Regulatory framework and regulatory authority
The basic laws comprising the competition regulatory framework in Ukraine are the Law of Ukraine on the Protection of Economic Competition of 2001 (the Competition Law), providing for the main principles, concepts, and procedures of the merger control, concerted practices, and dominance regulation regimes, the Commercial Code of Ukraine of 2003, and the Law on the Antimonopoly Committee of Ukraine of 1993.
The Antimonopoly Committee of Ukraine (AMC) is the primary state authority entrusted with assessment of how transactions and practices may affect the local competition environment. In particular, it has powers to investigate and grant or refuse clearance for mergers, concerted practices, as well as investigate and penalise for violations of the merger control regime, abuse of dominant position, etc. As far as mergers and concerted practices are concerned, the Cabinet of Ministers of Ukraine may overrule a prohibitive decision of the AMC.
By way of implementing the main competition laws the AMC issued a number of regulations detailing their provisions and elaborating on assessment. Such regulations include the procedural Regulation for Filing Applications with the AMC for Obtaining its Prior Approval of the Concentration of Undertakings of 2002, the Methodology for Assessment of Control Links, Procedural Regulation for Filing Applications with the AMC for Obtaining its Approval of the Concerted Practices of the Undertakings of 2002, Regulation on Standard Requirements Applicable to Concerted Practices for their General Exemption from the Requirement to Obtain Prior AMC Clearance of 2002, Regulation on the Standard Requirements to Concerted Practices concerning Specialization of Production of 2008, and the AMC Methodology for Establishing Dominance of 2002.
While concentration types provided for in the Competition Law are similar to developed merger control regimes, Ukrainian competition law has its own unique peculiarities.
Merger or consolidation
This type of transaction is notifiable only when two or more undertakings cease to exist as separate legal entities and a new entity emerges (a merger); or one or more undertakings are merged into another undertaking which survives (a consolidation).
Acquisition of control
In particular, control is deemed to exist if an undertaking:
• directly or indirectly holds or manages more than 50 per cent of shares, interest, votes, or assets, or is entitled to receive at least 50 per cent of profit of another undertaking;
• has more than 50 per cent votes in the highest corporate bodies of another undertaking;
• is authorised to appoint CEO, vice CEO or more than 50 per cent of members of the supervisory board (the board of directors), the management board or the controlling body (or if the same persons hold positions of CEO, vice CEO, the chairman, the vice chairman or more than 50 per cent of members of said boards or committee, etc, in two undertakings);
• grants financial support of the notified transaction and such support results or may result in acquisition of decisive influence over the recipient of such support); and/or
• otherwise controls another undertaking (through contractual (eg, management) arrangements, etc).
Notably, Ukrainian competition law does not differentiate between sole and joint control. In practice, however, the AMC has on several occasions considered changes from joint to sole control to be a concentration. However, examples to the contrary are also known -the AMC referred to the intra-group exemption from the clearance requirement saying that where a jointly controlling parent acquires sole control over the jointly controlled entity, the transaction is considered intra-group, as control relations already existed between such parent and the controlled entity.
Acquisition of control in the form of the acquisition of assets may require a merger clearance if such assets constitute the so-called 'integral property complex'. This is a rather archaic notion and is often used in connection with privatisations. Traditional interpretation normally links it to a full production cycle facility (eg, a plant) or a going concern. However, other interpretations (eg, for tax purposes) allow the following understanding of the concept: integrity of the assets that allows independent business activity to be conducted on a lasting and regular basis, where the term of use of such assets exceeds 12 months. In practice the AMC often refers to the latter definition of the term and this creates misunderstandings when assessing the notifiability requirement.
Establishment of an undertaking
The Competition Law sets several qualification requirements (cumulative) for the establishment of an undertaking to amount to a concentration:
• Two or more parent undertakings that do not belong to the same group
In order to meet this criterion the new undertaking should not necessarily be jointly controlled by its parents, unlike in many developed merger control systems. Furthermore, this type of a concentration presupposes incorporation of a new entity, the triggering event being the registration of such new entity. Any other transactions that are usually regarded as establishment of a joint venture would normally be considered as 'acquisition of control', as discussed above, and/or as 'acquisition of 'equity/ shares'.
