Merger control in Ukraine: overview

Regulatory framework

1. What (if any) merger control rules apply to mergers and acquisitions in your jurisdiction? What is the regulatory authority?

Regulatory framework

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

Applicable laws and regulations include the:

Law on Protection of Economic Competition 2001 (Competition Law).
Law on the Antimonopoly Committee of Ukraine 1993 (AMC Law).
Commercial Code of Ukraine 2003.
Regulation on the Procedure for Filing Applications with the Antimonopoly Committee of Ukraine for Obtaining its Prior Approval of the Concentration of Undertakings 2002 (Concentrations Regulation).
Methodology for Assessment of the Monopoly (Dominant) Position of Undertakings on the Market 2002.
Guidelines on Calculation of Fines for Ukrainian Competition Law Violations 2016 (Guidelines on Fines).
Guidelines on the Assessment of Horizontal Mergers 2016.
Guidelines on the Assessment of Non-Horizontal Mergers 2018.
Guidelines on Definition of Control 2018.
Guidelines on the Assessment of Joint Ventures 2019.
Guidelines on the Application of SSNIP Test 2020.

Regulatory authority

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

Triggering events/thresholds

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

Triggering events

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

Merger or takeover of one undertaking by another.
Acquisition of direct or indirect control over an undertaking (including through the acquisition or lease of its assets, appointment to management positions and so on).
Establishment by two or more undertakings of a new undertaking that will independently pursue business activity on a lasting basis and its establishment will not result in co-ordination of competitive behaviour of either:
- its parents;
- the new undertaking, on the one hand, and its parents, on the other.
Direct or indirect acquisition(s) of participation interests (shares, equity), whether controlling or non-controlling, where certain thresholds (25% or 50% of the votes in the highest governing body of the undertaking concerned) are reached or exceeded.

The following are not considered concentrations:

The establishment of a new undertaking aiming at or resulting in co-ordination of competitive behaviour of either its parents or of the new undertaking and its parents. This kind of establishment is generally regarded as a concerted practice and may require a separate antitrust clearance.
An acquisition of shares qualifying as a financial buyer transaction (that is, shares are acquired by a financial institution for the purposes of further resale within a one-year period (extendable), provided that the acquirer does not exercise voting rights in the meantime).
Intra-group transactions, unless control links within the group were established in violation of the Ukrainian merger control rules.
An acquisition of control over an undertaking, or a part of an undertaking, by a receiver or a representative of the state authority.
An acquisition by the bank or other financial institution of shares/assets of an undertaking, if the acquisition is made in a recovery proceeding and is provided subject to a restructuring plan approved in accordance with the Law On Financial Restructuring, assuming such shares/assets will be further resold to a third party during the next two years.

The limitation period for the authority to take action in relation to mergers is five years from closing.

Thresholds

A concentration is notifiable and requires prior approval by the AMC if in the financial year immediately preceding the year of the concentration either of the following thresholds is met:

The combined worldwide value of assets or turnover of the parties to the concentration exceeds EUR30 million and the value of Ukrainian assets or turnover of each of at least two parties exceeds EUR4 million.
The value of Ukrainian assets or turnover of the target group (including the controlling parent(s)) or of at least one of the founders of a new entity exceeds EUR8 million and worldwide turnover of at least one other party exceeded EUR150 million.

All figures must be taken at the parties' corporate group level (that is, including all entities connected by control relationships with the parties). Control is broadly defined as the ability to exercise decisive influence (including via blocking rights) on the strategic decisions related to the business activity of an undertaking. In particular, control is deemed to exist if an undertaking:

Directly or indirectly holds or manages more than 50% of shares or votes in another undertaking.
Is entitled to receive at least 50% of profit in another undertaking.
Is authorised to appoint CEO, deputy CEO or more than 50% of the members of another undertaking's corporate bodies (or if the same persons hold positions of CEO, deputy CEO, the Chairman, the Deputy Chairman or more than 50% of members of said boards or committees in two undertakings).
Otherwise controls another undertaking (through contractual arrangements, for example, management or joint activity).

