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

Pursuant to the Guidelines on the Assessment of Horizontal Mergers and recently adopted Guidelines on the Assessment of Non-Horizontal Mergers, the AMC is also required to consider the following counter­vailing factors while reviewing the concentrations:

• likelihood that buyer power would act as a countervailing factor;

• likelihood that entry would maintain effective competition on the relevant markets; and

• 'failing firm' defence.

20. Is there a special substantive test for joint ventures?

No.

Theories of harm

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

As a general rule, 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).

Under the Guidelines on the Assessment of Horizontal Mergers, the authority is also required to assess whether the concentration would result in any of the following effects:

• unilateral or non-coordinated effects - whether the merger will eliminate important competitive constraints on one or more firms, which consequently would have increased market power; and

• coordinated effects - whether the merger will change the nature of competition in such a way that firms that previously were not coordinating their behaviour, would have been significantly more likely to coordinate and raise prices or otherwise harm effective competition.

Also, under the Guidelines on the Assessment of Non-Horizontal Mergers (approved in early 2018), the AMC is required to consider the following potential effects:

• non-coordinated effects:

• upstream foreclosure (vertical mergers): raising costs of rivals by restricting their access to an important input;

• downstream foreclosure (vertical mergers): raising costs and reducing revenue streams of rivals by integrating with an important customer in a downstream market to foreclose access to an important customer base; and

• foreclosure in related markets (conglomerate mergers): reducing rivals' ability or incentive to compete by combina­tion of products in closely related markets to leverage strong market position from one market to another by means of tying or bundling practices; and

•   coordinated effects - possibility that non-horizontal mergers could increase the likelihood of tacit coordination.

Non-competition issues

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

The AMC would predominantly consider competition issues. Other considerations may still be used as supporting arguments, although they are unlikely to be decisive.

However, 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).

Economic efficiencies

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 such arguments are unlikely to be decisive. 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 a 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 this restriction is not necessary for attaining the purpose of the concentra­tion or jeopardises the market economy system.

REMEDIES AND ANCILLARY RESTRAINTS

Regulatory powers

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.

Remedies and conditions

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, which may be either structural (for example, divestitures) or behavioural (for example, restrictions on use or management of certain assets or price increases).

Under the Competition Law, in case during the Phase II review 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.

In practice, remedies in most cases are behavioural and conditional clearances often include reporting requirements allowing the authority to monitor compliance.

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

There are no uniform conditions. The only relevant requirements are that remedies should alleviate competition concerns, be proportionate and supervision of their implementation should be reasonable.

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

During the past five years or so, the AMC cleared transactions subject to binding commitments in approximately 2 per cent of cases. As not all 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.

Ancillary restrictions

28. In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?

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

Third-party involvement and rights

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. Third parties may be involved during 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.

Publicity and confidentiality

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.

The AMC is required to publish short notes regarding its resolu­tions on the initiation of Phase II review, and 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.

Cross-border regulatory cooperation

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, inter alia, with the EU, 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

Available avenues

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. Still, there are no publicly available cases of CMU granting clearance for the concentration that was prohibited by the AMC.

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 a 20-day period. Further, if the appeal is unsuccessful, the claimant may go to a higher cassation court - the Supreme Court of Ukraine (the cassation commercial court).

Because there have been very few AMC prohibition decisions and in each of these cases the authority has thoroughly and deliberately assessed the facts and the potential impact of the transaction on the relevant markets, there have been no instances of successful appeals in merger cases (although not all court decisions are publicly available). Further, there is no public record of successful appeals against the AMC clearance decisions.

Nevertheless, there have been several notable appeal cases (including with respect to the AMC clearance decision in the Procter & Gamble/Olvia Beta Cleaning Products assets case) with the definition of the relevant product market as the central and most disputable issue.

Time frame

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

Decisions of the AMC can be appealed to the commercial courts within two months upon the receipt of the decision. The new procedural rules governing the review of the case in commercial courts entered into force in late 2017. Now, the consideration of cases in the first instance may last:

• up to 135 calendar days;

• in the appeal - up to 75 calendar days; and

• in cassation - up to 80 calendar days.

However, such terms are not always met because of the courts' heavy workload, insufficient personnel, the necessity of conducting additional investigations, collection of documents and information, etc.

ENFORCEMENT PRACTICE AND FUTURE DEVELOPMENTS

Enforcement record

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

According to the AMC's statistics, in 2018 the AMC reviewed 532 merger notifications.

Of these applications, 447 (85 per cent) were cleared, 79 were rejected by the AMC or withdrawn by the parties, and in six cases the AMC closed the review without taking a decision. The vast majority of applications did not raise competition concerns and were cleared within Phase I; Phase II investigations were initiated in 25 cases (approximately 4.5 per cent of the overall number of applications submitted to the AMC).