• Status of an undertaking and ability to pursue business activity independently
To be considered an undertaking a new legal entity should engage in production, sales or purchase of goods (this also covers services and works) or another business activity. While the Competition Law does not clarify which other business activities may be relevant for the said purpose, interpretations based on other applicable laws and regulations broaden the concept to include any activity aimed at receiving profit in any form (tangible or intangible).
Also, to be considered an undertaking, it will suffice for the new entity (not being by itself engaged in any business activity) to exercise control over another legal entity, irrespective of whether the latter may be considered an undertaking. In practice, under adverse interpretation, incorporation by the parties of a shell company as a preparatory step with a view for such SPV to further acquire the target or otherwise participate in the main transaction may in itself be regarded by the AMC as a stand-alone concentration.
There is no clear legal or practical guidance as to the 'independence' criteria. In practice, the independency arguments supported by sufficiency of the new entity's own management and staff, capital, assets (including IP, where relevant), customer base or contractual arrangements with third parties usually receive favourable feedback from the authority.
• Ability to do so on a lasting basis
There is no clear legal guidance on this point, though, in practice, usually one year would suffice.
• Absence of coordination
Using the terminology of the EU law, the first two conditions would classify the entity as a fully functional undertaking. However, even if the company is completely fully functional in these terms, should the slightest coordination element be involved, establishment of such undertaking may qualify as concerted practices.
Acquisition of equity or shares
Acquisition of equity or shares of a company that confers 25 per cent or more in the highest governing body of an undertaking is considered to be a concentration. If in the future the equity stake (shares) reaches or exceeds 50 per cent of the votes, this constitutes a new concentration. Furthermore, acquisition of more than 50 per cent of the shares or equity in the share capital of a company irrespective of the number of votes attached is a presumed concentration in the form of acquisition of control over an undertaking.
A concentration is notifiable and requires prior approval of the AMC if all of the following thresholds are exceeded:
• 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 €12 million;
• 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 €1 million; and
• 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 €1 million.
Alternatively, 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 per cent. In practice the market share threshold often applies to any market, where the parties are active in Ukraine, not just the markets concerned by the concentration. Unlike in EU law, under Ukrainian merger control rules for the purpose of calculation of financial thresholds the target group's figures should include those of all entities in its respective group to which it belongs prior to merger (including the ultimate controlling parent and all entities controlled by such parent); while in case of the establishment of an undertaking minority non-controlling founders' figures should be taken account of.
Applicability of effects doctrine
As stems from the above, the third threshold in the assets/turnover-based notifiability test is rather tricky for foreign companies doing foreign-to-foreign transactions, as the threshold is set very low. Furthermore, it is often unreasonable if, for example, the local threshold is met by the selling party only (and is not met by the target) or by the non-controlling parties to a joint venture only where the joint venture is not planned to have any local activities.
However, the general provisions of the Competition Law stipulate that 'the law applies to relations that impact or may impact economic competition in Ukraine'. This provision appears under 'Scope of Application of the Law' in chapter I, 'General Provisions', which should apply in all circumstances that are governed by the Ukrainian merger control law. This provision can be reasonably interpreted as containing a primary applicability test (based on the effects doctrine) for the merger control law in general and for the said notification thresholds in particular. On this basis, there is scope for arguing that merger clearance is not required due to transaction's insufficient local nexus if, for instance: the target has no sales or physical presence in Ukraine and the parties activities are not overlapping; the joint venture is not expected to carry out any activities in Ukraine and only one of the controlling founding parties or even only one non-controlling founding party meet the local threshold, etc.