Turnover or assets figures of non-controlling interests are not taken into consideration when determining the turnover or assets for the purpose of thresholds calculation.

Special rules apply to the calculation of thresholds for banking and insurance companies, as follows:

Banking companies. One tenth of the bank's assets must be considered for the purposes of turnover/asset threshold.
Insurance companies. The net assets of an insurance company must be considered for the purposes of the asset threshold, and the revenues from insurance activities must be considered for the purposes of the turnover threshold.

Even if a transaction falls below the thresholds, the parties can still apply for clearance on a precautionary basis.

Notification

3. What are the notification requirements for mergers?

Mandatory or voluntary

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

Timing

The law does not set any specific deadlines for filing a notifiable concentration. The only requirement is that AMC approval is obtained before closing.

Pre-notification and formal/informal guidance

Parties to a transaction may refer to the AMC for formal guidance (in the form of a non-binding preliminary opinion) on whether the concentration is notifiable, or whether the clearance is likely to be granted or refused.

The law does not provide for formal pre-filing consultations although informal pre-filing discussions are usually possible. The parties can request formal consultations with the AMC during the 15-day preview period (see Question 4).

Responsibility for notification

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

Relevant authority

The AMC is the relevant authority. However, if the AMC prohibits a concentration, it may still be approved by the Cabinet of Ministers on public interest considerations (see Question 7).

Form of notification

The parties must submit a written notification with the contents and annexes required under the Concentrations Regulation. There is no prescribed form of notification. The parties must also submit electronic versions of the notification and all documents attached to it (on CD).

The notification can be submitted based on the letter of intent, memorandum of understanding, draft agreement, or any other document outlining in sufficient detail the transaction structure (that is, parties involved and essential terms).

Submission of a draft notification is not required.

Filing fee

The filing fee is UAH20,400 per one notifiable event (there may be multiple events depending on the transaction structure) to be paid by either party.

Obligation to suspend

The parties must suspend implementation of the transaction until the AMC clearance is granted. In addition, they must refrain from any actions that may restrict competition and make restoration of the initial state of affairs impossible (for example, through pre-clearance "gun-jumping"). This suspension requirement applies globally. Early termination is not possible.

Other

In connection with the conflict with Russia, Ukraine introduced sanctions against certain entities and individuals. Under the Competition Law, the AMC must reject notifications (or drop their review, if they are already in Phase I or II) if the notified concentrations are prohibited by the Law on Sanctions. According to the AMC, the new rules apply to situations where:

Any of the parties to the concentration (or any entity/individual connected by control relationships with them) is in the Ukrainian sanctions list.
A particular type of sanctions applies to a given individual or entity (for example, assets freeze).

Procedure and timetable

4. What are the applicable procedures and timetable?

The standard merger review procedure includes the following steps:

Preview period. The AMC has 15 calendar days to decide whether the notification is complete and can be forwarded for the substantive review (Phase I). If the AMC considers the notification incomplete, it is rejected and should be resubmitted.
Phase I review. This stage involves a substantive review and assessment by the AMC of whether the concentration can be approved or whether there are potential grounds to prohibit the concentration, in which case Phase II is initiated. The assessment must be completed within 30 calendar days following acceptance of the notification for substantive review. In practice, during this period the AMC will either issue the clearance or initiate Phase II.
Phase II review. The Phase II review involves a close analysis of the transaction and the associated competition concerns, examination of expert opinions and other additional information. The recommended Phase II review period is up to 135 calendar days from the date the authority sends the notice regarding the initiation of Phase II to the parties. During Phase II, the AMC will either issue the clearance (either conditional or unconditional) or adopt a prohibitive decision.

