The relevant merger control legislation in Ukraine includes the following:
There is no sector- or investor- specific merger control regime, although there may be certain special rules or exemption for particular industries or investors. For example, special rules apply to the review of notifications that concern capitalisation and reorganisation of banks – the Antimonopoly Committee of Ukraine (AMC) will review them and grant clearances within ten days of receiving the complete set of documents.
Also, due to the conflict with Russia, Ukraine introduced sanctions against certain individuals and legal entities. The AMC is required to reject notifications on concentrations (or drop their review, if they are already in Phase I or II) if any of the parties to the concentration (or any entity/individual connected to them through control relationships) is on the Ukrainian sanctions list, and where a particular type of sanctions applies to a given individual or entity (eg, assets freeze, etc).
Ukraine is now developing the set of FDI rules and expecting to introduce the relevant law within the nearest year.
Restrictions Applicable to Foreign Companies
For now, certain restrictions and limitations apply to foreign companies – for example, they are prohibited from owning agricultural land. Also, some restrictions apply in the following industries:
The AMC is the primary state authority that enforces merger control rules in Ukraine. It has powers to review transactions and grant or refuse clearance, and to investigate and penalise violations of the merger control regime. The Cabinet of Ministers of Ukraine (CMU) may overrule AMC decisions prohibiting a concentration on public interest considerations.
Notification is compulsory if the transaction amounts to a concentration, and the thresholds triggering merger clearance are met. The Competition Law provides for the following exemptions (such transactions are not considered concentrations):
Failure to notify can attract a fine of up to 5% of the turnover in the year immediately preceding the year when the fine is imposed. Such fine can be imposed on the entire corporate group of the infringer that allows the AMC to fine any local subsidiaries of the parties and improves the AMC's chances to successfully collect fines.
As a matter of practice, fines for failure to notify are calculated based on the AMC Guidelines on Fines (which have a recommendatory nature, although the AMC has publicly committed to following them). Under the Guidelines, the "base" fines for failing to notify are as follows:
The above "base" amounts may be further adjusted depending on the effect of the violation on competition, the nature of the market involved, the profitability of operations connected with the violation, and other aggravating or mitigating circumstances. Based on recent AMC practice, the fines usually range from EUR5,000 to EUR16,000. Also, in 2019 the AMC imposed two biggest fines in its history for merger control violations – EUR1.9 million and EUR1.8 million. It appears that the AMC deviated from the rules provided by the Guidelines on Fines (in the past the fines did not exceed EUR500,000 for such violations).
Information about the imposed fine, the identity of the parties, and the non-confidential version of the fining decision, which normally includes general description of the transaction structure and the markets involved, are published by the AMC on its website.
Apart from the fine and possible reputational issues associated with the publication of the fining decision, parties may face the following negative implications:
The following types of transactions are caught by the merger control rules:
Intra-group transactions such as internal restructurings or reorganisations are not caught (see 2.1 Notification).
Operations not involving a transfer of shares or assets (eg, shareholders’ agreements, changes to articles of association, etc) are caught if they lead to the acquisition of control (including joint or negative) over an undertaking or a change in the nature of control (eg, joint control to sole control).
Control is broadly defined as the ability to exercise decisive influence on the strategic decisions related to the business activity of an undertaking, including via veto/blocking rights. Among others, control is deemed to exist if an undertaking:
In 2018 the AMC adopted the Guidelines on Definition of Control, which closely follow the lines of the EC Consolidated Jurisdictional Notice and provide some further guidance as to the concept of control. In particular, this document:
Acquisitions of minority or other interests less than control are caught, beginning from the level of 25% of voting rights in an undertaking (see 2.3 Types of Transactions).
A transaction is notifiable in Ukraine if either of the following thresholds is met:
All figures are calculated for the financial year immediately preceding the year of the concentration.
Special rules apply to the calculation of thresholds for banking and insurance companies, as follows:
The turnover-based threshold is calculated based on the net revenue (ie, without VAT, excise duties and other turnover-based taxes and contributions) according to the financial statements of the parties, excluding intra-group sales. The law does not provide for any reliable guidance regarding the geographical allocation of turnover for the purposes of assessing whether the local threshold is met. In practice, the domicile of a customer is the most decisive element for the AMC's determination regarding the geographical allocation of turnover. However, the AMC may also use EU approaches to allocation of turnover in cases of uncertainty.
Under the general rule, the asset-based threshold should be based on book value. Still, the AMC has publicly stated that in some cases it may also take account of fair market value of the assets (eg, in a privatisation procedure).