The quoted provision closely corresponds to the effects doctrine existing in many jurisdictions worldwide. Thus, it may reasonably be argued that the Ukrainian legislator intended to implement an equivalent effects doctrine into Ukrainian merger control law so that the jurisdiction of the AMC can be duly asserted.
There is no official clarification of the applicability of the merger clearance requirement to transactions lacking a sufficient local nexus. However, the AMC has on several occasions expressed its unofficial position on the issue: it claimed that such transactions are subject to merger clearance since the AMC has exclusive authority to determine whether a particular transaction may or may not affect competition in Ukraine; and such verification of impact on domestic competitive environment is in fact conducted while reviewing a merger case and granting the merger clearance. Similarly, the AMC has accepted and reviewed applications for clearance of transactions lacking a local nexus on the target's side, thus indirectly confirming its jurisdiction over such transactions.
In view of the above, although the insufficient nexus argument is not currently supported by the AMC and the AMC's precedent decisions typically indicate that it may not recognise it as valid and justifiable, it still is a strong argument that stands a reasonable chance of being accepted by the Ukrainian courts.
Pursuant to the Competition Law, the AMC clearance decision can be made conditional upon the parties' obligation to undertake certain actions (including refraining from certain actions) that will eliminate or at least mitigate the negative impact of the concentration on the competition. Such undertakings may be behavioural (eg, restrictions on the use, management or disposal of certain rights or assets, obligations to reduce prices or the like) or structural (eg, divestitures).
Ukrainian competition law does not provide for any fast-track or simplified procedures. The merger review includes the following stages:
• Preview period (15 calendar days)
The AMC reviews the notification and decides whether it is complete and can be passed for the review on the substance. The parties may request the AMC to limit the scope of the required information, but the AMC has full discretion as to whether to satisfy such requests.
• Phase I review (up to 30 calendar days)
This stage involves assessment of the concentration on the substance resulting in the AMC's decision on whether to approve the concentration or initiate Phase II review if there are grounds to prohibit the concentration or an in-depth investigation is required.
• Phase II review (up to three months)
Phase II review involves close analysis of competition concerns raised by the concentration, examination of expert opinions, other additional information, and so on. Although the statutory review period is limited to three months, in practice an AMC investigation may take much longer - if additional documents, information or expert examination are required. This term may be suspended or even restarted, in which case a new three-month period would begin from the date on which these documents, information or expert opinion have been filed with
Changes to the Competition Law
The most notable recent changes to the Competition Law include:
• removing some procedural imperfections of Phase II review of mergers and concerted practices;
• detailing the AMC's powers to deal with the effects of competition offences, in particular through requesting elimination or mitigation of the negative effects of concerted practices or concentrations; and
• allowing foreign applicants for merger clearance, authorisation of concerted practices, and official clarifications to pay filing fees and make other payments in euros or US dollars.
Triggering events and notifiability thresholds
The most important draft regarding this issue was submitted in
September 2011. In particular, it proposes to:
• remove such triggering event for merger clearance as reaching or exceeding 25 per cent of voting stock in an undertaking; and
• increase the merger notification thresholds and setting a higher standard for the local nexus requirement as follows: the merger control clearance will be required in cases when the total turnover or asset value of all the parties to the concentration exceeds €50 million and at least two of the parties have turnover or assets in Ukraine in excess of €4 million. Another test will be the total turnover or asset value of at least two parties to the concentration exceeding €50 million each and at least one of them having this turnover or asset value figure in Ukraine.
Collection of fines
Another AMC legislative initiative is aimed at more efficient enforcement, namely the imposition and collection of fines. In particular, the draft suggests the following:
• any member or several members of the violator's group may pay a fine, whether in full or in part, to discharge the liability of the
• all members of the offender's group are jointly and severally liable for payment of a fine imposed by the AMC; and
• the AMC may file a lawsuit seeking forcible collection of fines and accrued interest from any member of the offender's group.
Although the idea of bringing the concept of joint and several liability into the context of administrative sanctions was heavily criticised by the legal community, the changes are perceived quite positively as they are likely to create a stronger deterrence effect.
