What are the legal sources that set out the antitrust law applicable to vertical restraints?
The main legal source is the Law of Ukraine on Protection of Economic Competition of 2001. Other sources include:
Types of vertical restraint
List and describe the types of vertical restraints that are subject to antitrust law. Is the concept of vertical restraint defined in the antitrust law?
The Law of Ukraine on Protection of Economic Competition of 2001 (the Competition Law) generally prohibits any agreements, decisions of associations or any other concerted behaviour (including acts and failure to act) of the undertakings that resulted or may result in the prevention, elimination or restriction of competition (anticompetitive concerted practices). It also introduced the concept of concerted practices on supply and use of products.
Further, the Vertical Block Exemption Regulation defines the concept of ‘vertical concerted practices on supply and use of products' and ‘vertical restraints'. Vertical concerted practices on supply and use of products are concerted practices by two or more undertakings acting at different levels of the production or supply chain, whereby the parties purchase, sell or resell products. Vertical restraints are defined as restrictions of competition relating to vertical concerted practices on supply and use of products.
The Competition Law and the Law of Ukraine on the State Regulation on Technology Transfer Activities of 2006 contain non-exhaustive lists of prohibited concerted practices (which may contain vertical restraints), including:
Is the only objective pursued by the law on vertical restraints economic, or does it also seek to promote or protect other interests?
The objective is predominantly economic. In particular, the following objectives may overwhelm the purpose of protection of competition (block exempted under the Vertical Block Exemption Regulation or, if not applicable, exempted individually under the Resolution of the Antimonopoly Committee of Ukraine (AMC) on the Procedure for Filing Applications with the AMC for Obtaining its Approval of the Concerted Practices of the Undertakings of 2002): promotion of technical and technological development, improvement of the production and distribution processes, development and application of uniform standards, and so on.
Which authority is responsible for enforcing prohibitions on anticompetitive vertical restraints? Where there are multiple responsible authorities, how are cases allocated? Do governments or ministers have a role?
The Antimonopoly Committee of Ukraine (AMC), as a state authority with special status, is responsible for the protection of economic competition. The AMC and its regional divisions (which are involved in supervision of compliance as well as investigation of violations of competition laws on the regional product markets) form the system of AMC bodies responsible for ensuring compliance with the competition laws and, in particular, enforcement of prohibitions on anticompetitive vertical restraints.
Also, prohibitions on anticompetitive vertical restraints by the AMC may be enforced through commercial courts.
The Cabinet of Ministers of Ukraine (the Cabinet) is not directly involved in the enforcement of prohibitions on anticompetitive vertical restraints. However, it may authorise certain concerted practices that were prohibited by the AMC if the practices have an overwhelming positive effect on public interests. When deciding on a case, the Cabinet may involve any relevant governmental authorities (industry-specific ministries, national agencies, etc) as well as independent experts.
What is the test for determining whether a vertical restraint will be subject to antitrust law in your jurisdiction? Has the law in your jurisdiction regarding vertical restraints been applied extraterritorially? Has it been applied in a pure internet context and if so, what factors were deemed relevant when considering jurisdiction?
The Law of Ukraine on Protection of Economic Competition of 2001 (the Competition Law) applies to relations that have or may have an impact on economic competition in Ukraine, irrespective of the parties' domicile, place of agreement, and so on. This provision can be reasonably interpreted as an effects doctrine applicable to concerted practices in general and vertical restraints in particular. In practice, however, considering that the Antimonopoly Committee of Ukraine (AMC) has exclusive competence to decide on whether certain concerted practices have or may have an impact on economic competition in Ukraine, there is very little room for self-assessment.
There is no public record of extraterritorial application of the Competition Law regarding vertical restraints; however, the AMC regularly acts extraterritorially on other issues (eg, foreign-to-foreign mergers), and theoretically may do so with respect to vertical restraints that are imposed by non-Ukrainian undertakings and that concern Ukrainian product markets. However, extraterritorial enforcement of the AMC decision appears hardly practicable owing to a number of legal uncertainties and technical complications associated with cross-border reciprocal recognition of court judgments (through which the AMC decisions are forcibly imposed).
There is also no public record of the Ukrainian competition rules regarding vertical restraints being applied in a pure internet context.
