Pursuant to Article 42 of the Constitution of Ukraine the state ensures protection of competition in business. Unfair use of monopolistic position in the market is not allowed as is not allowed illegal restriction of competition and unfair competition. Law defines types and limits of monopoly.
Pursuant to Article 10 of the Commercial Code of Ukraine an antitrust and competition policy of the state is one of the major directions of the economic policy defined by the state. The antitrust and competition policy in its turn aims at creation of the optimum competition medium for businesses, insuring their cooperation while avoiding discrimination. Primarily it applies to the monopolistic pricing and to reducing the quality of products and services. The antitrust and competition policy benefits the growth of efficiency of the socially-oriented economy.
Ukrainian antitrust and competition legislation consists of a significant number of regulations divided into laws and other rules (by-laws) in terms of their legal force. The laws can either directly or indirectly regulate relationships in this area.
The key laws in this area are the Laws of Ukraine on Economic Competition, on Unfair Competition, on Natural Monopolies and on the Antimonopoly Committee of Ukraine.
The Law of Ukraine on Economic Competition of 11.01.2001 have practical importance for businesses operating in various markets. In the first place it relates to their obligation to obey such important and voluminous branch of law as antitrust law.
The Antimonopoly Committee of Ukraine is the state body responsible for application of the antitrust laws, and empowered to protect the businesses from abuse of monopolistic position and unfair competition. The Antimonopoly Committee is answerable to the President of Ukraine and reports to the Parliament of Ukraine.
In order to prevent monopolisation of the commodities markets, the abuse of monopolistic (dominant) position, and restriction of competition the antimonopoly authorities exercise state control over concentration of businesses. The Antimonopoly Committee must determine whether economic concentration might adversely affect competition and the market in whole.
It should be mentioned here that Ukrainian legislation defines concentration as:
amalgamation of businesses or joining of one business to the other;
direct or indirect acquisition by one or more businesses of the controlling interest in one or more businesses through:
either direct or indirect acquisition through purchase or by any other means of assets (property or a structural branch (a subsidiary) of a firm, governance, rental, leasing, concession or any other acquisition of rights to use property or a structural branch (a subsidiary) of a firm, including acquisition of assets of a firm which is being wound up;
appointment or election as a CEO, a deputy head of a supervisory board, a board of directors or any other supervisory or executive authority of a firm of a person occupying the same or similar positions in other firms, or creating a situation when more than a half of positions in the supervisory board, board of directors or any other supervising or executive authorities of two or more firms are held by the same people;
when two or more firms create an independent firm which is intended to be involved in commercial activities during an extended period of time but at the same time competitive actions of the founding firms and the new firm are not coordinated;
direct or indirect acquisition or receiving into governance a firm’s shares (stakes) ensuring 25% or 50% of votes in a governing body of the firm.
In some cases prior permission of the Antimonopoly Committee of Ukraine is required to conduct economic concentration, particularly when the following conditions are met:
when an aggregate value of assets or an aggregate volume of sales of the participants both locally and abroad including control relations during the last financial year exceeds a sum equal to 12 million EUR according to the official exchange rate specified by the National Bank of Ukraine on the last day of the financial year, and simultaneously an aggregate value of assets or an aggregate volume of sales of at least two participants of concentration both locally and abroad including control relations during the last financial year exceeds a sum equal to 1 million EUR each according to the official exchange rate specified by the National bank of Ukraine on the last day of the financial year, and if an aggregate value of assets or an aggregate volume of sales of at least one participant both locally and abroad including control relations during the last financial year exceeds a sum equal to 1 million EUR according to the official exchange rate specified by the National bank of Ukraine on the last day of the financial year;
regardless an aggregate value of assets or an aggregate volume of sales of the participants, a share in the certain commodities market of either participant of concentration, or an aggregate share of the participants of concentration including control relations exceeds 35 % and concentration is being performed in the same or neighbouring markets.