Also, in late June 2012 the AMC announced that starting from 1 July 2012 it will impose the maximum statutory fines for unauthorised mergers. Thus, companies closing transactions without the Ukrainian clearance may be hit with a fine of 5 per cent of their global group-wide annual turnover.
In view of the very low notifiability thresholds and limited acceptability of the effects doctrine arguments, a significant number of clearly non-problematic foreign-to-foreign transactions have been technically reportable in Ukraine. The AMC statement is silent on whether the maximum fines will also apply to such transactions. However, given that most of the recent fines have been imposed in the deals raising no competition concerns, including foreign-to-foreign transactions, this is quite likely. Although there is no public registry of AMC decisions, we have been witnessing a gradual increase in the amounts of fines over the past year, from €10,000-€15,000 to €20,000-€60,000, including in foreign-to-foreign deals with reasonably insufficient local nexus. Thus, the latest statement builds upon the existing trend and increases the risk of AMC's enforcement action for failure to get clearance in Ukraine prior to closing.
In an informal discussion AMC senior officers mentioned that the message in the June press statement was somewhat inaccurate in the sense that the real intention was to convey that the fines may reach the statutory ceiling, rather than that they necessarily will. They reconfirmed that while imposing fines the AMC will continue taking into account the circumstances of the case and try to keep fines proportionate to wrongdoings and that the statement was primarily intended to send a deterrence message to parties completing transactions that have potential effects for Ukrainian markets.
Anti-competitive agreements and concerted practices
The Competition Law prohibits all agreements (irrespective of their form and type), decisions of associations of undertakings, as well as any other coordinated practices which resulted or may result in prevention, elimination or restriction of competition (ie, anticompetitive concerted practices).
In particular, it is considered anti-competitive to:
• fix prices or other purchase or sale conditions;
• limit production, markets, technological development or investment, and to assume control thereof;
• divide markets or sources of supply according to territory, type of goods, sale or purchase volumes, or classes of sellers, purchasers or consumers;
• distort the results of trading, auctions, competitions or tenders;
• oust other companies from the market or limit their market access;
• apply different conditions in equivalent agreements that put other companies in a disadvantageous position;
• subject execution of agreements to the other party's acceptance of additional obligations which are not related to the subject-matter of the agreement; and
• substantially limit the competitiveness of other companies without justifiable reasons.
Parallel behaviour that resulted or may result in the prevention, elimination or restriction of competition is also considered anticompetitive and is prohibited, unless companies have objective reasons for such behaviour.
Exemptions General exemption
Any concerted practices (except for establishment of a joint venture) are generally exempted if the participating undertakings', including their respective groups, combined market share in any product market is below 5 per cent.
Furthermore, as regards vertical or conglomerate concerted practices, these are exempted if the participating undertakings', including their respective groups, combined market share is below 20 per cent. Similarly, horizontal and mixed concerted practices are exempted if the participating undertakings', including their respective groups, combined market share is below 15 per cent. Both cases are subject to all of the following conditions:
• neither of the participating undertakings holds a dominant (or monopolistic) position or has exclusive or privilege rights;
• the aggregate worldwide turnover or asset value of the participating undertakings (including their respective groups) did not exceed €12 million in the preceding financial year;
• the aggregate worldwide turnover or asset value of at least two undertakings which belong to the participating undertakings' groups did not exceed €1 million in the preceding financial year; and
• the aggregate turnover or asset value in Ukraine of at least one undertaking which belongs to either of participating undertakings' groups did not exceed €1 million in the preceding financial year.
This exemption will not apply to the following horizontal or mixed arrangements if the parties are at least potential competitors:
• price fixing;
• territorial, customer or supplier and other market sharing;
• restrictions on (including imposing an obligation to refrain from) production or distribution of products; and
• distortion of the results of trading, auctions, competitions or tenders.