Agreements concluded by public entities
To what extent does antitrust law apply to vertical restraints in agreements concluded by public entities?
The Law of Ukraine on Protection of Economic Competition of 2001 (the Competition Law) and other applicable regulations apply with respect to vertical restraints to both private and public entities, irrespective of their legal form and type of ownership if they are ‘undertakings' in the meaning of the Competition Law, which stipulates that state bodies, local self-administration authorities and bodies of administrative and economic management and control are considered undertakings for these purposes, including in the context of vertical restraints, in that part of their activities that concerns manufacture, sale and purchase of goods or other commercial activity.
Do particular laws or regulations apply to the assessment of vertical restraints in specific sectors of industry (motor cars, insurance, etc)? Please identify the rules and the sectors they cover.
The Law of Ukraine on Protection of Economic Competition of 2001 (the Competition Law) provides for a general exemption of concerted practices involving the transfer of intellectual property rights or the use of intellectual property (still, the Law of Ukraine on the State Regulation on Technology Transfer Activities of 2006 contains the list of prohibited restraints). As regards the motor sector, general rules apply (the Competition Law and the Vertical Block Exemption Regulation). Ukraine has implemented the Commission Regulation (EU) No. 330/2010 of 20 April 2010 on the application of article 101(3) of the Treaty on the Functioning of the European Union (TFEU) to categories of vertical agreements and concerted practices, but does not intend to supplement the regulation with EU special rules for the motor sector.
In February 2019, the Antimonopoly Committee of Ukraine (AMC) issued recommendatory guidelines on the application of competition laws to vertical relations in the pharmaceutical industry. The document summarises the authority's practice, providing guidance on matters such as market definition and identifying areas of potential AMC concern. In particular, the AMC clarified that the following practices are potentially anticompetitive:
Arrangements on the above, acccording to the AMC, likely aim at or result in restriction, elimination or prevention of competition by foreclosing generic drugs manufacturers from the market; they may also lead to market sharing or excessive pricing.
Are there any general exceptions from antitrust law for certain types of agreement containing vertical restraints? If so, please describe.
The Law of Ukraine on Protection of Economic Competition of 2001 sets general rules exempting vertical restraints concerning a product's supply and the use and transfer of intellectual property rights (IPRs) or the use of intellectual property (IP).
Products supply and use
The general prohibition does not apply to those restrictions imposed on the other party to the agreement, which limit:
This exemption does not apply, however, where such restrictions:
The Vertical Block Exemption Regulation added more detail to these rules.
Transfer of IPRs or use of IP
The general prohibition does not apply to those restrictions imposed on the transferee (licensee) that do not exceed the limits of the legitimate rights of the owner of the IP. Vertical agreements containing provisions that relate to the assignment to the buyer or use by the buyer of intellectual property rights are also covered by the Vertical Block Exemption Regulation to the extent that those provisions do not constitute the primary object of such agreements and are directly related to the use, sale or resale of products by the buyer or its customers; and that, in relation to the contract products, those provisions do not contain restrictions of competition having the same object as vertical restraints that are not exempted under the Vertical Block Exemption Regulation.
The Resolution of the AMC on Establishing Standard Requirements to Concerted Practices of Undertakings concerning Technology Transfer Agreements of 2018 provides further guidance on this.
To the extent applicable in vertical context, the general prohibition does not apply to joint purchasing arrangements of small and medium-sized enterprises that do not result in significant restriction of competition and contribute to strengthening such companies' competitiveness.
TYPES OF AGREEMENT
Is there a definition of 'agreement' - or its equivalent - in the antitrust law of your jurisdiction?
The Law of Ukraine on Protection of Economic Competition of 2001 and regulations applicable to vertical restraints do not define 'agreement' and thus, the more general civil law notion should be considered. In particular, the Civil Code of Ukraine of 2003 defines the term 'arrangement or transaction' as actions aimed at the establishment, alteration or termination of civil rights and obligations. The term 'agreement' is similarly defined in the Recommendations on the Application of the Concept on Control of 2018.
