IFLR Survey: Merger Control in Ukraine. 2016
Author: Igor Svechkar, Anastasia Usova
Source: IFLR Survey. Merger Control. – 2016



1.1 What is the applicable legislation and who enforces it?

The Law of Ukraine on Protection of Economic Competition of 2001 (the Competition Law) is the main merger control legislation. It defines the notion of a concentration, sets out the basics of the domestic effects concept, notifiability thresholds, exemptions, principal procedural rules, and sanctions.

The Antimonopoly Committee of Ukraine (the AMC) is the primary state authority responsible for enforcement of merger control rules in Ukraine. In particular, it has powers to investigate and authorise or prohibit mergers, penalise for violations, and issue individual guidance.

1.2 What types of mergers and joint ventures (JVs) are caught?

The following transactions are considered concentrations:

the merger of independent undertakings or the takeover of one undertaking by another; the direct or indirect acquisition of control over an undertaking (including through the acquisition or leasing of assets or appointments to certain management or supervisory positions); the establishment by two or more independent undertakings of a new undertaking that will itself pursue business activities on a lasting basis, and the establishment of the new undertaking will not result in the co-ordination of competitive behaviour of either: (a) its parents, or (b) the new undertaking, on the one hand, or its parents, on the other; and, the reaching or exceeding of 25% or 50% of the votes in the highest governing body of an undertaking.

The following are not considered concentrations:

the establishment of an undertaking – this would qualify as a concerted practice; the acquisition of shares qualifying as a financial buyer transaction; intra-group transactions; and, the acquisition of control over an undertaking or part of an undertaking by a trustee in bankruptcy proceedings or the like.

2. Filing

2.1 What are the thresholds for notification, how clear are they, and are there circumstances in which the authorities may investigate a merger falling outside such thresholds?

The thresholds for notification are reasonable and are sufficiently clear.

There are two alternative thresholds: turnover or assets-based (for the previous fiscal year): the combined worldwide asset value or turnover of the parties exceeded €12 million ($13 million); the value of each of at least two of the parties' total worldwide assets or turnover exceeded €1 million; and, the value of assets or turnover of at least one party in Ukraine exceeded €1 million. Market share-based: either the individual or combined market share of the parties in the market concerned or the adjacent market exceeds 35%.

There is no official clarification on the application of thresholds to guide the parties in uncertain cases. For instance, it is unclear as to which parent the turnover of a jointly-controlled undertaking should be allocated. Ukrainian competition law does not differentiate between sole and joint control and in practice such a joint venture's turnover may be equally attributable in full to either parent. The AMC may also apply a 35% market share threshold to any product market where at least one party is active.

The authority has no powers to investigate mergers that fall below the thresholds.

2.2 Are there circumstances in which a foreign-to-foreign merger may require notification, and is a local effect required to give the authority jurisdiction?

Foreign-to-foreign mergers/joint ventures may require notification and there is no local effects test.

The same notifiability tests apply irrespective of whether the mergers are domestic or foreign-to-foreign. Although the Competition Law only applies to transactions that have or may have an effect on the economic competition in Ukraine (a kind of local effects concept), in practice, that effect is presumed once the thresholds are met. In particular, the AMC may assert its jurisdiction even in cases where the local €1 million threshold is crossed by the controlling seller only (technically the seller's turnover is attributable to that of the target).

2.3 Is filing mandatory or voluntary and must closing be suspended pending clearance? Are there any sanctions for non-compliance, and are these applied in practice?

Filing is mandatory (if relevant thresholds are met), closing must be suspended pending clearance and sanctions are enforced in practice for failing to comply.

Once the notifiability thresholds are met, a transaction must be cleared before closing, unless it qualifies for an exemption (such as a financial buyer exemption).

Closing before clearance effectually amounts to closing without clearance and may entail: (i) a fine of up to five percent of the total worldwide turnover of the undertaking in the previous fiscal year (in practice fines have ranged from $550 to $65,000); (ii) an AMC de-merger order or an order to restore the pre-merger state; or, (iii) a ruling to declare the transaction invalid by the court at the request of the AMC.

