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PLC Competition and Cartel Leniency Handbook 2012. Country Q&A. Ukraine

MERGER CONTROL

1. Are mergers and acquisitions subject to merger control in your jurisdiction? If so, what is the regulatory framework and what authorities are responsible for merger control?

Regulatory framework

Mergers and acquisitions, as well as establishment of an under­taking and appointments to corporate positions under certain cir­cumstances, are subject to merger control in Ukraine.

Applicable laws and regulations include the:

• Law of Ukraine on Protection of Economic Competition of 2001 (Competition Law).

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

• Commercial Code of Ukraine of 2003.

• AMC 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 of 2002 (Concentrations Regulation).

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

Regulatory authority

The AMC is the primary state authority entrusted with ensuring protection of competition. In particular, it has powers to investigate and grant or refuse clearance for mergers (concentrations). If the AMC refuses to approve a concentration, the Cabinet of Ministers of Ukraine (CMU) may overrule that decision (see Question 7).

Triggering events/thresholds

2. What are the relevant jurisdictional triggering events/ thresholds?

Triggering events

The Competition Law sets out the exhaustive list of transactions/ events that are considered concentrations and may require prior merger clearance:

• Merger of previously independent undertakings or the takeover of one undertaking by another.

• Acquisition of direct or indirect control over an undertaking (including through the acquisition of a significant part of the assets of an undertaking, appointment of its managers and so on).

• Establishment by two or more undertakings of a new undertaking that will independently pursue business activity on a lasting basis and its establishment will not result in co-ordination of competitive behaviour of either:

• its parents;

• the new undertaking, on the one hand, and its parents, on the other.

• Direct or indirect acquisition(s) of control over participation interests whereby certain thresholds (25% or 50% of the votes in the highest governing body of the undertaking concerned)are reached or exceeded.

Thresholds

A concentration is notifiable and requires prior approval of the AMC if all of the following thresholds are exceeded (Competition Law):

• The combined worldwide asset value or turnover of the participants of the concentration (for the purposes of this chapter, participants of the concentration are considered as part of their corporate group) in the financial year preceding the year of the transaction exceeded EUR12 million (as at 1 December 2011, US$1 was about EUR0.7).

• Each of the parties to the concentration had worldwide asset value or turnover in the financial year preceding the year of the transaction in excess of EUR1 million.

• The value of assets located in Ukraine or Ukrainian turnover of either of the parties to the concentration in the financial year preceding the year of the transaction exceeded EUR1 million.

There is also a market share test, which applies independently. The AMC clearance is required if either the individual or com­bined market share of the parties in the market concerned or the adjacent market exceeds 35%.

See Question 39 in relation to proposed changes.

Notification

3. What are the notification requirements for mergers? Mandatory or voluntary

The parties to the concentration must obtain the AMC approval of the notifiable concentration before closing (see Question 2).

Timing

The law does not set any specific deadlines for filing a notifiable concentration, the only requirement being that the AMC approval be obtained before the implementation of the concentration (for example, transfer of the title to shares, acquisition of control or registration of a new entity).

Formal/informal guidance

Parties to a transaction may refer to the AMC for formal guidance on whether the concentration is notifiable, or whether the clear­ance is likely to be granted or refused. Such guidance is issued in the form of a non-binding preliminary opinion. Informal discussions with the AMC's officers are usually possible, although the law does not expressly provide for it.

Responsibility for notification

The parties to the transaction are jointly responsible for notifying. However, the AMC may agree to accept a notification filed by one of the parties in the following circumstances:

• During a hostile takeover.

• If there is a lack of co-operation between the parties to a concentration in relation to filing the notification in Ukraine.

Relevant authority

The AMC is the relevant authority. However, if the AMC prohibits the concentration the CMU may still approve it (see Question 7).

Form of notification

The parties must submit a written notification in the form and with the contents and annexes required under the Concentrations Regulation. Some information regarding the transaction and the parties must also be submitted in electronic form using specific software developed by the AMC for that purpose.

Filing fee

The filing fee is UAH5,100 (as at 1 December 2011, US$1 was about UAH8).

Obligation to suspend

The parties must suspend the transaction until the AMC clear­ance is granted. In addition, they must refrain from any actions that may restrict competition and render it impossible to restore the initial position (pre-clearance gun-jumping).

Procedure and timetable

4. What are the applicable procedures and timetable?

The merger review procedure includes the following steps:

• Preview period. The AMC considers the notification and decides whether it is complete and can be passed for the

review on the substance. If the AMC considers the notifi­cation to be incomplete, the notification is rejected and should be resubmitted. The AMC has 15 calendar days to make a decision.