The Antimonopoly Committee of Ukraine (AMC) may assess agreements in aggregate. In particular, pursuant to the Vertical Block Exemption Regulation, in cases where parallel networks of similar vertical restraints cover more than 50 per cent of a relevant market, the AMC may issue a resolution that the vertical block exemption will not apply to such restraints.
In order to engage the antitrust law in relation to vertical restraints, is it necessary for there to be a formal written agreement or can the relevant rules be engaged by an informal or unwritten understanding?
No. The prohibition of anticompetitive practices generally applies to any concerted practices irrespective of their form (eg, formal written agreements, informal oral arrangements, gentlemen's agreements and mutual understandings).
Parent and company-related agreements
In what circumstances do the vertical restraints rules apply to agreements between a parent company and a related company (or between related companies of the same parent company)?
The vertical restraints rules apply with respect to undertakings. Pursuant to the Law of Ukraine on Protection of Economic Competition of 2001 (the Competition Law), when defining the composition of an undertaking all controlling and controlled persons or entities of a separate undertaking in question should be included (ie, a group of undertakings is considered an undertaking itself). Thus, prohibition of anticompetitive concerted practices, including anticompetitive vertical restraints, does not apply to agreements concluded between separate undertakings belonging to the same group of undertakings, since they occur within the same undertaking.
The Competition Law defines 'related companies/persons' as undertakings or natural persons that jointly or in an agreed manner engage in commercial activity (including jointly or in an agreed manner influencing the commercial activity of another entity).
In what circumstances does antitrust law on vertical restraints apply to agent-principal agreements in which an undertaking agrees to perform certain services on a supplier's behalf for a sales-based commission payment?
According to the Vertical Block Exemption Regulation, agent-principal agreements shall not be regarded as vertical concerted practices (and shall not be subject to competition rules) if the agent does not bear any, or bears only insignificant, commercial or financial risks in relation to the activities performed for the principal in its capacity of the agent.
The Vertical Block Exemption Regulation further clarifies that the agent bears significant commercial or financial risks (alternative conditions) if the agent:
Where antitrust rules do not apply (or apply differently) to agent-principal relationships, is there guidance (or are there recent authority decisions) on what constitutes an agent-principal relationship for these purposes?
The law does not define ‘agency' for antitrust purposes (the Vertical Block Exemption Regulation only defines criteria for their exception), and the notion applicable in a general civil law context is used. The Civil Code of Ukraine of 2003 defines the commission agreement as an undertaking to perform certain actions on behalf and at the expense of the principal, while the Commercial Code of Ukraine of 2003 provides for a more detailed definition: commercial intermediation (agency) is an entrepreneurial activity whereby the commercial agent provides intermediary services to the principal, acting on behalf, in the interest, under control and at the expense of the latter. Both notions are equally referred to in the Vertical Block Exemption Regulation.
Intellectual property rights
Is antitrust law applied differently when the agreement containing the vertical restraint also contains provisions granting intellectual property rights (IPRs)?
The Law of Ukraine on Protection of Economic Competition of 2001 does not apply to agreements concerning the transfer of IPRs or the rights to use the IP where such agreements contain certain allowed limitations on the economic activities of the transferee, in particular, on the volume of transferred rights, the period and the territory of permitted use of the IP, type of activity, application and the minimal production volume.
However, if the provisions on the transfer of IPRs form part of a broader agreement, general rules apply to the remaining part of the agreement. If an agreement involves technology transfer it should also be analysed against the list of prohibited restraints contained in the Law of Ukraine on the State Regulation on Technology Transfer Activities of 2006.
ANALYTICAL FRAMEWORK FOR ASSESSMENT
Explain the analytical framework that applies when assessing vertical restraints under antitrust law.
Some arrangements have an anticompetitive aim and are considered per se unlawful, such as price-fixing or output restrictions. The analytical framework for assessment of other vertical restraints may include the following steps:
In exceptional cases,and as a last resort,a vertical restraint prohibited bythe AMCmaybe cleared bya decision ofthe Cabinet. This will involve illustrating that:
To what extent are supplier market shares relevant when assessing the legality of individual restraints? Are the market positions and conduct of other suppliers relevant? Is it relevant whether certain types of restriction are widely used by suppliers in the market?
The supplier's market share will be most relevant when considering whether a vertical restraint may benefit from the Vertical Block Exemption Regulation.