Under the newly adopted AMC guidelines on calculation of fines for violations of competition laws (the Fining Guidelines) the basic amount of a fine for the implementation of non-problematic concentrations without clearance ranges from UAH 510,000 ($21,100) to five percent of the turnover of the undertaking from the sale of products on the relevant and adjacent markets for the period of violation or, in certain cases, for the financial year preceding the year in which the fine is imposed. In cases where the parties are active on non-overlapping and non-adjacent markets, the basis for the fine ranges from UAH 170,000 to UAH 510,000. The basic fine amounts mentioned above can be adjusted (increased or decreased) by up to 50% in view of aggravating or attenuating circumstances of the case.

Importantly, the Fining Guidelines also introduce a quasi-amnesty for 'corrective' merger filings. This limits a fine for the failure to have past mergers cleared to approximately UAH 20,400 if a corrective filing is made within the six-month grace period following the publication of the Fining Guidelines (September 15 2015), or to approximately UAH 102,000 if the filing is carried out within the subsequent six months. The Fining Guidelines also recommend that the AMC satisfies confidentiality requests from any such quasi-amnesty applicants with respect to fining decisions.

2.4 Who is responsible for filing and what, if any filing fee applies? What are the filing requirements and how onerous are these?

The filing requirements are moderately onerous.

The notification is filed jointly by the parties directly involved in the transaction (for example, the purchaser and the target – or the seller, in the case of an acquisition). However, the liability for the closing of a notifiable transaction without clearance normally rests with the acquiring party. Filings with respect to hostile takeovers can be submitted by the acquirer only.

The filing fee is UAH 5,100. The filing requirements are somewhat onerous with respect to foreign-to-foreign transactions that have no, or limited nexus to Ukraine. The disclosure requirements are extensive and burdensome (for example, they cover the parties' activities in all markets, not only relevant markets, and the composition and activities of the seller group). However, it is usually possible to have these waived by the AMC.

3. Clearance

3.1 What is the standard timetable for clearance and is there a fast-track process? Can the authority extend or delay this process?

Standard phase I clearance takes between six weeks and three months.

The regular merger review procedure includes the following stages (preview and phase I are mandatory).

The preview period (15 calendar days) consists of a formal check where the AMC decides whether the filing is complete and can be passed on the substance of the filing.

In the phase I review (up to 30 calendar days), the AMC assesses the substance of the filing. In particular, it analyses the parties' standing, the overall market situation, and effects of the transaction on the market. Phase I closes with the AMC's decision to either clear a concentration or to initiate the phase II review.

The phase II review (up to three months) is initiated if there are grounds to prohibit the concentration, or if an in-depth investigation is required. The authority takes a closer look at the transaction and competition concerns that were identified during phase I. To finalise the review, the AMC normally collects expert opinions from other governmental authorities and competent private agencies, and requests additional information and documents from the parties. The phase II statutory review period is limited, but in practice it may be suspended or even restated each time the AMC receives additional input.

There is no fast-track review. However, a draft law on merger review reform (Merger Review Draft Law – passed after its first reading by parliament in November 2015 and now pending a second reading,) provides for the introduction of a simplified and fast-track 25-day review procedure for transactions where: (i) only one party is active in Ukraine, or, (ii) the parties' combined market shares do not exceed 15% on the overlapping markets or 20% on vertically related markets.

3.2 What is the substantive test for clearance, and to what extent does the authority consider efficiencies arguments or non-competition factors such as industrial policy or the public interest in reaching its decisions?

The test for clearance and relevant factors considered are moderately established, sophisticated and clear.

A concentration can be authorised by the AMC if it does not result in monopolisation or the substantial restriction of competition on the Ukrainian market or a large part of it. The authority also may clear an initially problematic transaction if the parties offer acceptable remedies to alleviate competition concerns.