Exemption of certain types of agreements and practices The Competition Law does not extend the general prohibition of anti-competitive concerted practices to the following types of concerted practices:
• certain vertical arrangements, that is 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 exemption 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.
• certain intellectual property rights transfer agreements, that is, those containing certain allowed limitations; in particular, limitations on the:
• scope of transferred rights;
• period and territory of permitted use of the IP; and/or
• type of activity, application, and the minimal production volume.
• concerted practices of SMEs concerning the joint acquisition of products which do not result in substantial limitation of competition.
• specialisation concerted practices, that is, horizontal arrangements contemplating concentration of the participating 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 (monopolistic) position;
• their combined market share on any of the markets concerned exceeds 25 per cent;
• the specialisation arrangement results in output limitation, market sharing or similar, or its term exceeds five years.
In particular, the following actions may be implemented without specific permission:
• discontinuing production of identical or similar products;
• an agreement to produce or sell agreed products only jointly;
• refraining from supplying or acquiring the agreed products to or from competing undertakings; and
• keeping minimum stock of the agreed products.
Anti-competitive arrangements may nevertheless be individually exempted by the AMC from the prohibition if such arrangements:
• contribute to various efficiencies: improvement and rationalisation of manufacturing, product purchase or sale processes; technical, technological and economical development; development of SMEs; optimisation of export and import processes; development and use of uniform product standards; and
• do not result in significant restriction of the competition on the market or a substantial part thereof.
Transactions eligible to benefit from an individual exemption should be suspended until the AMC clearance is granted. In order to obtain clearance the participating undertakings should file a notification to the AMC which is similar in all material aspects to a merger notification, and additionally provide a well-grounded justification for the concerted practices arguing its efficiencies and overall positive effect for the market. The notifications review procedure is similar to the review in merger cases, except Phase I in concerted practices cases lasts for up to three months.
If the AMC refuses to grant an individual exemption, the Cabinet of Ministers of Ukraine may nevertheless grant permission for implementation of certain concerted practices if the parties prove that the positive effects of such practices for the public interests outweigh the negative consequences of the restriction of competition. The AMC prohibition decision cannot be overruled if the restrictions pertaining to the concerted practices are not required for the implementation of such practices; and if such practices pose a threat to the market economy of Ukraine.
Participants to an anti-competitive arrangement that was implemented without clearance and is not covered by an exemption can be fined up to 10 per cent of their global group turnover in the year immediately preceding the year when the fine is imposed. So far, the largest fine in AMC's history (approximately €41.5 million) was imposed on the manufacturers of wood-based panels, members of a bid rotation cartel.
The following sanctions may also apply:
• ban on the companies' cross-border activities with Ukraine;
• third-party damages claims; and
• invalidation of the transaction.
Pursuant to the Competition Law a participant to an anti-competitive arrangement may apply for immunity. The law, however, lacks detailed requirements that must be met by an undertaking; it also does not set out any applicable leniency procedures.
To benefit from immunity the leniency applicant should meet the following criteria (cumulative):
• be the first to voluntarily report to the AMC on the violation (unless the applicant initiated the anti-competitive arrangement, in which case it cannot apply for immunity);
• provide the AMC with information of essential importance that will enable the authority to make the decision;
• provide all available evidence and information concerning the violation; and
• take effective measures to cease its participation in the anticompetitive practices.
The latest 2011 development was the AMC's unveiling of the long-awaited draft regulation dealing with vertical agreements and concerted practices. The document generally follows the pattern of EC Regulation 330/2010 of 20 April 2010, though it also brings along some local differences, such as:
• allowing vertical interaction between an association of retailers and its individual members to the extent that no such individual retailer (together with its group) has turnover in excess of €1 million (instead of €50 million in EU);
• referring to market shares of the supplier and the purchaser instead of their market shares on the markets in which they sell and purchase, respectively;
• introducing dominance as a standalone disqualifier from the
ability to benefit from the vertical exemptions; and
• inverting the exemption that may apply by way of derogation under article 5(3) of EC Regulation 330/210 in a way that the elements permitting an obligation not to manufacture/purchase/ sell/resell goods after termination of the agreement actually bar such obligation (which may well be a drafting mistake as the document looks like a rather rough draft for now).