Sales or assets booked in foreign currency should be converted into EUR using the FX rate established by the National Bank of Ukraine as of the last day of the respective financial year.
Special rules regarding the calculation of thresholds apply in the banking and insurance sectors (see 2.5 Jurisdictional Thresholds).
All businesses and corporate entities belonging to the respective group should be taken into account. The relevant group is defined as ultimate controlling parent(s) and all entities directly/indirectly controlled by it (them), including due to shareholding and/or directorship, family ties and otherwise. Importantly, the figures of a controlling seller (or other parent) also count towards those of the target. Formal interpretation of the law also allows for the allocation of turnover/assets of all controlling parents to the JV, and of the JV's turnover in full to each of the controlling parents.
If there are changes in the group composition, the relevant figures should be adjusted accordingly to reflect the actual pre-transaction group composition.
The merger control law does not differentiate between domestic and foreign-to-foreign transactions. The latter are also subject to merger control if the relevant thresholds are met, irrespective of the overall effect of the transaction in Ukraine. This means that a filing can be required even if only the controlling seller meets the local turnover or assets threshold, while the target has no sales and/or assets in Ukraine.
However, based on general provisions of the Competition Law, there may be an argument that the application of the turnover/asset thresholds should be qualified by the effects doctrine, and clearance should not be required if a transaction lacks reasonable local nexus and cannot have any anti-competitive effects in Ukraine. Still, this argument is rather vague in legal terms and is not currently supported by the AMC.
There is no market share jurisdictional threshold in Ukraine.
The establishment of a joint venture through the formation of a new company may qualify as a concentration or concerted practice.
In particular, under the Competition Law, a joint venture is considered a concentration if such new company:
In 2019 the AMC published the Guidelines on the Assessment of Joint Ventures, which provided further guidance as to assessment if the criteria above, as well as introduced the full-functionality criterion (ie, ability to perform all functions of an autonomous economic entity) for joint ventures to be considered a concentration.
Joint ventures that do not meet the above-mentioned criteria may be considered a concerted practice (and not concentration) that may require antitrust clearance (and not merger clearance). If the establishment of a joint venture qualifies as a concentration, the general rules on jurisdictional thresholds apply.
The AMC does not have power to investigate a transaction that does not meet the jurisdictional thresholds, although the parties may still voluntarily file such transaction.
The statute of limitations for transactions that meet the relevant thresholds is five years from closing.
The implementation of a transaction must be suspended until clearance.
The penalties and risks associated with the implementation of the transaction before clearance are the same as for not filing at all (see 2.2 Failure to Notify), although, in practice, pre-clearance closing may receive more favourable treatment from the authority and involve less severe sanctions – in particular, a lower fine (compared to not filing at all and being caught).
Fines have been imposed for pre-clearance closing in a number of cases, including foreign-to-foreign transactions. In most cases they were below EUR10,000. The highest known fine for pre-clearance closing amounted to approximately EUR100,000 – it was imposed in the local transaction and the fact of closing was discovered during Phase II review.
Information regarding such penalties (the amount of the imposed fine, the identity of the parties, and the non-confidential version of the decision) is published by the AMC on its website.
The requirement to suspend a notifiable transaction applies globally. There is no possibility to seek a waiver or derogation from this rule.
The only exception applies in case of a tender/bid process where a notifiable concentration should be filed within 30 days of the winner of a tender/bid being announced. This exception was originally designed for local privatisation procedures and may not be adaptable to public bids abroad.
The AMC cannot permit closing before clearance. Hold-separate/carve-out arrangements also do not remove the risks of fines; however, in practice, they may mitigate the liability, as they would clearly show the parties’ intention to comply with the Ukrainian merger control rules.
There is no deadline for notification. The only relevant rule is that the parties should apply for and obtain clearance before closing of the transaction.
See 2.2 Failure to Notify and 2.13 Penalties for Implementation of a Transaction Before Clearance regarding penalties applied in practice and publicity given to them, and 2.14 Exceptions to the Suspensive Effect regarding exemption for the tender/bid process.
The parties can file on the basis of a draft transactional documentation, a letter of intent, a memorandum of understanding or similar written document providing sufficient details re transaction. No binding agreement is required prior to notification.
Under the general rule, filing cannot be made if there is nothing in writing, although this may be possible in some cases. For example, in a hostile takeover, the acquirer can file without any written documentation endorsed by the target or its shareholders. In this situation, the AMC can independently request certain information from the target that is necessary for merger review.