If prior to or on the date when Phase I period or Phase II period expires the AMC has failed to adopt any decision on the concentration, clearance by tacit consent is deemed to have been granted, though the AMC does not normally clear by tacit consent.

The law also provides for the fast-track simplified 25-day review procedure for transactions where either:

Only one party is active in Ukraine.
The parties' combined shares do not exceed 15% on the overlapping markets or 20% on vertically related markets. The AMC tends to interpret these thresholds quite restrictively, irrespective of whether an overlap occurs on a relevant or non-relevant market.

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

Publicity and confidentiality

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

Publicity

The AMC must publish non-confidential versions of the following documents on its website:

Decisions on merger and concerted practice applications and cases.
Decisions on violation of competition cases.
Notices on initiation of merger Phase II reviews.
These documents should be published within ten working days of the adoption of the resolution or decision.

Currently, the AMC also publishes on its website a short note of the decision/resolution made (with the identity of the parties and the outcome) followed by publication of the non-confidential version of the relevant decision/resolution (see below, Confidentiality on request).

Automatic confidentiality

Automatic confidentiality does not apply to any information.

Confidentiality on request

Confidentiality may be available to the parties on request. The parties must provide a grounded justification when applying for the confidentiality, as well as a non-confidential version of the information. If not satisfactorily justified, the parties' confidentiality request will be rejected by the AMC.

Rights of third parties

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

Representations

Third parties (for example, competitors and customers of the notifying parties) can be involved during the Phase II review if the notified transaction may significantly affect their rights and interests. The law is generally silent on whether and how third parties must show an interest in the transaction. The decision on their involvement is up to the discretion of the AMC. The law also does not distinguish between different classes of third parties with respect to the rights they have.

Document access

Third parties participating in an investigation have the right to access case materials, except for confidential information (see Question 5) and/or other information, disclosure of which may cause harm to the interests of the other parties involved or hinder further review of the case.

Be heard

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

Substantive test

7. What is the substantive test?

The AMC approves the concentration if it does not lead to monopolisation (creating or strengthening the party's monopoly/dominant position) or substantial restriction of competition on the Ukrainian market or a significant part of it. Otherwise, the transaction will be prohibited unless the parties offer sufficient remedies.

If the AMC identifies the grounds to prohibit the transaction, it opens Phase II investigation (see Question 4).

Ukrainian competition laws define monopolistic (dominant) position and set out the relevant benchmarks, which are:

Above 35% market share if held individually, unless it proves that effective competition exists on the market.
Above 50% if held collectively by not more than three largest undertakings (where each can be considered dominant), unless they prove that effective competition exists on the market.
Above 70% if held collectively by not more than five largest undertakings (where each can be considered dominant), unless they prove that effective competition exists on the market.

Each transaction is assessed on a case-by-case basis. Further, under the Guidelines on the Assessment of Horizontal Mergers and the Guidelines on the Assessment of Non-Horizontal Mergers, the AMC will investigate possible unilateral and/or co-ordinated effects of the transaction, as well as countervailing factors (such as buyer power, market entry, failing firm defence).

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

Is not necessary for achieving the purpose of the concentration.
Jeopardises the market economy system.

8. What, if any, arguments can be used to counter competition issues (efficiencies, customer benefits)?

The Guidelines on the Assessment of Horizontal Mergers and the Guidelines on the Assessment of Non-Horizontal Mergers clarify that the AMC will take the following countervailing factors into account:

Likelihood that buyer power would act as a countervailing factor.
Likelihood that entry would maintain effective competition on the relevant markets.
Conditions for a failing firm defence (see Question 9).

The AMC can also take account of the transaction's potential to contribute to modernisation and rationalisation of production, purchase or sales, technical and product standards, promotion of technical, technological or economic development and so on.

If the transaction poses serious competition concerns, adequate remedies will be required.