On 30 September 2011 the AMC published a draft regulation detailing rules and procedures applicable to leniency applications in cartel cases (the Regulation). Beyond all doubt, the document is an important step towards better prevention, detection and controlling of cartels.
The possibility to apply for leniency has been in place in Ukraine since 2002. However, the absence of clear and adequate procedural rules hindered its effective implementation. The long-awaited Regulation clarifies requirements to immunity applicants, details the information and evidence an undertaking should provide in order for its application to be successful, review procedure, etc. It also introduces several new concepts to the existing leniency regime: in particular, for the first time the term 'cartel' is defined in Ukrainian antitrust legislation; the document also introduces the marker system (equivalent to the one that exists in the EU), the possibility to benefit from partial (20 to 50 per cent) fine reduction, etc.
A 'cartel' is defined as anti-competitive concerted practices concerning (exclusively):
• fixing of prices (tariffs) of purchase or sale of goods;
• limitation (including termination) of production, purchase or sale of goods;
• dividing markets or sources of supply by territory, type of goods, sale or purchase volumes, or classes of sellers, purchasers or consumers or otherwise; and
• distortion of the results of auctions, contests, tenders.
The concept of a cartel is significantly narrower than that of the anticompetitive concerted practices, as these are defined in the Competition Law. Pursuant to general leniency rules of the Competition Law, the participants of any anti-competitive concerted practices may apply for immunity, while the Regulation appears to apply to cartels only.
Immunity requirements Applicable requirements have been detailed to clarify:
• that only the first to apply (ie, before anyone else has applied and before the AMC has initiated its investigation into the same violation) can benefit from full immunity;
• which information will be necessary and sufficient to qualify for full immunity;
• that the applicant will not be considered in breach of the immunity requirements if it did not cease to participate in anti-competitive concerted practices with a view to obtaining necessary evidence (upon AMC approval);
• that an applicant exercising coercion upon other undertakings with a view to their participation in a cartel cannot benefit from immunity.
The Regulation introduces detailed procedural rules:
• the AMC will appoint an authorised person to accept and deal with leniency applications. Importantly, an application can be made to the authorised person verbally and will then be reflected in the minutes, a copy of which shall be provided to the applicant;
• the identity of the applicant and the fact that an application has been filed will be kept confidential;
• the application shall include information concerning: details of the applicant, information regarding all participants of the alleged cartel, detailed descriptions of the activities of the alleged cartel (ie, type of the cartel, product and geographical markets involved, duration of the cartel, role of each participant, etc), all available evidence, and the applicant's role in the alleged cartel;
types of admissible evidence (listed);
• a marker system is introduced (ie, an undertaking can apply based on limited information for a marker-letter securing its first place on the list of immunity applicants, provided it is in a position to obtain and submit sufficient information later on);
• after receiving an immunity application (or an application for a marker-letter and subsequent completed immunity application) the AMC will decide whether the information is sufficient to grant immunity; if it is not, an applicant may still qualify for a reduced fine;
• in case of doubt a potential applicant may request a preliminary conclusion from the AMC regarding its chances to be granted immunity (such request should be supported by available information presented in generalised (hypothetical) form).
Reduction of fines To maximise the information inflow, the Regulation encourages other participants (besides the first immunity applicant) to a cartel to submit additional available information in exchange for a partial (20 to 50 per cent) reduction of the fine, etc. Evidence provided in such subsequent applications should have added value and the AMC has full discretion to decide whether such additional data is sufficient for the purpose. It appears that subsequent applicants may qualify for a partial fine reduction even after the AMC investigation has already been initiated.
The timing of adoption of the Regulation is unclear even though it appears to be one of the authority's top policy priorities.