While the restrictions not covered by the said regulation may still be cleared individually under the Resolution of the Antimonopoly Committee of Ukraine (AMC) on the Procedure for Filing Applications with the AMC for Obtaining its Approval of the Concerted Practices of the Undertakings of 2002 (unless they result in substantial restriction of competition), the authority will rather assess whether they carry strong efficiencies (ie, better quality of the products, cost efficiencies etc) than consider their historical background or whether they may be considered usual practice. During the review of an application for individual clearance the authority would consider, among other things, the market position of other suppliers (as well as other market players), the general market structure and the resulting changes of the restraint in question.
To what extent are buyer market shares relevant when assessing the legality of individual restraints? Are the market positions and conduct of other buyers relevant? Is it relevant whether certain types of restriction are widely used by buyers in the market?
The Antimonopoly Committee of Ukraine's approach is similar for buyer market shares as for supplier market shares.
BLOCK EXEMPTION AND SAFE HARBOUR
Is there a block exemption or safe harbour that provides certainty to companies as to the legality of vertical restraints under certain conditions? If so, please explain how this block exemption or safe harbour functions.
The Vertical Block Exemption Regulation generally exempts vertical restraints (save for hardcore restrictions) where the market shares of the supplier and the buyer on the market where they respectively sell and buy the contract goods or services, do not exceed 30 per cent.
The following practices are not covered by the exemption:
The Resolution of the AMC on Establishing Standard Requirements to Concerted Practices of Undertakings concerning Technology Transfer Agreements of 2018 exempts technology transfer agreements if:
A technology transfer agreement, as a whole, will not benefit from the exemption if it contains hardcore restrictions, such as restrictions on resale prices, limitation of output, allocation of markets or customers, restriction of the licensee's ability to exploit its own technology rights and so on.
The Joint Puchasing Regulation (to the extent it applies in vertical context) exempts joint purchasing arrangements among small and medium-sized enterprises if (with some exceptions):
TYPES OF RESTRAINT
Assessment of restrictions
How is restricting the buyer's ability to determine its resale price assessed under antitrust law?
Generally, anticompetitive concerted actions that set prices or other conditions with respect to the purchase or sale of products are prohibited. The Vertical Block Exemption regulation explicitly defines fixing a resale price and establishing a minimum resale price as hardcore restrictions. Theoretically, such restrictions may still benefit from an individual exemption by the Antimonopoly Committee of Ukraine (AMC), but to obtain that, in addition to arguing economic efficiencies, the parties will also need to show that such restriction does not result in substantial restriction of competition. The Law of Ukraine on Protection of Economic Competition of 2001 lacks the proper definition of substantial restriction of competition and a great degree of discretion is vested in this respect with the AMC.
The establishment of maximum and recommended resale prices is generally not viewed as problematic (unless those amount to a fixed or minimum sale price as a result of pressure or certain incentives).
Have the authorities considered in their decisions or guidelines resale price maintenance restrictions that apply for a limited period to the launch of a new product or brand, or to a specific promotion or sales campaign; or specifically to prevent a retailer using a brand as a ‘loss leader'?
There are no publicly available AMC decisions on the issue and such arrangements are likely to be analysed under the general rules and exemptions applicable to the establishment of resale prices.
Have decisions or guidelines relating to resale price maintenance addressed the possible links between such conduct and other forms of restraint?
It is likely that, to assess the degree of impact on the market and possible foreclosure effects, the Antimonopoly Committee of Ukraine (AMC) may consider other restrictive provisions in combination with resale price maintenance restrictions.
Have decisions or guidelines relating to resale price maintenance addressed the efficiencies that can arguably arise out of such restrictions?
There are no publicly available AMC decisions or guidelines containing such analysis. The AMC makes an assessment of any efficiencies that may be brought about by a restrictive provision (including resale price maintenance restrictions) in the course of the review of the parties' application for individual exemption under the Resolution of the Antimonopoly Committee of Ukraine (AMC) on the Procedure for Filing Applications with the AMC for Obtaining its Approval of the Concerted Practices of the Undertakings of 2002. In addition to arguing efficiencies, the parties will also need to show that resale price maintenance will not result in substantial restriction of competition. The burden of proof lies on the parties.