There is a filing fee of UAH20,400 (approximately EUR680) per notifiable event (ie, each action/step of the transaction that qualifies as a concentration), which should be paid prior to filing a notification.
The obligation to file is joint, and all parties to the transaction (ie, the buyer and target/seller, merging parties, JV partners or their direct/indirect parents) are responsible for filing.
It is important to note, however, that "failure to file" does not in itself amount to a competition offence; rather, "closing without clearance" is the violation. Thus, although, for example, both the seller and the purchaser may fail to comply with the (joint) filing obligation, only the purchaser will eventually be held liable, because it is the "acquisition of control/interest" (and not a "divestiture" on the part of the seller) that qualifies as "closing without clearance" under the law.
If the transaction qualifies for the simplified fast-track procedure, the filing should include the following information and documents (in summary):
If the transaction is subject to the standard procedure as opposed to the simplified fast-track procedure, the filing should additionally include the following information and documents (in summary):
Furthermore, together with the hard copy of the notification, the parties are also required to attach electronic versions (PDF/Word, etc) of the notification and all documents filed along with it.
The filing should be made in Ukrainian, and all documents to be filed alongside it should be translated into Ukrainian. Additionally, powers of attorney (if the parties authorise external counsels) and registry excerpts for foreign entities should be notarised and apostilled/legalised, depending on the jurisdiction. Confidential information should be properly marked in the filing so that the AMC treats it accordingly.
If the notification is deemed incomplete, it is rejected and parties will need to resubmit it. Still, normally the AMC holds consultations with the notifying parties during the 15-day "preview" period regarding the completeness of the filing and usually allows the parties to supplement any missing information during the "preview" period (or sometimes even the "review" period) without a formal rejection.
Submission of inaccurate or misleading information in the filing may result in a fine of up to 1% of the respective party’s turnover in the preceding year being imposed. However, in practice and pursuant to the Guidelines on Fines, the fine for such violation is capped at UAH136,000 (approximately EUR4,400), subject to possible adjustments for aggravating or attenuating circumstances.
Also, the authority may reconsider its decision if it was based on inaccurate or misleading information.
The standard merger review procedure involves the following phases:
The AMC has 15 calendar days to decide whether the notification is complete and can be accepted for the substantive review (Phase I). If the notification does not meet the formal requirements, the AMC may consider it incomplete and reject it, so the parties would need to refile, restarting the process.
During Phase I, the AMC will either issue the clearance or initiate Phase II. Phase I lasts up to 30 calendar days and involves a substantive review and assessment by the AMC of whether the transaction can be approved or whether there are potential grounds to prohibit the transaction, in which case Phase II is initiated.
Phase II review (if initiated) involves a close analysis of the transaction and the associated competition concerns, and an examination of expert opinions and other additional information. The recommended Phase II review period is up to 135 calendar days, starting from the day Phase II notice is sent to the parties. During this period, the AMC will either issue the clearance (conditional or unconditional) or adopt a decision prohibiting the concentration.
If the transaction qualifies for fast-track review, a 25-day period applies (see 3.11 Accelerated Procedure).
The Competition Law does not provide for formal pre-notification discussions. Usually, the parties can only request formal consultations with the AMC during the 15-day preview period although, in practice, informal pre-filing discussions are also possible.
Requests from the authority during the review process are very common and, depending on various factors (such as the complexity of the transaction mechanics and potential competition concerns), may be quite burdensome. Requests during the preview period do not stop the clock but can lead to the filing being rejected as being incomplete if the parties fail to respond promptly. Requests during Phase I also do not stop the clock. Requests at Phase II may suspend or even restart the review, but its overall duration still should not exceed 135 days.
The 25-day simplified fast-track review procedure is available for transactions where only one party is active in Ukraine (for this purpose, the seller's group should also be taken into account), or where the parties’ combined shares do not exceed 15% on the overlapping markets or 20% on vertically related markets. The AMC tends to interpret the 15%/20% threshold quite restrictively, often in the manner that more than 15%/20% with one of the parties and 0% with the other (ie, no increment at all) does not meet the test, and the filing should undergo a standard review.
As a practical matter, the parties may also try to negotiate a more expedited review with the AMC under the standard review procedure.
A transaction can be cleared by the AMC if it does not result in monopolisation (ie, creating or strengthening of the monopolistic (dominant) position) or a substantial restriction of competition on the Ukrainian market or a significant part of it.