• Phase I review. This stage involves an assessment by the AMC of whether the concentration can be approved or whether there are grounds to prohibit the concentration, in which case an in-depth investigation (that is, Phase II review) is required. The assessment must be completed within 30 calendar days of the AMC's decision that the notification is complete.

• Phase II review. Phase II review involves a close analysis of competition concerns raised by the concentration, examination of expert opinions and other additional information, and so on. Although the review period is limited to three months from the AMC's decision to initiate a Phase II review, in practice it may take longer if additional documents, information and/or expert evidence are required.

For an overview of the notification process, see flowchart, Ukraine: merger notifications.

Publicity and confidentiality

5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?

Publicity

The AMC can disclose certain general information on the transac­tion and the parties, the nature of the transaction, the relevant markets, and so on. The authority can also publish (usually on its website) other information regarding the transaction to the extent it was not marked confidential by the parties (see below, Confidentiality on request).

In addition, under the Law on Access to Public Information enacted in 2011, the AMC must also disclose its decisions (except for the parties' confidential information). So far, this provision has been implemented by the AMC through publishing short announcements regarding its decisions and major investiga­tions. With a view to implementing this provision, the AMC has also adopted an internal regulation on dealing with third party document requests (except for the information marked as confi­dential by the parties).

Procedural stage

On the receipt of the merger notification, the AMC can disclose general information on the transaction and the parties involved if either:

• The authority believes that third parties may object to the transaction.

• Phase II review is initiated (see Question 4).

The AMC must also disclose its decisions under the Law on Access to Public Information (see above, Publicity).

Upon issuing a decision, the AMC can also disclose other information regarding the transaction and/or the parties within the scope agreed with the parties to the concentration.

Automatic confidentiality

Automatic confidentiality does not apply to any information. Confidentiality on request

Merger filings submitted with relevant confidentiality marks are treated by the AMC as confidential and cannot be disclosed to the public except with the express written consent of the parties to the concentration or as outlined above (see above, Procedural stage).

Rights of third parties

6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?

Representations

Third parties (for example, competitors) can be involved during the Phase II review if the notified transaction may significantly affect their rights and interests. The decision on their involve­ment is made by the AMC at its discretion.

Document access

Third parties participating in an investigation have the right to access case materials, except for the data with restricted access (confidential information) and/or other information, disclosure of which may infringe upon the interests of the other parties involved in the case or hinder further review of the case.

Be heard

Third parties can submit their observations relating to, among other things, the notified transaction and its impact on the market. The AMC must take these observations into account when decid­ing on the case.

Substantive test

7. What is the substantive test?

The AMC approves the concentration if it does not lead to monopolisation or substantial restriction of competition on the Ukrainian market or a significant part of it.

Even if the AMC prohibits the concentration, the CMU may still permit it if its positive effects for the public interest outweigh the negative impact of the restriction of competition, unless such restriction:

• Is not necessary for achieving the purpose of the concentration.

• Jeopardises the market economy system.

Remedies, penalties and appeal

8. What remedies can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?

The AMC clearance decision can be made conditional on the parties' undertaking to perform, or refrain from performing, certain actions. The undertakings aim at removing or mitigating the negative impact of the concentration on the market competi­tion and may be either structural (for example, divestitures) or behavioural (for example, restrictions on the use or management of certain assets or price increases).

Remedies, divestments and relevant procedures are not compre­hensively regulated by the Ukrainian laws and are usually negoti­ated with the AMC on a case-by-case basis. Although remedies may be offered at any time after the submission of the merger notification, in practice, remedies are usually offered and dis­cussed during Phase II review (see Question 4).

Remedies cannot be accepted to prevent the initiation of a Phase II review or to obtain a conditional Phase I clearance. Once the AMC identifies competition concerns, procedurally it has no other options than to initiate a Phase II review.

9. What are the penalties for failing to comply with the merger control rules?

Failure to notify correctly

There are no penalties for failure to notify. However, the following may lead to a fine for the company of up to 1% of its turnover in the year immediately preceding the year when the fine is imposed:

• Failure to provide requested information within the period specified by the AMC.

• Provision of incomplete information.

• Submission of false information to the AMC.

The Chief Executive Officer (CEO) (or a top manager) of the com­pany may incur a nominal administrative fine if he (on behalf of the company):

• Fails to provide information to the AMC.

• Does not provide information to the AMC on time.

• Provides knowingly false information to the AMC.