Explain how a buyer agreeing to set its retail price for supplier A's products by reference to its retail price for supplier B's equivalent products is assessed.
There are no publicly available AMC decisions in this respect, but, given that the AMC considers alignment with competitors' prices anticompetitive (as parallel behaviour without justification), it is likely that setting retail prices for supplier A's products by reference to supplier B's retail price may be also seen by the AMC as anticompetitive and aimed at or resulting in elimination of price competition between suppliers' products at the retail level.
Explain how a supplier warranting to the buyer that it will supply the contract products on the terms applied to the supplier's most-favoured customer, or that it will not supply the contract products on more favourable terms to other buyers, is assessed.
It may be assumed that, where sufficient competition at the retail level exists, most-favoured nation clauses (MFNs) may benefit end-customers and be regarded by the Antimonopoly Committee of Ukraine (AMC) as pro-competitive and thus authorised. If, however, MFN clauses are applied to buyers that have strong market positions at the retail level, the AMC may find wholesale MFNs as facilitating coordination of competitive behaviour and softening of competition between the retailers (eg, via unjustified price growth). Reportedly, there has been at least one decision of the AMC's regional division (although this decision is not publicly available), where very similar practices were found to be anticompetitive, but this does not appear indicative of the AMC's position, given that the AMC comes across similar provisions in contracts quite often, and has not expressed concerns (at least where no dominant players were involved).
Explain how a supplier agreeing to sell a product via internet platform A at the same price as it sells the product via internet platform B is assessed.
The supplier is free to set prices for its products within an agent-principal arrangement, but competition concerns may arise if the supplier enjoys some degree of market power at the supply level and the agent acts as an independent undertaking at the resale level.
Explain how a supplier preventing a buyer from advertising its products for sale below a certain price (but allowing that buyer subsequently to offer discounts to its customers) is assessed.
There is no relevant guidance or precedent enforcement practice by the AMC on the minimum advertised price policy (MAPP) or internet minimum advertised price (IMAP) issue. There is an appreciable risk that such restrictions will be treated by the AMC as an indirect resale price maintenance obligation. Thus, it is advisable to obtain either a positive opinion letter from the authority or individual antitrust clearance before implementing such MAPP or IMAP.
Explain how a buyer's warranting to the supplier that it will purchase the contract products on terms applied to the buyer's most-favoured supplier, or that it will not purchase the contract products on more favourable terms from other suppliers, is assessed.
The AMC assesses buyers purchasing under favourable conditions in broadly the same way it assesses suppliers selling to consumers.
Restrictions on territory
How is restricting the territory into which a buyer may resell contract products assessed? In what circumstances may a supplier require a buyer of its products not to resell the products in certain territories?
Allocating territories under the exclusive distribution is exempted by the Vertical Block Exemption Regulation (except for restrictions of passive sales), provided that the market shares of the supplier and the buyer on the market where they respectively sell and buy the contract goods or services, do not exceed 30 per cent. As regards selective distribution, the said guidelines permit restrictions on members of a selective distribution system on operating out of their unauthorised place of establishment.
Have decisions or guidance on vertical restraints dealt in any way with restrictions on the territory into which a buyer selling via the internet may resell contract products?
The antitrust aspect of internet sales is not specifically regulated by the Law of Ukraine on Protection of Economic Competition of 2001. There are also no publicly available Antimonopoly Committee of Ukraine (AMC) or court decisions in relation to restrictions on internet sales.It is expected, though, that having implemented EURegulation No. 330/2010, the AMC will also refer to the relevant EC Vertical Guidelines and established EU courts' practice for practical guidance.
Restrictions on customers
Explain how restricting the customers to whom a buyer may resell contract products is assessed. In what circumstances may a supplier require a buyer not to resell products to certain resellers or end-consumers?
The following may be permissible under the Vertical Block Exemption Regulation (if the relevant market share test is met):
Restrictions on use
How is restricting the uses to which a buyer puts the contract products assessed?
Restrictions on the use to which a buyer may put the contract products may be caught by the prohibition on putting into agreements additional obligations that are not related to the subject matter of the agreement. However, such restrictions may be allowed under block exemptions:
Restrictions on online sales
How is restricting the buyer's ability to generate or effect sales via the internet assessed?
