A number of significant reforms have taken place in Ukraine in recent years. Following a complete reboot of all state bodies − including the election of the President of Ukraine, Petro Poroshenko, as well as a new parliament and government − the Antimonopoly Committee of Ukraine (AMC) has been completely revamped.
This Ukrainian regulator consists of a head and eight state commissioners, who are appointed by the President for seven-year terms. For the first time since the AMC was established in 1992, the majority of its members have a business practice background. Some of them are well known professionals in the field of competition law, chairing competition law practices at well-known law firms. The new head of the AMC, Yuriy Terentiev, has been an in-house counsel of Ukrainian subsidiaries of multinational companies for almost 20 years. Along with his colleagues, the newly appointed state commissioners, he plans to reform the competition regulator and environment.
Reform of the competition legislation
About the most significant problem with Ukrainian competition law is the extraterritorial effect of Ukrainian merger clearance, accompanied by extremely low financial thresholds. In Ukraine this approach, unfortunately, results in imposing form over substance, imposing the requirement of merger clearance on vast numbers of transactions: nearly 1,000 transactions a year. That is three times more than in Austria and is a number comparable to the number of applications in the entire United States. Clearly, this situation requires urgent correction. According to the existing rules, in fact, cross-border transactions, even those taking place outside Ukraine and having nothing to do with the Ukrainian market and competition, could well be caught. In particular, foreign-to-foreign mergers could be subject to Ukrainian merger clearance if at least one of the companies involved has a sufficient amount of sales or assets in Ukraine.
The financial threshold test requires the worldwide aggregate value of the assets of the seller‘s group and buyer‘s group or their aggregate turnover to exceed €12 million for the preceding financial year and the worldwide aggregate assets or turnover of at least two participants to the transaction to exceed €1 million each; in addition at least one of the participants must have Ukrainian assets or Ukrainian sales turnover exceeding €1 million for the preceding financial year.
Simply put, any transaction between any two players of middle size elsewhere in the world could require merger clearance in Ukraine if at least one of the parties has sales or assets in Ukraine exceeding €1 million. And it makes no difference whether such subsidiary in Ukraine acts at the same market in which the concentration takes place.
As a result, many multinational companies do apply for a permit in Ukraine for nearly all of their transactions worldwide; however, some companies simply choose to ignore the requirement.
Therefore, one of the first reforms that the AMC plans to implement is to increase the financial threshold requirements. In addition, the AMC plans to implement fast-track procedure for merger clearance, shortening the period for review from 45 to 25 calendar days. At present, parties to a transaction need to obtain the permit for concentration from Ukrainian authorities before completing the transaction (there is no postnotification procedure, except for public biddings). Also, the authorities are reluctant to accept carveout agreements. This sometimes means a delay in the closing, and failure to comply may entail fines up to five percent of global turnover of all the parties involved. Therefore, introduction of a fast-track procedure would be welcomed by the market players.
One euro or a million? Calculating fines
Another coming amendment relates to calculation of fines for competition law violations. At the moment, the law provides only maximum amount of fines which may be imposed for those breaching the law. For instance, failure to provide information upon the Committee‘s request could entail a fine of up to one percent of the prior year’s turnover; concentration without the necessary permit could entail a fine of up to five percent of the prior year’s turnover; anticompetitive concerned actions would result in a fine up to 10 percent of the prior year’s turnover of all participants to such actions. Add to that the lack of guidelines or clear policy on how the exact amount of fines is calculated. In the past, cases arose in which one company could be fined €1,000, while another company could be fined €100,000 or more for a similar violation under similar circumstances. This disparity, and selectivity, has led to accusations of government corruption. The proposed new guidelines, which would include a list of mitigating and aggravating circumstances along with clear principles and rules for calculating fines, are drafted now and are expected to be adopted.
Going public: publication of the Antimonopoly Committee's decisions
Last but not least is the amendment which concerns publication of Committee decisions. Under current rules, decisions that the Committee has made are not typically made public – for only a limited number of cases has the outcome been publicly announced. The new rule aims to provide for publication of all decisions, excluding confidential information and commercially sensitive data. That rule has been developed and is expected to be close to approval.