Also, during 2018-2019 the AMC imposed the three biggest fines in its history for implementing M&A transaction without prior merger clearance. These fines ranged from approximately €500,000 to approxi­mately €1.9 million and concerned local transactions. Such an increase in the level of fines shows that the AMC wants merging parties to take the merger control regime more seriously.

Reform proposals

35. Are there current proposals to change the legislation?

Current proposals for merger control reform concern the following:

• Calculation of fines in merger cases. According to the AMC, further changes to the Guidelines on Fines are possible. Also, the draft law on calculation of fines was rejected by the Parliament in February 2019. The draft law aimed 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.

• Definition of the relevant market and monopoly position. The AMC presented drafts of the Methodology on the Market Definition and Methodology on Establishment of the Monopoly Position of the Undertakings on the Market. These documents should replace the regulation originally adopted in 2002 and improve the rules on defining the relevant market and establishment of the monopoly position of the undertaking on such market.

• Amendments to the simplified procedure. Draft amendments to the Competition Law suggest also applying a 25-day simplified proce­dure to the transactions where:

•   none of the parties to the concentration is engaged in busi­ness activities in the same product and geographical market, or in a product market that is upstream or downstream from a product market in which the other party to the concentra­tion engages;

• a party is to acquire sole control of an undertaking over which it already has joint control, assuming such joint control was acquired in compliance with the competition law in the past; and

• parties submit voluntary filings (ie, where the concentration does not require clearance);

• Increasing filing fees. Draft amendments to the Competition Law suggest increasing filing fee for submission of the notification, that does not qualify for review under the simplified procedure from 20,400 hryvnas (approximately €690) to 40,800 hryvnas (approximately €1,400). The filing fee for the simplified procedure notifications will not change: 20,400 hryvnas (approximately €690).

• Calculation of the target assets or turnover. Currently the assets or turnover of the controlling shareholder or controlling seller need to be counted towards the target, although control link may be lost after closing. Thus, the local filing threshold is often met only formally: for example, by the exiting seller rather than by the target. In December 2018, the AMC published a draft amendment to the Merger Regulation that should resolve this issue.

• Assessment of joint ventures. The AMC is developing Guidelines on the assessment of transactions in the form of establishment of joint ventures. No details are available yet.

• Guidelines regarding remedies. The AMC is working on the Guidelines on the remedies in merger control cases. They should clarify the procedure of applying the structural remedies (for example, divestitures), as well as the procedure for monitoring compliance with such remedies. No further details are available yet.

Besides that, the following issues may evolve 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);

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

UPDATE AND TRENDS

Key developments of the past year

36. What were the key cases, decisions, judgments and policy and legislative developments of the past year?

Guidelines on Definition of Control

In November 2018, the AMC adopted Guidelines on Definition of Control, replacing the 2002 AMC methodology regarding the same. In this document the AMC consolidates its practice on the definition and assessment of control. Although the document is not legally binding, it provides valuable comprehensive guidance on how AMC treats different transaction structures and explains rules applicable to specific deals. In general, the Guidelines closely follow the lines of the Commission Consolidated Jurisdictional Notice.

Exclusion of seller from the merger control thresholds calculation

The AMC expressed its intention to exclude turnover of control­ling sellers and other controlling shareholders from the notifiability assessment and take into account only the turnover generated by the business being acquired. The relevant draft amendment to the Merger

Regulation aiming to resolve this issue was presented by the AMC in December 2018. Currently, the AMC is updating the draft based on feed­back received from the public. The amendment is expected to come into force in 2019.

Record fines for merger control violations

During 2018-2019, the AMC imposed the three biggest fines in its history for merger control violations. The first fine (approximately €500,000) was imposed in November 2018 on a Ukrainian individual for the acquisition of control over a Ukrainian bank. The second fine (approximately €1.8 million) and the third fine (approximately €1.9 million) were imposed in April 2019 on large Ukrainian groups for acquisitions of big Ukrainian industrial plants. Such an increase in the level of fines shows that the AMC wants merging parties to take the merger control regime more seriously.

Ukraine

 

Voluntary or mandatory system

Mandatory.

Notification trigger/ filing deadline

A transaction qualifying as a concentration requires AMC merger clearance if in the last financial year immediately preceding the year of the concentration:

• 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; 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.

All figures shall be taken for 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.

Clearance deadlines (Stage 1/Stage 2)

Preview period: 15 calendar days.

Phase I review period: up to 30 calendar days.

Phase II review period: up to 135 calendar days.

Also, there is a fast-track simplified 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.

Substantive test for clearance

No monopolisation or substantial restriction of competition in the Ukrainian market or a significant part of it.

Penalties

Statutory maximum fine for pre-clearance closing or closing without clearance is up to 5 per cent of the consolidated turnover in the year immediately preceding the year when the fine is imposed.

In practice, according to the Guidelines on Fines, the actual fines in merger cases are lower.

Remarks

The Ukrainian merger control regime is extraterritorial, in some cases excessively: the AMC claims jurisdiction over transactions reasonably lacking sufficient local nexus.

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