The antitrust aspect of internet advertising and sales is not specifically regulated by the Law of Ukraine on Protection of Economic Competition of 2001. There is also no public record of Antimonopoly Committee of Ukraine (AMC) decisions in relation to restrictions on using the internet for advertising or selling, or antitrust-based litigation resulting in court judgments regarding restrictions on internet sales. It is anticipated, though, that the AMC will generally follow EC Commission and courts' practice on the issue.
Have decisions or guidelines on vertical restraints dealt in any way with the differential treatment of different types of internet sales channel? In particular, have there been any developments in relation to ‘platform bans'?
Ukrainian competition laws and regulations do not specifically address this. Also, there is no publicly available AMC decision analysing such issues.
Selective distribution systems
Briefly explain how agreements establishing ‘selective' distribution systems are assessed. Must the criteria for selection be published?
Selective distribution systems may be exempt under the Vertical Block Exemption Regulation, provided that the applicable market share thresholds are met. Irrespective of the parties' market shares, the following will be regarded as hardcore restrictions:
Also, any direct or indirect obligation causing the members of a selective distribution system not to sell the brands of particular competing suppliers will not be covered by the said block exemption regulation.
Currently, there is no available AntimonopolyCommittee ofUkraine (AMC)practice prohibiting the selective distribution systems from limiting the total number distributors admitted to the system.
Are selective distribution systems more likely to be lawful where they relate to certain types of product? If so, which types of product and why?
There is no clear legal guidance on the issue. However, it is likely that selective distribution systems relating to certain types of product requiring specific presentation and protection of brand reputation (eg, luxury products and cars) or treatment and personnel (eg, healthcare and cosmetics) will be justified. Also, it is quite likely that the AMC will follow the EC approach in this respect.
In selective distribution systems, what kinds of restrictions on internet sales by approved distributors are permitted and in what circumstances? To what extent must internet sales criteria mirror offline sales criteria?
There is no legal guidance on the issue.
Has the authority taken any decisions in relation to actions by suppliers to enforce the terms of selective distribution agreements where such actions are aimed at preventing sales by unauthorised buyers or sales by authorised buyers in an unauthorised manner?
There is no public record of such decisions.
Does the relevant authority take into account the possible cumulative restrictive effects of multiple selective distribution systems operating in the same market?
The AMC will likely consider the market structure as one of the relevant factors for the market analysis. The possible cumulative restrictive effects of multiple selective distribution systems may also be taken into account. It is the AMC's position that vertical restraints may have cumulative restrictive effects if selective distribution systems cover more than 50 per cent of the market.
Has the authority taken decisions (or is there guidance) concerning distribution arrangements that combine selective distribution with restrictions on the territory into which approved buyers may resell the contract products?
Restriction of active or passive sales to end-users by the approved members of a selective distribution system operating at the retail level of trade (except for permissible restriction from selling to unauthorised distributors or unauthorised points of sale located in the territory of the selective distribution system) and restriction of cross-supplies between distributors within a selective distribution system are expressly considered as hardcore restrictions, irrespective of the market shares of the parties.
How is restricting the buyer's ability to obtain the supplier's products from alternative sources assessed?
Restriction on the buyer's ability to obtain the supplier's products from alternative sources may come within several categories of prohibited practices (eg, as dividing markets or sources of supply, ousting of other suppliers from the market or limitation of their access to the market, or substantial limitation of competitiveness of the buyer without objectively justifiable reasons). In particular, such restrictions may amount to a non-compete obligation, exempt under the Vertical Block Exemption Regulation only if their duration does not exceed five years and the parties' market shares are below 30 per cent.
How is restricting the buyer's ability to sell non-competing products that the supplier deems ‘inappropriate' assessed?
Such restriction may be exempt under the Vertical Block Exemption Regulation, provided that the parties meet the market share thresholds. Otherwise, such restrictions may be cleared individually, unless they result in substantial restriction of competition.
Explain how restricting the buyer's ability to stock products competing with those supplied by the supplier under the agreement is assessed.
