Sanctions

Criminal sanctions

What, if any, criminal sanctions are there for cartel activity?

Currently, there is no criminal liability under Ukrainian legislation for anticompetitive concerted actions (cartels), as it was repealed in 2011 for the purposes of humanisation of criminal legislation. Nevertheless, the issue of defining criminal responsibility for anticompetitive concerted actions has been much debated and we expect to see the incorporation of relevant provisions into Ukrainian legislation soon.

Civil and administrative sanctions

What civil or administrative sanctions are there for cartel activity?

The Competition Law provides for sanctions to be imposed on the participants of anticompetitive concerted actions as follows:

  • a fine for anticompetitive concerted actions of up to 10 per cent of income (revenue) of an undertaking for the previous financial year;
  • double compensation for damage caused by committing the infringement; or
  • obligations upon termination of the consequences of infringing legislation on the protection of economic competition.

 

Guidelines for sanction levels

Do fining or sentencing principles or guidelines exist? If yes, are they binding on the adjudicator? If no, how are penalty levels normally established? What are the main aggravating and mitigating factors that are considered?

Cartels in Ukraine are not uncommon. The government should always analyse markets and identify the preconditions that allow and even encourage business representatives to negotiate and violate legislation on the protection of economic competition.

Identifying signs of a cartel is, in principle, not difficult, since most consumer markets are currently transparent for monitoring. Its main symptom is rising prices. But it is difficult to prove the substance in court because there is usually no direct evidence for this.

In 2016, the AMCU updated the Recommendation Clarifications regulating the order of fines determined for each infringement of the legislation on protection of economic competition. This document submits anticompetitive concerted actions to the severest punishments. In the process of fine determination, the AMCU is guided by the above-mentioned Clarifications.

Horizontal anticompetitive concerted actions of undertakings (cartels) are subject to the severest punishments. For such actions, the AMCU’s Clarifications provide for a basic fine of 45 per cent of income (revenue) from sales of goods (works, services) or the buyer’s expenses on the purchase of a product, either directly or indirectly related to the violation.

The total amount of a fine is to be determined in two steps. First, the AMCU determines a basic amount of the fine, and second, the basic amount is adjusted according to any aggravating and mitigating factors.

The basic amount of the fine shall be reduced up to 50 per cent in aggregate if evidence of mitigating factors is as follows:

  • a defendant ceases the alleged infringements (acts or omissions) before an AMCU structural division has made a corresponding final or preliminary decision;
  • a defendant compensates for damage caused by the infringement, or remedies the infringement in another way before the AMCU structural division makes a corresponding final or preliminary decision;
  • a defendant eliminated conditions contributing to the infringements before the AMCU structural division has made the corresponding final or preliminary decision;
  • the defendant’s cooperation with the AMCU structural division contributed to the finding of facts, notably where some facts and data not requested by the authorities were revealed or other infringements of competition legislation were found, including those committed by another person; or
  • the defendant proved that infringements were committed under undue influence exercised by an executive authority, a local authority, a body of administrative management and control or another enterprise, on which the defendant is economically dependent.

 

Compliance programmes

Are sanctions reduced if the organisation had a compliance programme in place at the time of the infringement?

Legislation on the protection of economic competition does not envisage such an option.

The basic amount of the fine shall be reduced up to 50 per cent in aggregate if evidence of mitigating factors is as follows:

  • a defendant ceases the alleged infringements (acts or omissions) before an AMCU structural division has made a corresponding final or preliminary decision;
  • a defendant compensates for damage caused by the infringement or remedies the infringement in another way before the AMCU structural division makes a corresponding final or preliminary decision;
  • a defendant eliminated conditions contributing to the infringements before the AMCU structural division has made the corresponding final or preliminary decision;
  • the defendant’s cooperation with the AMCU structural division contributed to the finding of facts, notably where some facts and data not requested by the authorities were revealed or other infringements of competition legislation were found, including those committed by another person; or
  • the defendant proved that infringements were committed under undue influence exercised by an executive authority, a local authority, a body of administrative management and control or another enterprise, on which the defendant is economically dependent.

 

Director disqualification

Are individuals involved in cartel activity subject to orders prohibiting them from serving as corporate directors or officers?

Legislation on protection of economic competition does not envisage such an option, and this is usually to be decided by the business itself, especially now when it has internal compliance programmes. There is no criminal responsibility of individuals involved in cartel activity. Officials of undertakings may be subject to administrative responsibility under the Code of Administrative Offences of Ukraine, but this administrative responsibility does not envisage prohibiting them from serving as corporate directors or officers.

Debarment

Is debarment from government procurement procedures automatic, available as a discretionary sanction, or not available in response to cartel infringements?

Debarment from government procurement procedures is envisaged in article 17 of the Public Procurement Act of Ukraine. Its application is mandatory by the respective customer of procurement as a sanction for anticompetitive concerted actions (cartel infringements) leading to distortion of public procurement procedure results and committed in the last four years before the organisation of respective procurement. The list of undertakings that are subject to debarment is available on the AMCU’s website. A tender committee automatically makes a decision on debarment on the basis of this list.

Parallel proceedings

Where possible sanctions for cartel activity include criminal and civil or administrative penalties, can they be pursued in respect of the same conduct? If not, when and how is the choice of which sanction to pursue made?

There is no criminal responsibility provided in Ukrainian legislation for anticompetitive concerted actions. Sanctions for violation of competition legislation are imposed by the AMCU. In addition, administrative responsibility may be imposed on authorised persons or employees of an undertaking in the event of a violation by the said persons of the Code of Ukraine on administrative offences, but it does not refer to cartel regulation.

Law stated date

Correct on

Give the date on which the information above is accurate.

6 November 2020.