Implementation before approval or after prohibition

Once the violation is established, the parties to the concentration can be fined in the amount of up to 5% of their turnover in the year immediately preceding the year when the fine is imposed. The law is silent on whether turnover refers to local or global turnover. The AMC currently interprets this as a reference to the worldwide turnover.

The fine can be imposed on the entire corporate group of the company whose actions or omissions have led to violation of the law (Competition Law). This allows the AMC to fine immediately any local subsidiaries of the parties to the concentration and improves the AMC's chances of the successful collection of fines.

The late payment fee is 1.5% per day, but cannot exceed the principal amount of the fine imposed.

In addition to the financial penalties, any or all of the following sanctions may apply:

• Ban on the companies' cross-border activities with Ukraine such as importing/exporting goods, performing under cross-border contracts and so on. This can be imposed by the Ministry of Economy of Ukraine at the AMC's request.

• Third party damages claims (see Question 25).

• Invalidation of the transaction.

Failure to observe

Failure to observe the AMC decision prohibiting a concentration, or only partial compliance with it, may result in a fine of up to 10% of the party's turnover in the year immediately preceding the year when the fine is imposed. Failure to observe the AMC decision that imposes certain obligations on the parties to the concentration may result in a fine of up to 5% of their turnover in the year immedi­ately preceding the year when the fine is imposed. The fine may be based on the global turnover of the infringing party (see above, Implementation before approval or after prohibition).

In addition, the CEO (or a top manager) of the infringing party may be subject to a nominal administrative fine for failure to implement the AMC decision or its untimely implementation.

See Question 39 in relation to proposals to strengthen enforcement.

10. Is there a right of appeal against any decision? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties or only the parties to the decision?

Rights of appeal and procedure

The AMC decision can be appealed by the parties to the decision or third parties within two months following the receipt of the decision. Administrative courts have jurisdiction over appeals.

Generally, the court can suspend the AMC decision until the final judgment is rendered. However, to protect the public interest or prevent the possible negative impact of the violation(s), the AMC can declare the decision unsuspendable.

Third party rights of appeal

Third parties are entitled to appeal (see above, Rights of appeal and procedure).

Automatic clearance of restrictive provisions

11. If a merger is cleared, are any restrictive provisions in the agreements automatically cleared? If they are not automatically cleared, how are they regulated?

Restrictive provisions are not automatically covered by the AMC clearance decision. Therefore, if the restrictive provisions qualify as concerted practices (see Question 13), a separate clearance may be required.

Regulation of speciic industries

12. What industries (if any) are specifically regulated?

Generally, no industry is specifically regulated, although some industry-specific requirements may apply (for example, special rules for calculation of thresholds for banks and insurance companies).

RESTRICTIVE AGREEMENTS AND PRACTICES

Scope of rules

13. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?

Restrictive agreements and practices may qualify as anti-compet­itive concerted practices (that is, practices which resulted or may result in prevention, elimination or restriction of competition). The Competition Law generally prohibits any anti-competitive concerted practices, unless exempted individually.

In addition to the Competition Law, the regulatory framework includes the:

• Law on the AMC.

• Monopoly Methodology.

• AMC Resolution on the Procedure for Filing Applications with the AMC for Obtaining its Approval of the Concerted Practices of the Undertakings of 2002 (Concerted Practices Regulation).

• AMC Resolution on the Standard Requirements to Concerted Practices of the Undertakings for their General Exemption from the Requirement to Obtain Prior AMC Clearance of 2002 (General Exemption Regulation).

• AMC Resolution on the Standard Requirements to Concerted Practices of the Undertakings concerning Specialisation of Production of 2008 (Specialisation Regulation).

Concerted practices are defined as follows (Competition Law):

• Agreements in any form (including verbal arrangements and networks of agreements).

• Decisions of associations of undertakings.

• Any co-ordinated practices (actions or omissions) of the undertakings.

• Establishment of an undertaking or an association (or entry into an association) aiming at, or resulting in, the co-ordina­tion of the competitive behaviour of the:

• undertakings that established a new undertaking or an association; or

• undertakings that established a new undertaking or an association, on the one hand, and the new undertaking, on the other.

Anti-competitive concerted practices include (Competition Law):

• Fixing prices or other purchase or sale conditions.

• Limiting production, markets, technological development or investment, as well as assuming control thereof.

• Dividing markets or sources of supply according to territory, type of goods, sale or purchase volumes, or classes of sellers, purchasers or consumers.

• Distorting the results of trading, auctions, competitions or tenders.

• Ousting other companies from the market or limiting their market access.

• Applying different conditions to identical agreements to put a specific company at a disadvantage.

• Executing agreements that are conditional on the contract­ing party's acceptance of additional obligations unrelated to the subject of the agreement (tying).