Restriction on the buyer's ability to stock products competing with those supplied by the supplier may amount to a noncompete obligation, which is exempt under the Vertical Block Exemption Regulation, provided that the parties meet the applicable thresholds and duration of the restriction does not exceed five years. Otherwise, such restrictions may be cleared individually, unless they result in substantial restriction of competition.
How is requiring the buyer to purchase from the supplier a certain amount or minimum percentage of the contract products or a full range of the supplier's products assessed?
A requirement that the buyer purchase a certain amount, a minimum percentage of the contract products or a full range of the supplier's products may pose competition concerns, especially if the supplier's market position is strong or it is an important source of supply for other reasons. These practices may amount to a non-compete obligation and will be assessed similarly to restrictions to the buyer's ability to sell non-competing products that the supplier deems inappropriate.
Explain how restricting the supplier's ability to supply to other buyers is assessed.
Restricting the supplier's ability to supply to other buyers may be covered by the Vertical Block Exemption Regulation, if the parties meet the market share thresholds. Otherwise, the general rules will apply.
Explain how restricting the supplier's ability to sell directly to end-consumers is assessed.
Restricting the supplier's ability to sell directly to end-consumers is not prohibited as such and, for example, may make up part of an exclusive distribution system that allows a supplier to keep the wholesale and retail level of trade separate. However, the restriction of the supplier's ability to sell components as spare parts to end-users or to repairers or other service providers not entrusted by the buyer with the repair or servicing of its goods is regarded as a hardcore restriction.
Have guidelines or agency decisions in your jurisdiction dealt with the antitrust assessment of restrictions on suppliers other than those covered above? If so, what were the restrictions in question and how were they assessed?
Outline any formal procedure for notifying agreements containing vertical restraints to the authority responsible for antitrust enforcement.
The Law of Ukraine on Protection of Economic Competition of 2001 (the Competition Law) provides for the possibility of individual exemptions: agreements containing vertical restraints that are not covered by the Vertical Block Exemption Regulation or other block exemptions may not be executed, unless individually exempt in accordance with the procedure prescribed by the Resolution of the Antimonopoly Committee of Ukraine (AMC) on the Procedure for Filing Applications with the AMC for Obtaining its Approval of the Concerted Practices of the Undertakings of 2002. A more reasonable interpretation of this prohibition allows execution of an agreement prior to clearance, provided the parties refrain from its implementation until it is authorised by the AMC.
Further, although the Competition Law provides some room for self-assessment of vertical agreements, in practice, the AMC expects that restrictive arrangements that are not covered by block exemptions are notified.
The notified agreement may be individually exempt if the parties prove its economic efficiencies, such as:
However, AMC authorisation may not be granted if the agreement results in substantial restriction of competition in the market or a significant part thereof.
The parties seeking individual exemption must submit an application for clearance to the AMC. Upon review of the application, which may last three and a half months (and can be further extended), the AMC takes a reasoned decision to authorise the notified agreement or, if the notified agreement raises any competition concerns, the AMC initiates an in-depth investigation (Phase II review). The statutory Phase II review period is limited to three months from the date when all the information requested by the AMC was provided. However, in practice, the AMC investigation may take much longer since the AMC may request additional information, in which case a new three-month period would begin from the date on which the requested information was filed with the AMC. In practice, depending on the complexity of the case, the Phase II review period may last up to one year or even more. Within the second phase, the AMC may hold hearings of the applicants and interested parties. Following an in-depth investigation, the AMC may authorise, conditionally authorise or prohibit implementation of the notified agreement. Since mid 2015, the AMC has published non-confidential versions of its decisions.
Exceptionally, a prohibited agreement may be exempted by a decision of the Cabinet based on the above efficiencies analysis, unless the restrictions contained therein are not indispensable to the attainment of the above efficiencies or the resulting restriction of competition constitutes a threat to the market economy system.
If there is no formal procedure for notification, is it possible to obtain guidance from the authority responsible for antitrust enforcement or a declaratory judgment from a court as to the assessment of a particular agreement in certain circumstances?
It is possible to obtain guidance from the AMC. The following procedures are available:
Complaints procedure for private parties
Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?