Under the Competition Law, the relevant benchmarks to establish a monopolistic (dominant) position are as follows:
The CMU may still approve a transaction that was prohibited by the AMC if the positive effects of such transaction on the public interest outweigh the negative impact of the restriction of competition, provided that such restriction is necessary for achieving the purpose of the concentration and does not jeopardise the market economy system.
The Concentrations Regulation defines the markets affected by the transaction as those where a target, the merging parties or a joint venture is (would be) active, as well as vertically related (adjacent) markets. In practice, the authority is unlikely to see competition concerns if the parties’ combined market shares do not exceed 15% on the overlapping markets or 20% on vertically related markets.
The AMC usually relies on case law (precedents) of the European Commission and the competition authorities of EU countries and the USA, mainly with respect to the approach to market definition.
Under the Guidelines on the Assessment of Horizontal Mergers and the Guidelines on the Assessment of Non-Horizontal Mergers, the authority shall investigate the following main competition concerns. While reviewing the concentrations, the AMC should take into account countervailing factors such as countervailing buyer power, the likelihood that entry would maintain effective competition on the relevant markets, and the "failing firm" defence.
Unilateral or Non-coordinated Effects
These change the nature of competition in such a way that undertakings that did not previously co-ordinate their behaviour would be significantly more likely to co-ordinate (including by tacit co-ordination) and raise prices or otherwise harm effective competition (in the case of horizontal and vertical mergers).
The AMC may take into account efficiency arguments and any positive effect on the public interest (such as the modernisation and rationalisation of production, purchase or sales, technical and product standards, the promotion of technical, technological or economic development, etc) but they are not likely to be decisive.
Still, this factors will be relevant for the CMU analysis, which can authorise a transaction prohibited by the AMC even though there are no public records of any recent transactions cleared in such a way.
The AMC should predominantly consider competition issues, while non-competition issues may be used as supporting (but not decisive) arguments. Still, the non-competition issues may serve as grounds for the CMU when overruling the AMC prohibition decision (see 4.5 Economic Efficiencies).
There are no special substantive tests/considerations for joint ventures. However, in practice, the authority also tends to consider potential vertical effects in such types of transactions.
If the establishment of the joint venture results in the co-ordination of competitive behaviour either of its parents or the joint venture, on one hand, and its parents, on the other, then such transaction will be treated as a concerted practice (rather than a concentration), requiring individual antitrust clearance by the AMC (subject to certain conditions).
The AMC may prohibit a transaction if it leads or may lead to monopolisation (ie, the creating or strengthening of a monopolistic (dominant) position) or to a substantial restriction of competition on the Ukrainian market or a significant part thereof. In practice, the AMC rarely imposes a blanket ban and completely refuses to authorise a transaction; rather, it may require that the parties propose remedies (accept certain obligations) in order to ensure a sufficient level of competition in the market.
According to the Competition Law, if the AMC identifies any grounds for a transaction to be prohibited during the Phase II review, it shall inform the parties of these grounds and the parties, in turn, can propose remedies (structural or behavioural) to be further negotiated with the AMC.
The Competition Law provides for structural remedies (eg, divesting overlaps) or behavioural remedies (eg, restrictions on the use or management of certain assets, or price increases), although there are no comprehensive rules regarding scope, specific conditions, or the various technicalities of the remedies. The only relevant requirements are that remedies should alleviate competition concerns and be proportionate, and that supervision of their implementation should be reasonable. Therefore, in practice, the remedies are usually negotiated on a case-by-case basis.
In practice, remedies are most often behavioural (and often accompanied by reporting obligations that allow the authority to monitor compliance). There are no public records of non-competition issues being addressed in remedies.
Under the merger control rules, discussions on remedies start at Phase II when the authority identifies the grounds to prohibit the transaction. Procedurally, the authority should notify the parties of such grounds, and in turn the parties can propose the remedies to the AMC within a 30-day period (extendable upon the parties’ request). The AMC does not formally propose remedies on its own motion, but is required to carry out consultations with the parties in order to agree the terms and conditions of the remedies, where it can outline the scope of remedies in order for them to be acceptable. The AMC cannot impose remedies not agreed by the parties.
There is no standard approach, as the remedies are usually negotiated with the AMC on a case-by-case basis. All relevant conditions and timing (including the possibility to complete the transaction before remedies are complied with) should be set out in the AMC clearance decision. Non-compliance with remedies may result in a fine of up to 5% of the parties' worldwide turnover in the year immediately preceding the year when the fine is imposed. In practice, and according to the Guidelines on Fines, the fine for this violation is limited to 10% of the turnover on the relevant (and/or adjacent) Ukrainian market (if it resulted in monopolisation or a significant restriction of competition).