• Substantially limiting the competitiveness of other companies without justifiable reasons.

Parallel behaviour (actions or omissions) which resulted or may result in the prevention, elimination or restriction of competition is also considered a violation, unless there are objective reasons for this behaviour.

14. Do the regulations only apply to formal agreements or can they apply to informal practices? Are there broad categories of agreements that might violate the law?

The regulations apply to agreements and other concerted practices irrespective of their form. The following are covered:

• Formal written agreements.

• Informal verbal arrangements.

• Gentlemen's agreements.

• Mutual understandings.

• Other concerted practices, including, in certain circum­stances, parallel behaviour.

Any agreements involving anti-competitive concerted practices are presumed to violate the law (for example, price-fixing or market sharing arrangements).

Exemptions and exclusions

15. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?

Individual exemption

The AMC may authorise (grant an individual exemption to) certain anti-competitive concerted practices if both (Competition Law):

• The parties can prove that these practices encourage manu­facturing, technological or economic development, or other efficiencies.

• The practices do not lead to a substantial restriction of the market competition.

In exceptional circumstances the CMU can allow concerted practices (unless the restriction of competition poses a threat to the market economy system) that have not been approved by the AMC if the parties can show that the positive effects of these practices for the public interest outweigh the negative conse­quences of the restriction of competition.

General Exemption Regulation

In addition to the possibility of obtaining an individual exemption from the AMC, the following block exemptions exist (General Exemption Regulation):

• De minimis exemption, applicable where the aggregate mar­ket share of the parties (including their respective corporate groups) in any of the product markets concerned is less

than 5%.

• Market share-based exemption, applicable to vertical or conglomerate arrangements where the parties' combined market share is below 20%, and to horizontal and mixed arrangements where the parties' combined market share is below 15%, provided all of the following conditions are met:

• neither of the parties is a dominant undertaking (or a monopoly) and has exclusive privilege rights;

• the aggregate worldwide turnover or assets value of the parties (including their respective groups) did not exceed EUR12 million in the preceding financial year;

• the aggregate worldwide turnover or assets value of at least two undertakings which belong to the parties' groups did not exceed EUR1 million in the preceding financial year; and

• the aggregate turnover or assets value in Ukraine of at least one undertaking which belongs to either party's group did not exceed EUR1 million in the preceding financial year.

If the parties are at least potential competitors, the above general exemptions do not apply to horizontal or mixed hard-core restric­tions, including:

• Price-fixing.

• Territorial, customer or supplier and other market sharing.

• Restrictions on (including imposing an obligation to refrain from) production or distribution of products.

• Distortion of the results of trading, auctions, competitions or tenders.

Specialisation Regulation

In addition, the Specialisation Regulation provides a block exemption for horizontal arrangements contemplating concentra­tion of the undertakings' efforts and resources in the production (distribution) of certain products which result in the improvement (rationalisation) of production, acquisition or distribution of the products, unless one of the following applies:

• Either of the undertakings holds a dominant position (or is a monopoly).

• Their combined market share on any of the markets con­cerned exceeds 25%.

• The specialisation arrangement results in output limitation, market sharing or similar, or its term exceeds five years.

In particular, the following actions are permissible:

• Discontinuing production of identical or similar products.

• An agreement to produce/sell agreed products only jointly.

• Refraining from supplying/acquiring the agreed products to/ from competing undertakings.

• Keeping minimum stock of the agreed products.

16. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?

Exclusions

The prohibition of anti-competitive concerted practices does not apply to the (Competition Law):

• Concerted practices of small or medium-sized undertakings concerning the joint acquisition of products.

• Concerted practices in relation to the supply and use of products that limit:

• use of products supplied by the imposing undertaking or use of products of other suppliers;

• purchase of other products from other suppliers or sale of such other products to other undertakings or consumers;

• purchase of products that, due to their nature or trade custom and other fair business practices, are not related to the subject matter of the relevant agreement (tying); or

• price formation or establishment of other contractual terms and conditions for selling the products supplied by the imposing undertaking to other undertakings or consumers.

However, this exception does not apply if the restrictions:

• result in substantial restriction of competition on the market;

• limit other undertakings' access to the market; or

• result in economically unjustified price increases or product shortages.

• Agreements concerning the transfer of intellectual property rights (IPRs) if such agreements contain certain allowed limitations on the economic activities of the transferee, particularly on the:

• scope of transferred rights;

• period and territory of permitted use of the IP;

• type of activity, application, and the minimal production volume.

For the de minimis exemption, see Question 15, General Exemption Regulation.