The Cabinet of Ministers of Ukraine may still approve a transaction that was prohibited by the AMC if the positive effects of the transaction on public interest outweigh the negative impact of the restriction of competition, unless that restriction: (i) is not necessary for achieving the purpose of the concentration; or, (ii) jeopardises the market economy system.

3.3 Are remedies available to alleviate competition concerns? Please comment on the authority's approach to acceptance and implementation of remedies.

There is a procedure for remedies and remedies are occasionally accepted.

In cases raising competition concerns, the AMC may still issue a clearance that will be conditional upon remedies. Those remedies may be behavioural (for example, to refrain from certain actions) or structural (for example, divestitures). In practice, it appears the authority is more likely to impose behavioural rather than structural remedies.

The issue is not regulated comprehensively; there are no specific requirements as regards remedies or procedures for their approval. In practice, remedies are usually offered in phase II when competition concerns are already identified and are negotiated with the authority on a case-by-case basis. It is also a usual practice to impose a reporting obligation as regards the implementation of remedies.

The Merger Review Reform Draft Law contains further detail on the procedure. In cases where the AMC sees any grounds for the prohibition of a merger, it must inform the parties about the substance of those grounds. At this point, the parties may propose remedies to the AMC within a 30-day period, which can be extended upon the request of the parties.

4. Rights of appeal

4.1 Please describe the parties' ability to appeal merger control decisions – how successful have such challenges been?

There are several opportunities for appeal.

Under the Competition Law, the AMC's decisions may be appealed in whole or in part to the commercial court. Generally, in practice, Ukrainian courts do not review substantive competition issues, such as market definition, the standing of an undertaking in the market, or considerations for determining the level of fines. Judicial review in competition cases remains rather unpredictable due to the lack of specific expertise and a uniform approach in this area.

However, under the Merger Review Draft Law the courts will have powers to annul the AMC's decisions as regards fines and/or obligations imposed on the parties and to order the AMC to reconsider the case in this respect.

5. Your jurisdiction

5.1 In no more than 200 words outline any merger control regulatory trends in your jurisdiction

Transparency. The Law on Ensuring Transparency of the AMC (the Transparency Law) provides for the publication of non-confidential versions of the AMC's decisions/resolutions on/in (i) merger and concerted practice applications and cases; (ii) violation of competition cases, and, (iii) the initiation of merger phase II reviews within 10 working days of the decision/resolution. Although the Transparency Law officially enters into force on March 3 2016, since mid-July 2015 the AMC has already been publishing its decisions. When submitting confidential information to the AMC, the Transparency Law requires the parties to provide a grounded justification for the relevant confidentiality claim, as well as a non-confidential version of the information.

Merger Control Reform. As mentioned above, on November 12 2015 the draft law reforming merger review passed its first reading in parliament, with its second reading now pending. In addition to the introduction of a fast-track review procedure (please see question 3.1), the draft law provides for the removal of the market share-based notifiability test and the remodeling of alternative financial thresholds: (i) where the worldwide value of assets or turnover of the parties exceeded €30 million and the value of Ukrainian assets or the turnover of each of at least two parties concerned exceeded €4 million – both in the last financial year; or (ii) the Ukrainian turnover of at least one party exceeded €8 million and the worldwide turnover of at least one other party exceeded €100 million – both in the last financial year. Reportedly, the draft in this respect is not in its final form and the proposed plan for the second reading is to link the local turnover to the target. Other notable amendments include the introduction of consultations at the pre-filing and the 15-day preview stages; clarification of rules applicable to remedies; and an increase in the amount of the filing fees (from UAH 5,100 to UAH 20,400).

Fining Guidelines. On September 15 2015 the AMC adopted the Fining Guidelines which set key principles and calculation methods for fines in merger cases and introduced a quasi-amnesty for corrective merger filings (see question 2.3). There is also a new draft law on amendments to competition laws regarding the calculation of fines (passed in the first reading by parliament in November 2015, now pending a second reading) which aims to make the Fining Guidelines binding upon the AMC and empower courts to annul the AMC's decisions as regards fines and/or obligations imposed on the parties, and to order the AMC to reconsider cases in this regard.

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