Other efficiencies (such as the positive effects of the transaction on the public interest that outweigh the negative impact of the restriction of competition caused by the transaction) are likely to be taken into account by the Cabinet of Ministers, which may authorise a transaction that has been prohibited by the AMC (see Question 7).

9. Is it possible for the merging parties to raise a failing/exiting firm defence?

According to the Guidelines on the Assessment of Horizontal Mergers and the Guidelines on the Assessment of Non-Horizontal Mergers, the AMC can take into account a failing/exiting firm defence.

However, in cases posing serious competition concerns, adequate remedies are likely to be required.

Remedies, penalties and appeal

10. What remedies (commitments or undertakings) can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?

The AMC clearance decision can be made conditional on the parties' undertaking to perform, or refrain from performing, certain actions aiming to remove or mitigate the negative impact of the concentration on the market competition, which may be either:

Structural (for example, divestitures).
Behavioural (for example, restrictions on use or management of certain assets or price increases).

If during a Phase II review, the AMC identifies grounds to prohibit the concentration, it must inform the parties of these grounds and allow them 30 days (with possible extension) for offering remedies to resolve the competition concerns identified by the AMC, and therefore obtain clearance for the transaction. The AMC must also carry out consultations with the parties to agree on the terms and conditions of the remedies.

There are no comprehensive guidelines regarding the requirements for remedies, the only relevant requirements are that:

Remedies must alleviate competition concerns.
Remedies must be proportionate.
Supervision of their implementation must be reasonable.
Therefore, remedies are usually negotiated with the AMC on a case-by-case basis.

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

Failure to notify correctly

The statutory maximum fine for failure to notify is 5% of the group's turnover worldwide in the year immediately preceding the year when the fine is imposed.

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

In practice, the fines rarely reach the statutory maximum. The Guidelines on Fines set the following base fines in merger cases:

10% of the turnover on the relevant (and adjacent) Ukrainian markets for failure to notify a concentration that resulted in monopolisation or substantial restriction of competition.
Between UAH510,000 and 5% of the turnover on the relevant (and adjacent) Ukrainian markets for failure to notify a concentration that does not lead to monopolisation or significant restriction of competition and/or have impact on Ukrainian product markets.
Between UAH170,000 and UAH510,000 for failure to notify a concentration if the parties are active on non-overlapping and non-adjacent markets in Ukraine.

When defining the "base" fine, the AMC can apply coefficients depending on the effect of the violation on competition, the social importance of the market involved, and profitability of the economic activity connected with the violation, which may lead to an increase or a decrease of the fine. Additionally, the above "base" amounts are subject to possible further adjustment for aggravating and/or mitigating circumstances.

Although the Guidelines on Fines have a recommendatory nature and are non-binding, the AMC is publicly committed to follow its rules. The statutory ceiling of fine of 5% of the turnover in the year preceding the fining decision remains in force, but under the Guidelines on Fines can be imposed only in exceptional circumstances to ensure deterrence.

In addition to the financial penalties, parties may be subject to any or all of the following negative implications:

Third party damages claims (double the amount of actual damages sustained).
Reputational issues (information about the imposed fine, the identity of the parties, and non-confidential version of decisions are published by the AMC on its website) (see Question 5).
Invalidation of the transaction.

Additionally, the AMC may more actively scrutinise future notifications submitted by either party.

As regards notifying incorrectly, the following may lead to a fine of up to 1% of the infringer's turnover in the year immediately preceding the year when the fine is imposed:

Failure to timely provide requested information.
Provision of incomplete information.
Submission of false information to the AMC.

The Guidelines on Fines limit the "base" fine for the above informational violations to UAH136,000. This amount is also subject to possible adjustment in the case of aggravating or mitigating circumstances.

There is no criminal or administrative liability for individuals, except that a state official, the CEO (or a top manager) may incur a nominal administrative fine if they fail to provide information to the AMC or provide incorrect or misleading information. However, an efficient mechanism for implementation of this norm has not been created to date.