Statutes of limitation

The statute of limitation in relation to restrictive agreements and practices is five years as of the moment when the infringement was terminated. The statute of limitation is suspended for the duration of the AMC's investigation of the alleged infringement.

Notiication

17. What are the notification requirements for restrictive agreements and practices?

Notification

Implementation of an anti-competitive concerted practice which is not covered by a block exemption or other exclusion is prohibited, unless the transaction is individually cleared by the AMC before the implementation.

Informal guidance/opinion

Similarly to mergers, the parties to a transaction can refer to the AMC for formal guidance on whether a concerted practice requires an individual AMC clearance or whether the clearance is likely to be granted or refused. Informal discussions with the AMC's officers are also possible, although the law does not expressly provide for it.

Responsibility for notification

The parties are jointly responsible for notifying.

Relevant authority

The AMC is the relevant authority. However, the CMU may approve a concerted practice even if the AMC has refused clearance (see Question 15, Individual exemption).

Form of notification

The parties to a concerted practice must submit a written noti­fication in the form and with the contents and annexes as set out in the Concerted Practices Regulation. Similarly to merger notifications, some information must also be submitted in elec­tronic form.

Filing fee

The filing fee is UAH2,550. Investigations

18. Who can start an investigation into a restrictive agreement or practice?

Regulators

The AMC can launch an investigation:

• On its own initiative based on the available information, market research and so on.

• If requested by other businesses or individuals.

• If requested by governmental or local authorities.

Third parties

Third parties can file a complaint with the AMC if they believe that certain arrangements/practices on the market may be anti­competitive. The AMC can start an investigation based on the third party complaint.

19. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?

Representations

A complainant and third parties can be involved in the investiga­tion as third parties if their rights and interests may be signifi­cantly affected by the AMC decision on the investigated transaction. The decision on their involvement is made by the AMC at its own discretion.

Third parties can submit their written and oral observations, and provide evidence.

Document access

Third parties can access case materials, except for confidential information and any other information the disclosure of which may violate the interests of other parties involved in the inves­tigation. In addition, third parties can obtain copies of the AMC decision in relation to the case.

Be heard

Third parties can submit their observations relating to, among other things, the notified transaction and its impact on the mar­ket. The AMC must take these observations into account when deciding on the case.

20. What are the stages of the investigation and timetable?

Confidentiality on request

Filings submitted with relevant confidentiality marks are treated by the AMC as confidential and cannot be disclosed to the public except with the express written consent of the parties or as out­lined above.

22. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?

The stages of a regular investigation initiated by the AMC on the notification submitted by the parties to a concerted practice are as follows:

• Preview period. The AMC considers notification and decides whether it is complete and can be passed for the review on the substance. If the AMC considers the notification to be incomplete, the notification is rejected and should be resub­mitted. The AMC has 15 calendar days to make a decision.

• Phase I review. This involves an assessment by the AMC of whether the concerted practice can be approved or whether there are grounds to prohibit the concerted practice, in which case an in-depth investigation is required. The assessment must be completed within 30 calendar days of the AMC's decision that the notification is complete.

• Phase II review. This involves a close analysis of competi­tion concerns raised by the concerted practice, examination of expert opinions and other additional information, and so on. Although the review period is limited to three months from the AMC's decision to initiate a Phase II review, it may be extended.

The AMC investigation initiated on a complaint by a third party or on its own initiative is limited to 30 calendar days, which can be extended by up to 60 calendar days. There are no strictly defined stages of investigation.

21. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?

Publicity

The AMC can disclose certain general information on the trans­action and the parties, the nature of the transaction, relevant markets and so on. The authority can also publish (usually on its website) other information regarding the transaction to the extent it was not marked confidential by the parties. During an investiga­tion the AMC can also disclose its findings and the background analysis (except for confidential information) to all parties of the proceedings.

In addition, the AMC must also disclose its decisions (except for the parties' confidential information) (see Question 5, Publicity).

Automatic confidentiality

This is the same as in relation to mergers (see Question 5, Automatic confidentiality).

When investigating potentially restrictive agreements or prac­tices, the AMC can:

• Request information, explanation, materials and other data from the undertakings whose actions are being investigated.

• Request oral and written explanation from the undertakings whose actions are being investigated, third parties, officials and individuals.

• Request expert opinions.

• Seize and retain evidence (for example, documents and objects).

23. Can the regulator reach settlements with the parties without reaching an infringement decision? If so, what are the circumstances in which settlements can be reached and the applicable procedure?