Abuse of market power
Parties to the exempted concerted practices (either as an individual exemption, or due exemption of certain types of arrangements) are prohibited to impose restrictions on third parties that normally do not apply to other undertakings. It is also prohibited to apply different conditions without justifying reasons. In particular, it is prohibited to impose such restrictions on dependent - due to the absence of alternative sources of purchase or supply or otherwise - SMEs.
Abuse of dominance
Acquisition and maintenance of a dominant position on the market is not prohibited as such, although acquisition of dominance though mergers is subject to the AMC prior review and approval. However, pursuant to the Competition Law certain practices of dominant companies may have harmful effects on the market and are, thus, prohibited.
Prohibited practices Prohibited practices include:
• setting such prices or conditions that 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;
• substantial limitation on competitiveness of other companies without justifiable reasons; and
• hindering market access for other companies or ousting them from the market.
The above list is indicative. In practice, the authority will see into the nature of the dominant undertaking's behaviour and analyse whether such behaviour resulted or may result in prevention, elimination or restriction of competition or infringe upon other undertakings' or consumers' interests that would have been impossible should effective competition exist in a given market.
There is no notification or prior approval procedure applicable to undertakings with significant market power. However, the Competition Law provides for a possibility to obtain the AMC's conclusion in the form of a non-binding recommendation regarding certain actions or behaviour that may potentially qualify as abuse of a dominant position.
Definition of dominance
The Competition Law defines an undertaking as dominant, if:
• it has no competitors in the market;
• it does not face significant competition due to, inter alia, the other market players' limited access to raw materials and distribution channels, existence of entry barriers, certain privileges, or due to other circumstances.
An undertaking is presumed to be dominant if its market share is higher than 35 per cent. Though, this presumption may be rebutted if the undertaking proves that it faces significant competition from other market participants. Furthermore, an undertaking with a smaller market share may also be considered dominant if there is no significant competition, in particular, because its competitors' market shares are comparatively small.
It should be noted that the draft law of September 2011 suggests that overhauling and simplification of the definition of dominance to refer to an undertaking's market share in excess of 50 per cent coupled with absence of significant competition that it suffers.
Ukrainian competition law recognises the concept of collective dominance whereby several undertakings may be considered to collectively hold a dominant position on the market if the following criteria are met:
• the combined market share of not more than three undertakings with highest individual market shares exceeds 50 per cent; or
• the combined market share of not more than five undertakings with highest individual market shares exceeds 70 per cent.
For the above purposes the AMC will refer to the AMC Methodology for Establishing Dominance, which sets detailed procedures regarding the definition of the relevant market, taking into account the product, geographical and time dimensions of the particular market, existence of regulatory and other market entry barriers, actual and potential competitors, etc, as well as regarding the calculation of the undertakings' market shares.
Once the AMC has established the violation, the infringing undertaking can be subject to a fine in the amount of up to 10 per cent of its global group-wide turnover in the year immediately preceding the year in which the fine is imposed.
In dominance cases the AMC can also make a decision requesting that a dominant undertaking is divided; such division should be implemented within the time limit established by the AMC, which should not be less than six months. The dominant undertaking's division is implemented at its discretion, provided that it will no longer hold a dominant position once the division has been finalised. The division cannot be requested if:
• from an organisational or territorial standpoint it is impossible to separate several enterprises or structural units; or
• there are strong technological ties among several enterprises or structural units.
According to the AMC statistics, abuse of a dominant position is the most common violation (43 per cent of cases in 2011) of competition laws. In 2011, the AMC has investigated approximately 2,000 cases regarding abuse of dominance, having prevented the violations both by imposing fines and by issuing recommendations to the market players. In 2011, the highest fine for the abuse of a dominant position on the market for liquid chlorine and sodium hypochlorite reached approximately €97,000. The highest ratio of violations in the form of abuse of a dominance position was recorded in the following industries: housing and communal services, energy, public health, medicines and medical equipment.