Since the 2016 major amends in merger control, the market tends to calm down and come to certain steadiness. Lawyers feel more comfortable understanding practices of the Antimonopoly Committee of Ukraine (the AMCU), a new fast-track procedure seems to run smoothly, amnesty period have been very popular and, thus, probably successful. Then, some more changes in merger control took place in the latest. Firstly, we should mention the tendency to more frequent and more public survey of relevant markets. Also, horizontal merger assessment rules appeared. And, finally, sanctions rule, which is an extraordinary exception to merger control regime impacted many Russian businesses.

New thresholds

The brave new world of Ukrainian merger control was impelled by increase of thresholds within quite moderate 30/4/4 and 8/150 MEUR alternative system (for more but not too many details on the thresholds, see our early 2016 newsletter). The new system is in any terms far more adequate than ridiculous 12/1/1, when transactions were caught, where parties had 1 MEUR sales or assets in Ukraine each and 12 MEUR together worldwide. However, quite many foreign-to-foreign transactions having remote impact on Ukrainian markets are still caught by Ukraine's merger controls. Although there are still certain public discussions on further increasing the bar, we would not expect that to happen in the nearest future; this is not on the agenda for the next few years at least.

Amnesty

So-called amnesty concerned transactions completed before September 15, 2015 and allowed getting previously uncleared transaction cleared at a small fine of app. 4 KEUR. The amnesty was available until March 15, 2017, and almost a hundred transactions were cleared in 2017 only under the amnesty rules. Taking into consideration that the amnesty period was extended twice, again, similarly to the threshold, there are no indications that the mentioned procedure would be launched again, at least in the foreseeable future, although there are still certain companies which have failed to clear up for many reasons and would be more than happy to opt for the amnesty procedure if any becomes available again.

Fast-track

Moreover, the year of 2016 brought new Concentration Regulation (for details see our newsletter of August 2016). Some irrelevant information was excluded from the filing requirements. The fast-track procedure became much simpler than the full-procedure. However, the full procedure requires more thorough and grounded economic feasibility. Moreover, now, the consultations with the AMCU officers and remedies are officially regulated. The most important feature of the new procedures is that they actually work, which is unluckily not always the case for Ukraine.

Market focus

In 2017 and early 2018, practically each in-depth investigation was reported by the AMCU, and all interested persons were encouraged to submit any information they may deem relevant in regard to concentration.

The AMCU has considered several cases of global concentrations such as InBev-Anadolu Efes, HP Inc-Samsung Printing or Bayer-Monsanto; however, latter with remedies regarding vertical effects. Domestic in-depth investigations covered pharmaceutical markets, sugar, construction materials, financial services.

Now, it is hard to imagine that any domestic concentration on energy or telecom markets will get away without in-depth investigation. These markets, as well as pharmaceuticals, DIY-retail, film distribution and some others, are in the focus of the AMCU. For telecom markets, the AMCU even has a dedicated unit within the merger control department.

New rules for horizontal mergers assessment

New rules on horizontal merger assessment (the Horizontal Mergers Regulation) is nothing new to the world, and, actually, not much unknown to the AMCU. Many of the assessment criteria prescribed in the Horizontal Mergers Rules have been employed by the AMCU earlier. However, the merit of the new rules is that the mentioned criteria are enshrined and the AMCU would not evade them, even though the rules are soft-law.

Now, the AMCU has to take into consideration, apart from structure analysis, unilateral and coordinating effects, differentiation of the market, buyer power, timeliness and sufficiency of market entry, etc. Actually, there is no need to recite all of the criteria as they are practically duplicated from the EU horizontal merger guidance. Now, we have more grounds to invoke EU practices when reasoning with the AMCU.

Further, in late 2017 the AMCU adopted vertical block exempts. Though not regulating merger clearance directly, we believe the exempts would impact assessment of concentrations having vertical effects. We expect that, being armed with tools of new vertical block exempts, the AMCU will consider more scrupulously a filed concentration analyzing vertical effects, which earlier were often not considered.

Total sanctioning

Due to the armed hostilities in the East and considering US and EU sanctions against Russian Federation, Ukrainian state tries to reach aggressor state's interests wherever it can. Antitrust is not an exclusion. Actually, by means of antitrust, Ukraine can grab them by business. That is why the parliament obliged the AMCU to refuse considering filings from groups which include persons listed in sanctions lists.

Even before this rule came into effect on December 12, 2017, the AMCU was more scrupulous to the Russian businesses. Now, even if some of the seller's beneficiaries are on the sanctions list, the AMCU gives red light as evident from the recent case of Linde AG, Technip France SA, and NIPIgazpererabotka JSC acquiring LNG Nova Engineering. Thus, Russian business is a kind of stuck in between: even desiring to evacuate, it may be deprived of doing it in compliance with the merger clearance rules. Of course, market finds some work-arounds, which allow investment bankers and lawyers to prove themselves.

And even more to go…

Two major amendments in merger control we anticipate are the 6723 draft law adding grounds for fast-track and new market definition rules. Both amendments are not aimed solely at merger control, as market definition takes place in every antitrust investigation and the 6723 draft law covers different procedures of the AMCU. Inter alia, the 6723 draft law prescribes for voluntary obtaining a concentration permit where the transaction is not caught, double increase of merger clearance duty and new rules for fine payment.

Thus, this year is expected to be interesting in terms of both law making and the practice of implementing the newly adopted regulations. We can only hope that they would be timely, sufficient and of high-quality. At least, the dialogue between the AMCU and business gives us reasonable grounds to expect this to happen.

Published: Terralex Connections, 07 May 2018