Ukrainian competition laws do not provide for an official procedure to reach settlements in an investigation. However, sanctions may be minimised by agreeing on commitments mitigating adverse effects of an infringement.

Penalties and enforcement

24. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?

Orders

With respect to a prohibited restrictive (anti-competitive) agree­ment or practice the AMC can, in particular:

• Issue an individual clearance decision on the parties' application for approval of the agreement/practice. The decision can be conditional or unconditional, and limited or unlimited in time.

• Prohibit a notified or investigated agreement/practice and impose sanctions (fines).

• Issue an order to bring an infringement to an end.

• Issue an order to eliminate the consequences of an infringement.

• Repeal its earlier clearance decision if the parties to the agreement/practice impose on certain undertakings such restrictions that generally are not imposed on other under­takings, or apply unequal terms.

Fines

Once the violation is established, the parties to a prohibited agreement/practice can be fined up to 10% (5% if the agree­ment/practice is implemented before the AMC clearance) of their turnover in the year immediately preceding the year when the fine is imposed. For further details on fines and late payment, see Question 9.

In addition to the financial penalties, any or all of the following sanctions may apply:

• Ban on the companies' cross-border activities with Ukraine

(see Question 9, Implementation before approval or after prohibition).

• Third party damages claims (see Question 25).

• Invalidation of the transaction (see below, Impact on agreements).

Personal liability

Currently, only forcing undertakings into anti-competitive concerted practices by violence or material harm, or threat of such violence or material harm is regarded as a criminal offence. Such crimes are punishable by either:

• Imprisonment of two to five years.

• Imprisonment of three to six years if the crime is committed by an organised group or a person who had previously com­mitted the same offence.

Immunity/leniency

The Competition Law provides a possibility to apply for full immu­nity, although the leniency procedure is not detailed. The appli­cant must meet the following cumulative criteria to benefit from full immunity:

• Be the first party to voluntarily inform the AMC of the viola­tion (initiators of anti-competitive practices cannot apply for immunity).

• Provide the AMC with information of essential importance for making the decision on the case.

• Provide all available evidence and/or information concerning the violation.

• Take effective measures to cease its participation in the anti-competitive practices.

See Question 39.

Impact on agreements

An anti-competitive agreement may be invalidated by the court on the AMC's initiative. Invalidation of an unauthorised transaction is primarily linked to its adverse effects on the market, but as the AMC can seek invalidation to remove the consequences of an unauthorised transaction, any such transaction can be potentially invalidated.

Third party damages claims and appeals

25. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are class actions possible?

Third party damages

The parties to a prohibited restrictive agreement or practice may be exposed to damages claims by third parties (for example, competitors). Third parties that sustained damage as a result of an unauthorised transaction can seek to recover the damages suffered in court. The amount of compensation can be up to twice the amount of the actual damage sustained.

Special procedures/rules

There are no special procedures or rules.

Class actions

Although class actions are theoretically available, the procedural framework is underdeveloped, which makes them inefficient.

26. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?

This is the same as for mergers (see Question 10).

MONOPOLIES AND ABUSES OF MARKET POWER

Scope of rules

27. Are monopolies and abuses of market power regulated under civil and/or criminal law? If so, what are the substantive provisions and regulatory authority?

Natural monopolies and abuses of market power are regulated under civil law. The principal laws governing these issues are the Competition Law and the Law of Ukraine on Natural Monopolies dated 20 April 2000. The AMC is the state authority primarily responsible for prevention and investigation of the infringements involving companies holding a dominant or monopolistic position.

28. How is dominance/market power determined?

An undertaking holds a dominant position on the market if it (Competition Law):

• Has no competitors on the market.

• Does not face significant competition on the market due to, among other things, the other market players' limited access to raw materials and distribution channels, existence of entry barriers and certain privileges.

An undertaking is presumed to enjoy a dominant market position if it holds a market share in excess of 35%, unless it can prove

significant competition on the part of the other market players. An undertaking with a smaller market share may also be considered domi nant if there is no significant competition due to the compara­tively small market shares of its competitors. (See Question 39.)

Several undertakings may also be deemed to collectively enjoy a dominant position on the market (collective dominance) if either:

• The combined market share of three or fewer undertakings exceeds 50%.

• The combined market share of five or fewer undertakings exceeds 70%.

A detailed procedure of determination of the product and geo­graphical boundaries of the market, as well as calculation of the relevant market shares, is set out in the Monopoly Methodology.

29. Are there any broad categories of behaviour that may constitute abusive conduct?

The following practices are regarded as abuses of a dominant market position:

• Setting such prices or conditions which could not have been established in a considerably competitive market environment.