Implementation before approval or after prohibition

Implementation before approval entails virtually the same liability as failure to notify at all. However, in practice, closing a non-problematic transaction before clearance but after the filing was made receives a more favourable treatment by the AMC than an omission to file. Closing after prohibition may entail more severe sanctions (see below, Failure to observe).

Failure to observe

The statutory maximum fine for failure to observe the AMC decision prohibiting a concentration, or only partial compliance with it, is 10% of the party's worldwide turnover in the year immediately preceding the year when the fine is imposed. Under the Guidelines on Fines, the base fine for the above violations is 10% of the turnover on the relevant (and/or adjacent) Ukrainian market.

The statutory maximum fine for failure to observe the AMC clearance decision that imposes certain obligations on the parties to the concentration is 5% of their worldwide turnover in the year immediately preceding the year when the fine is imposed. Under the Guidelines on Fines, the base fine for this violation, if it results in monopolisation or significant restriction of competition, is 10% of the turnover on the relevant (and/or adjacent) Ukrainian market.

The base fine can be further increased or decreased, subject to the application of coefficients and the existence of aggravating or mitigating circumstances (see above, Failure to notify correctly).

In addition, the CEO (or a top manager) of the infringing party may be subject to a nominal administrative fine for failure to implement the AMC decision or its untimely implementation. However, an efficient mechanism for the implementation of this rule has not been created to date (see above, Failure to notify correctly).

12. Is there a right of appeal against the regulator's decision and what is the applicable procedure? Are rights of appeal available to third parties or only the parties to the decision?

Rights of appeal

Any AMC decision can be appealed by the parties or third parties within two months following the receipt of the decision.

Procedure

Decisions of the AMC can be appealed to the commercial courts. The new procedural rules governing the review of the case in commercial courts entered into force in late 2017. Now, the consideration of cases may last:

Up to 135 calendar days in the first instance.
Up to up to 75 calendar days in the appeal.
Up to 80 calendar days in the cassation.

In practice, these terms are not always strictly adhered to due to the courts' heavy workload and insufficient personnel. In complicated cases, the timelines can be longer due to the additional time required for investigations, collection of documents and information, and so on.

Third party rights of appeal

Third parties can appeal an AMC decision (see above, Rights of appeal and Procedure).

Automatic clearance of restrictive provisions

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

Restrictive provisions, including ancillary restraints, such as non-competes or other covenants, are not automatically covered by the AMC merger clearance decision. They usually qualify as concerted practices and require a separate anti-trust clearance.

Regulation of specific industries

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

Some industry-specific requirements may apply. In particular, there are special rules for calculation of thresholds for banks and insurance companies (see Question 2, Thresholds).

15. Has the regulatory authority in your jurisdiction issued guidelines or policy on its approach in analysing mergers in a specific industry?

There are no industry-specific guidelines or policy for the analysis of mergers in a specific industry.

Powers of intervention and foreign investment review

16. What powers does the national government have to intervene in mergers on the grounds of public interest, national security or media plurality?

The AMC cannot intervene in mergers that do not exceed the thresholds. If the transaction exceeds the thresholds, the AMC will not review it if any of the parties is in the Ukrainian sanctions list (see Question 3, Other).

Also, there are some restrictions for foreign companies (for example, they are restricted from owning agricultural land). The law may also establish industries and/or territories where foreign ownership interest can be limited, as well as territories, where foreign investment can be restricted or prohibited due to the national security reasons.

There are also certain limitations that apply to foreign ownership in the following industries:

Aviation. In general, a foreign investor is permitted to invest in a Ukrainian air carrier, but, if its shareholding is 50% of the authorised (share) capital, the carrier cannot be granted the Ukrainian air transportation licence. Also, the licence will not be granted if the carrier is under the control of residents of an aggressor state.
Television and broadcasting. There is a ban on investing in Ukrainian television and broadcasting companies for persons registered in the aggressor state or offshore jurisdictions indicated in a list approved by the Cabinet of Ministers.
Licensed business activities. The licence for conducting certain types of business activities (education, medicine production and supply, medical practice and passenger transportation (among others)) will not be granted (or may be annulled, if already granted) if the relevant entity is under the control of residents of an aggressor state.