Private parties may file complaints to the Antimonopoly Committee of Ukraine (AMC) bodies about alleged violations of the relevant competition laws. The complainants may either be parties to the relevant restrictive agreement or third parties. The filing and investigation procedure is governed by the Rules for Investigation of Antitrust Violations of 1994.
If not rejected on formal grounds, the complaint shall be reviewed by the AMC within 30 calendar days (extendable further by 60 calendar days if additional information is required). Review of the complaint is finalised by the issuance of the resolution to initiate or reject the initiation of the investigation of the case. The time of investigation on the substance is not limited.
How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?
No separate statistics are publicly available with regard to vertical restraints. Based on available general Antimonopoly Committee of Ukraine (AMC) statistics, the vertical restraints proportion is likely to be significantly below 15 per cent.
What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?
The Law of Ukraine on Protection of Economic Competition of 2001 does not declare agreements containing prohibited vertical restraints void per se. Respective provisions of an agreement and even the entire agreement may be rendered null and void by a court if requested by interested parties based on the AMC's decision establishing the violation of Ukrainian competition law. Recent case law argues that agreements among shareholders aimed at the restriction or elimination of economic competition in the Ukrainian product markets are void. It is not clear whether the courts will extend this approach to cases regarding vertical restraints.
May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?
The Antimonopoly Committee of Ukraine (AMC) is entitled to impose fines for violation of Ukrainian competition law, including implementation of prohibited concerted practices, as well as to impose other obligations on the parties (eg, imposing conditions on the authorisation of the restrictive agreement or obliging the parties to terminate the violation). If the fine is not paid voluntarily, the AMC decision may be enforced in court.
No separate AMC statistics regarding fines for implementation of prohibited vertical restraints is available. According to the AMC Fining Guidelines of 2016 (recommendatory, but the AMC is committed to strictly follow these), the basic amount of fine for implementation of anticompetitive concerted practices (including vertical restraints) may be equal to either:
According to the above-mentioned Fining Guidelines, the AMC may apply coefficients (depending on the effect of violation on competition, social importance of the products, profitability of economic activity connected with violation) that may increase or decrease the fine. Also, in each case, the above basic amounts are subject to possible further adjustment for aggravating or mitigating circumstances.
Still, theoretically, the maximum possible fine may amount to up to 10 per cent of the group worldwide turnover of the infringing undertaking in the financial year preceding the year in which the fine is imposed.
Notably, in 2019, the AMC imposed a historically record-breaking total fine of 6.5 billion hryvnas for vertical restraints.
Investigative powers of the authority
What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?
The Antimonopoly Committee of Ukraine (AMC) has broad investigative powers, including the power to:
Failure to provide information at the AMC's request or provision of incorrect or incomplete information, as well as prevention of the AMC's inspections and other evidence-collection activities, is punishable by a fine of up to 1 per cent of the group worldwide turnover of the infringing undertaking in the financial year preceding the year in which the fine is imposed.
To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?
An infringing party may be exposed to damages claims by aggrieved third parties (eg, competitors) and theoretically a party to a prohibited agreement is not precluded from recovering damages from the other parties to the agreement.
Persons that sustained damage as a result of an unauthorised or prohibited transaction may seek damages in court. Damages are awarded at twice the amount of the loss. Claims for damages are subject to a general three-year limitation period.
Is there any unique point relating to the assessment of vertical restraints in your jurisdiction that is not covered above?
UPDATE AND TRENDS
What were the most significant two or three decisions or developments in this area in the last 12 months?
The tobacco cartel was the most high-profile Antimonopoly Committee of Ukraine (AMC) vertical cartel case in 2019. In October 2019, the AMC imposed a historically record-breaking total fine of 6.5 billion hryvnas on the four largest Ukrainian tobacco manufacturers (part of global groups) and the largest distributor of tobacco products, Tedis Ukraine (formerly Megapolis), for anticompetitive vertical practices.
According to the AMC, parties to the alleged cartel created and then maintained artificial barriers to entry to the Ukrainian cigarettes' distribution market by other (potential) distributors by colluding to work de facto exclusively with Tedis Ukraine. The case is another AMC probe against Tedis Ukraine after the large-scale abuse of dominance investigation resulted in fining the company 431 million hryvnas in 2016.