• Applying different prices or conditions to identical agreements without justifiable grounds.

• Imposing contractual conditions that have no connection to the subject of the agreement.

• Limiting production, markets or technological development in a manner that may cause harm to other companies or customers.

• Refusing to purchase or sell goods in the absence of other sources or distribution channels.

• Substantially limiting the competitiveness of other compa­nies without justifiable grounds.

• Hindering market access for companies, or ousting them from the market.

The list is not exhaustive; it simply shows the AMC's approach to the determination of the abuses of a dominant market position.

Exemptions and exclusions

30. Are there any exemptions or exclusions?

There are no exclusions or exemptions. Notification

31. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?

As abuses of dominant position are anti-competitive and automati­cally prohibited, there is no notification requirement in relation to

such conduct. It is, however, possible to obtain guidance from the AMC (in the form of a non-binding recommendation) as to whether certain actions or omissions may qualify as abuse of dominance.

Investigations

32. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?

This is the same as for restrictive agreements and practices (see Questions 18 to 21 and Question 23).

33. What are the regulator's powers of investigation?

This is the same as for restrictive agreements and practices (see Question 22).

Penalties and enforcement

34. What are the penalties for abuse of market power and what orders can the regulator make?

In relation to fines, see Question 24, Fines.

Once the violation is established, the AMC can also request a mandatory division of a dominant undertaking unless:

• The division is impossible from an organisational or territorial point of view.

• There are strong technological links among the undertakings or their units.

Third party damages claims

35. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are class actions possible?

This is the same as in relation to prohibited restrictive agree­ments or practices (see Question 25).

EU LAW

36. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law?

Not applicable. JOINT VENTURES

37. How are joint ventures analysed under competition law?

There is no formal legal definition of a joint venture. Nor are joint ventures subject to any special treatment.

Under the Competition Law a joint venture may be considered a concentration or concerted practices, in which case the relevant general rules apply.

A joint venture is considered a concentration if it meets the following criteria:

• It is established by two or more independent undertakings.

• It can independently pursue business activity on a lasting basis.

• Its establishment does not result in co-ordination of com­petitive behaviour of the joint venture's parents or the joint venture, on the one hand, and its parents, on the other.

Establishment of such a joint venture requires prior AMC clear­ance if the thresholds referred to in Question 2 are met.

A joint venture is considered a concerted practice if it is estab­lished with an objective or result to co-ordinate competitive behaviour of the joint venture's parents or the joint venture, on one hand, and its parents, on the other. Establishment of such a joint venture requires prior AMC clearance if it results or may result in prevention, elimination or restriction of competition.

INTER-AGENCY CO-OPERATION

38. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?

The AMC most actively co-operates with the CIS competition authorities within the Interstate Council for Antimonopoly Policy which is currently headed by the AMC's Chairman. The Council functions as a forum for information exchange and co-ordinates reform in the area.

The AMC also co-operates with other competition authorities based on bilateral (for example, with Bulgaria, Hungary and Latvia) and multilateral treaties, as well as with the international organi­sations (for example, Organisation for Economic Co-operation and Development (OECD), United Nations Conference on Trade and Development (UNCTAD) and the International Competition Network).

PROPOSALS FOR REFORM

39. Are there any proposals for reform of competition law?

The main proposals for competition law reform concern the following:

• Dominance and merger control. A new draft law aiming to amend merger control thresholds, as well as introducing some further major modifications to the Competition Law was submitted to the Ukrainian Parliament in September 2011. The most important changes are:

• overhauling and simplifying the definition of dominance to refer to an undertaking's market share in excess of 50% coupled with absence of significant competition that it suffers;

• removing from the requirement to obtain merger clearance such triggering event as reaching or exceeding 25% of voting stock in an undertaking; and

• increasing the merger control thresholds and setting a higher standard for the local nexus requirement (combined worldwide assets value or turnover of the parties in excess of EUR50 million and local assets value or turnover of at least two of the parties in excess of EUR4 million; or local assets value or turnover of

at least one party in excess of EUR50 million and worldwide assets value or turnover of at least one other party in excess of EUR50 million).

The last proposed change follows an earlier draft law which was prepared for the parliament's second reading as early as 2009, but has not progressed further since then. The new draft law is expected to be reviewed by the legislator in 2012.

• Enforcement. Another AMC legislative initiative amending the Competition Law is aimed at a more efficient enforcement, in particular in relation to the imposition and collection of fines. The draft law suggests introduction of the joint and several liability of all members of the violator's corporate group. If the amendment is adopted, the AMC will be in

a position to file a claim seeking mandatory collection of the imposed fine and accrued interest from any member of the group. The development is expected to make a threat of fines more imminent, thus fostering compliance. The finalised draft is expected to be submitted to the parliament in 2012.