Upon review of a filing, the AMC issues a formal decision permitting or prohibiting the transaction, and publishes the non-confidential version of the decision on its website.
The AMC imposed behavioural commitments on the parties in a number of recent foreign-to-foreign transactions, including the Bayer/Monsanto deal (2017), the GSK/Novartis deal (2015) and the Whirlpool/Indesit deal (2015). There are no recent decisions prohibiting foreign-to-foreign transactions.
A merger clearance decision does not cover ancillary restraints (such as non-compete, non-solicitation), which may formally require separate (antitrust) clearance.
Third parties (eg, customers, competitors, complainants) can be involved during the Phase II investigation if the AMC believes that the notified transaction may significantly affect their rights and interests. Such third parties have the right to be heard, and to have limited access to the case materials.
The AMC contacts third parties in Phase II, typically publishing a statement regarding the instigation of Phase II and inviting all interested parties to provide their comments or objections concerning the effect of a concentration on the market; it may also send written requests for information.
As regards a “market test” of remedies offered by the parties, the Concentrations Regulation provides for consultations between the AMC and the parties, but is silent on the possibility of approaching third parties. Still, recently the AMC started to publish information re remedies offered by the parties on its website and invite public opinion on them.
The fact of the notification and a description of the transaction is made public upon either the adoption of the clearance decision or the initiation of Phase II, as the AMC is required to publish the non-confidential version of its decisions, as well as brief notes regarding its resolutions on the initiation of Phase II review within ten working days.
The parties may request that commercial information, including business secrets, is kept confidential, if it can provide a grounded justification for doing so.
The AMC may co-operate with the competition authorities in other jurisdictions, based in particular on the respective bilateral or multilateral treaties (such treaties are entered into with EU, certain CIS countries, Bulgaria, Hungary, Latvia, Lithuania and Slovakia, for example), as well as international organisations such as the Organisation for Economic Cooperation and Development (OECD), the United Nations Conference on Trade and Development (UNCTAD) and the International Competition Network (ICN). Such co-operation is usually limited to general policy matters and experience sharing, but may also involve the sharing of information (including confidential information).
The parties may appeal the AMC decision in whole or in part to the commercial court.
The AMC decision may be appealed within two months of its receipt by the respective party. There have been no instances of successful appeals in merger cases, although it should be noted that not all court decisions are in the public domain.
Formally, third parties can appeal a clearance decision to the commercial court, although there is no public record of any such appeal being successful.
Recent changes to the legislation/regulations include:
Both guidelines mentioned above closely follow the lines of the EC Consolidated Jurisdictional Notice regarding definition of control and assessment of joint ventures.
There are also several alternative drafts of the amendments to the Competition Law, which suggest, among others, the following changes to the current merger control regime:
Fining decisions have been publicly available since mid-July 2015. Since then, the AMC has imposed fines for failure to notify/closing without clearance in more than 100 instances. In almost all of these cases, the amount of the fine was between EUR5,000 and EUR16,000, and the fines were imposed for implementing non-problematic transactions (some of them were foreign-to-foreign deals). The largest fines were imposed in 2019 and amounted to EUR1.9 million and EUR1.8 million – both concerned local deals.
As far as is known, there have been no cases where the AMC prohibited a foreign-to-foreign transaction.
In a number of foreign-to-foreign transactions potentially raising concerns, the AMC imposed only behavioural commitments. As far as is known, there have been no structural remedies in foreign-to-foreign transactions (although please note that there is no public register of AMC decisions issued before mid-July 2015).
The AMC is currently focusing predominantly on analysing parties' market shares prior to and after implementation of the transaction. If combined shares exceed 30%, the AMC is likely to initiate Phase II to analyse thoroughly the transaction and possible competition concerns. The AMC also analyses the possible unilateral and/or co-ordinated effects of the transaction, as well as countervailing factors (such as buyer power, market entry, and the "failing firm" defence).
In terms of trends, the AMC imposed two largest fines in 2019, which amounted to EUR1.9 million and EUR1.8 million. These two cases demonstrate change in the AMCs approach, as before 2019 the highest fines were EUR500,000 and less.
The AMC introduced remote working for a number of case-handlers working on merger filings (on a weekly rotation basis). Otherwise, the authority keeps working as usual and these measures do not have much impact on the deadlines and the overall process in merger control.