On September 15 2015 the Anti-monopoly Committee of Ukraine (AMC) finally approved and published on its website the Recommendations on the Calculation of Fines for Infringements of Competition Law of Ukraine.
The recommendations set out the methodology for calculating fines for various competition law infringements, including abuse of dominance, concerted actions and merger control violations.
The new methodology is a major development in Ukrainian competition law practice, since in general the Competition Law allows for very high maximum fines (up to 10% of the global annual turnover of the groups of companies involved for the year preceding that in which the fine is imposed). Before the recommendations were issued, the authority assessed each matter separately and applied fines within the maximum allowed by law on a case-by-case basis. This approach was difficult for market players as it provided little to no predictability as to the potential fine in each case. The new recommendations provide clarity in this regard and will make the fine-setting process more transparent.
The recommendations provide for a merger control amnesty in Ukraine. This means that if an undertaking has previously failed to obtain merger control approval for a transaction – whether domestic or foreign – then for a one-year period, starting from September 15 2015, the undertaking may apply to the AMC to obtain approval and face a minimal fine.
The amnesty allows undertakings to clear any previous merger control violations in Ukraine. Such violations are widespread, as the merger control thresholds are quite low and nearly all large and medium-sized transactions carried out by multinational and national companies are subject to merger control approval. The maximum penalties under the law for failure to obtain merger control approval are high – up to 5% of the global annual turnover of the groups of companies involved for the year preceding that in which the fine is imposed. The AMC also has broad discretionary power to determine the fine in each case within the limits. This potentially exposes large multinationals to significant financial penalties, as well as reputational damage caused by competition violations.
In order to apply for amnesty, an undertaking must prepare a regular merger control application and file it with the AMC. The AMC has also expressed its willingness to take a liberal approach to the formalities of merger control applications (ie, the documents and information required for assessment). The terms and procedure for review of these applications have not yet been clarified, but in the interests of effectiveness the procedure will most likely resemble the review of regular merger control applications (which takes 45 calendar days), rather than the review of infringement cases (which takes several months).
Under the conditions of the amnesty, if an undertaking applies to the AMC within six months of the start of the amnesty the fine for a previous merger completed without approval will be approximately €800. If the application is filed in the subsequent six months, the fine will be approximately €4,000.
Merger control and infringement decisions are published as short notices on the AMC's website, except for rare cases where publication may significantly impair the economic activities of the companies concerned. It is well known that the publication of infringement decisions may affect the reputation of a company, especially public companies. Therefore, in order to make the amnesty more attractive to applicants, the AMC will not publish notices on amnesty decisions.
Questions still remain following the introduction of the amnesty.
First, will mergers completed during the amnesty period qualify for the amnesty regime? The recommendations provide that the amnesty applies only to mergers completed before they came into force. However, in some cases transactions are completed in various stages – will these cases receive the same treatment?
Second, will a merger that led to a monopoly be cleared under the amnesty? The amnesty provision in the recommendations is silent on this issue. It does not differentiate between straightforward mergers and mergers that pose substantive competition issues. Hence, based purely on the amnesty provision, all mergers – including those which led to monopolies – qualify for amnesty. On the other hand, in general the recommendations provide for higher penalties than those envisaged by the amnesty provision for mergers leading to monopolies. Further, higher penalties – including the possible invalidation of transactions leading to monopolies – are set out in the Competition Law, which has stronger legal force than the recommendations. Thus, for previous matters which may have resulted in a lessening of competition in the market or a monopoly,(1) the amnesty shall be applied with caution until the AMC determines its position on this issue through practice.
The amnesty for merger control violations provides a good opportunity for all companies to bring their structures into compliance with Ukrainian competition law. The AMC (whose new board consists mostly of former private practice lawyers) is committed to effective implementation of this instrument and its further enforcement for the benefit of market players. Thus, companies should take this opportunity to carry out a proper analysis of any transactions completed without due merger control approval in Ukraine and to obtain approval over the coming year with little exposure to penalties.
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