• Detailed leniency procedure. Recently, the AMC has pub­lished draft Leniency Regulation detailing the rules and procedures applicable to leniency applications in cartel cases. The draft clarifies, among other things:

• requirements applicable to leniency applicants;

• the type of information and evidence an undertaking should provide for its application to be successful;

• review procedure.

The draft regulation appears to apply to cartels only, the concept of which has been defined for the first time. The draft also introduces the marker system and the possibility to benefit from partial fine reduction (20% to 50%).

The timing of the adoption of the Leniency Regulation is unclear. However, it appears to be one of the authority's policy priorities and its enactment may be expected in early 2012.

• Introduction of vertical block exemption regulation. The

draft AMC regulation closely follows the main principles of the Regulation (EU) 330/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted (Block Exemption Regulation). The draft exempts a number of vertical agreements from prior AMC clearance, except for hard-core restrictions that include:

• restriction of the buyer's ability to determine its sale price (the supplier may impose a maximum sale price or recommend a sale price);

• restriction of the territory into which (or of the customers to whom) the buyer may sell the supplied goods or services;

• restriction of cross-supplies between distributors within a selective distribution system.

The exemption does not apply if:

• the combined market share of the supplier or the buyer in the Ukrainian market in relation to the supplied product exceeds 30%; or

• either of the parties to a vertical agreement is dominant in any of the Ukrainian markets concerned.

The draft regulation was published in November 2011 and is on the list of the authority's policy priorities.

• Introduction of research and development (R&D) regulation.

The draft AMC regulation regarding joint R&D and/or devel­opment and engineering works provides for their general exemption from the requirement to obtain prior AMC clear­ance. After publication in mid-December 2010, the draft was referred to the Ministry of Justice of Ukraine for review and registration, but was returned to the AMC in September 2011 for further development.

• Regulation of state aid. The draft Law on State Aid to Undertakings prepared by the AMC outlines the concept of state aid provided to undertakings and its forms, and defines its legitimacy limits. The draft law also sets out block exemptions, state aid control and refund procedures, defines the powers of the competent authority, the appeal procedure, and so on. The finalised draft is expected to be submitted to the Ukrainian parliament in 2012.

• Simplification of associations exemption. The AMC intends to enhance the general exemption regime applicable

to establishment of associations of undertakings. The Associations Regulation exempts establishment of business associations from prior AMC clearance if certain conditions are met, including that:

• the association have a contractual basis (not be a legal entity);

• the association's participants not gain profit from the association's activities;

• the association be financed solely from contributions made by its participants, donations and so on;

• the association can only co-ordinate some of its participants' activities (their organisational, educational, and informational aspects, for example, organisation of seminars or educational programmes or the like, or serving as a forum for industry-specific discussions) without interference with their business activities;

• there be no limitations on entry and exit;

• the association not engage in any entrepreneurial activity.

THE REGULATORY AUTHORITY

Antimonopoly Committee of Ukraine

Head. Vasyl Petrovych Tsushko (Chairman)

Contact details. 45 Urytskoho (V. Lypkivskoho) Street

Kyiv 03035

Ukraine

T +38 044 251 62 62 E mail@amc.gov.ua W www.amc.gov.ua

Outline structure. The AMC is the principal state authority entrusted with ensuring protection of competition in entre­preneurial activities and state procurement. It comprises the Chairman and ten State Commissioners. The AMC has territorial divisions and administrative boards. The central office of the AMC is further subdivided into working groups by industry and specialisation (for example, concentrations and concerted practices, unfair competition and state procurement).

Responsibilities. The AMC's responsibilities include:

• Review and analysis of the applications for approval of the concentrations and concerted practices.

• Investigation of violations of the Ukrainian competition laws, including unfair competition and abuse of domi­nance cases.

• Market research, definition of the product and geographi­cal market boundaries.

• General supervision of the compliance with the Ukrainian competition laws by the undertakings and state and local authorities.

Procedure for obtaining documents. The following are published on the authority's website:

• Main competition laws and regulations.

• Draft laws and prospective AMC internal regulations.

• Various other AMC documents (for example, annual reports on the AMC's activities).

• Short announcements of the AMC decisions.

In particular, it is suggested to expand the list of allowed financing sources and to improve the permitted information collection and exchange procedures among the participants of an association.

Author: Igor Svechkar, Tetiana Vovk
Source: Practical Law Multi-Jurisdictional Guide 2012