17. Are there any post-closing or foreign investment review filing requirements?

Currently, there are no post-closing or foreign investment filings in Ukraine. A set of foreign direct investment (FDI) rules is being developed and is expected to be introduced in the coming year.

Still, some approval requirements apply to transactions (such as investments in shares and equity interests) of Ukrainian target companies that operate in the following sectors (among others):

Banking (such as banks).
Stock market (such as stock exchanges, securities brokers and depository institutions).
Financial activities (such as insurance, leasing, investment and trust companies).

These requirements apply to both foreign and national investors.

The following may trigger the investment filing:

Acquisitions of a material interest in the target company.
The increase by a person of their existing interest in the target company to 10%, 25%, 50%, or 75% of the company's authorised (share) capital or votes in the company.

The relevant legislation includes the following:

Law Ukraine On Investment Activity 1991.
Law On Foreign Investment Regime 1996.
Law On Protection of Foreign Investments in Ukraine 1991.
Regulation On Protection Measures and Determination of the Procedure for Conducting Certain Operations in Foreign Currency 2019.
Law On Banks and Banking Activities 2000.
Law On Securities and the Stock Market 2006.
Law On Financial Services and State Regulation of Financial Services Markets.
Procedure for Approval of Acquision and Increase of a Material Interest in a Financial Institution 2012.
Procedure for Approval of Acquision and Increase of a Material Interest in a Professional Stock Market Participant 2012.
Regulation on Banks Licensing 2018 of NBU.

The relevant authorities are the following:

The National Bank of Ukraine – filing review and clearance of investments in banking institutions.
The National Commission on Securities and Stock Market of Ukraine – filing review and clearance of investments in professional stock market participants.

The following filing fees apply:

For financial institutions and stock market participants, there are no filing fees.
For banks, the fee is UAH25,630.

Joint ventures

18. How are joint ventures analysed under competition law?

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

A joint venture is considered a concentration if it meets the following criteria:
It is established by two or more independent undertakings.
It can independently pursue business activity on a lasting basis.
Its establishment does not result in co-ordination of competitive behaviour of its parents or the joint venture, on the one hand, and its parents, on the other.

A concentration is notifiable and requires prior approval of the AMC if the relevant thresholds are exceeded (see Question 2, Thresholds).

A joint venture is considered a concerted practice if it is established with an objective of, or results in, co-ordination of competitive behaviour of its parents or the joint venture, on one hand, and its parents, on the other. Such joint ventures require the AMC anti-trust (as opposed to merger) clearance prior to their establishment.

In 2019, the AMC published the Guideline clarifying applicability of merger control rules to joint ventures. This document provides more details on criteria mentioned above (establishment as a new entity by two or more undertakings, independent business activity on lasting basis, absence of co-ordination) and introduces full-functionality criterion (that is, the ability to perform all functions of an autonomous economic entity) for joint ventures that may constitute concentration.

Inter-agency co-operation

19. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to merger investigations? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information, remedies/settlements)?

The AMC can co-operate with regulatory authorities from other jurisdictions, including by transferring the information to foreign competition authorities where the relevant international treaty exists. Confidential information can be provided to a foreign competition authority, but only if that authority:

Will use the information exclusively for carrying out its duty.
Can ensure that no disclosure for other purposes occurs.

The law does not expressly provide for co-operation relating to remedies or settlements.

Recent mergers, cases, trends and statistics

20. What notable recent developments, trends or notable recent mergers or proposed mergers have been reviewed by the regulatory authority in your jurisdiction and why is it notable? Are there any statistics published on annual merger reviews conducted in the jurisdiction?