A peculiarity of the Ukrainian antimonopoly legislation is that the participants of concentration are not only the firms actually involved in activities defined as economic concentration but also other persons related to them because the following conditions are met:
They own more that 50 per cent of shares, stakes in a company;
More than 50 per cent of votes in a governing body of the company belong to them;
They are authorised to appoint a head, a deputy head, a chief accountant of the company or more than 50 per cent of members of a supervisory board, an executive or supervisory body of the company;
They are entitled to at least 50 per sent of distributable profits of the company;
There is direct or indirect submission to the company with regard to the certain matters related to rights stipulated by Articles of Association or agreements (contracts), in particular, trust agreements, joint ventures agreements, rental agreements, leasing, financial support, or creation of a business;
There are the same people holding positions of a head or a deputy head of the companies intending to concentrate, or at least half of the same people are the members of the supervisory board, the executive or supervisory body of the company;
There are obligations, including financial, trade, financial support etc, that might significantly affect activities of the company;
Concerted actions of the businesses aimed against competition, or abuse of a monopolistic position in the market;
Actions of the government authorities, local authorities, controlling authorities limiting competition;
Limiting and discriminating actions of the businesses and their associations.
Unfair competition is defined as any actions that contradict to rules, trade and other fair practices of commercial activities, to wit:
Illegal use of a business reputation that belongs to an existing business (entrepreneur)
Obstructing businesses (entrepreneurs) in competition and reaching illegal benefits;
Illegal gathering of information, dissemination and use of commercial secrets.
The following actions are considered to be concerted actions of the businesses aimed against competition, and abuse of a monopolistic position in the market:
Concerted actions of the businesses aimed against competition are the actions that led or could have led to obstruction, limitation or elimination of competition;
Such actions or negligence of businesses which have monopolistic position in the market that led or could have led to obstruction, limitation or elimination of competition, or infringing upon interests of other businesses or consumers that otherwise would have been impossible if competition had been significant constitute the abuse of a monopolistic position of a business in the market.
Actions of the government authorities, local authorities, controlling authorities that limit competition, are as follows:
Issuing any acts or directives, entering into agreements or conducting any other actions or negligence that led or could have led to obstruction, limitation, elimination or distortion of competition;
Delegating some powers of the government authorities and local authorities to associations, enterprises and other businesses if this could lead to obstruction, limitation, or elimination of competition;
Corrupted actions or negligence of the government authorities, local authorities, controlling authorities aimed at infringement of legislation which protects economic competition, creating conditions for such infringements and legitimating them.
Limiting and discriminating actions of the businesses and their associations are as follows:
Limiting actions of the businesses – the businesses are prohibited to persuade other businesses into infringement of the laws on protection of economic competition or to assist in effecting these infringements;
Abuse of the position in the market of the business;
Discrimination against competitors in the market;
Limiting actions of associations – refusing the other business to be admitted to the association hence putting him into unfavourable position in competition if such refusal was unreasonable and unfair.
Infringements of the laws protecting economic competition effect sanctions stipulated by law. The following sanctions can be imposed by the Antimonopoly Committee of Ukraine on the businesses and their associations:
concerted actions aimed against competition, abuse of the monopolistic (dominant) position in the market, disobeying rulings or preliminary rulings of the Antimonopoly Committee of Ukraine, either completely or in part, - a fine up to 10 per cent of consolidated earnings of the company during an accounting year preceding the year when the sanction is imposed. If an illegal profit that exceeds 10 per cent of the aforementioned proceeds was earned the fine should not treble the sum of the profits earned illegally.
concerted actions performed without permission from the Antimonopoly Committee or the Cabinet of Ministers of Ukraine, limiting or discriminating actions prohibited by the Law of Ukraine on Economic Competition, concentration without relevant permission from the antimonopoly authorities if such permission is required, failure to comply with requirements and obligations upon which concentration or concerted actions were conditioned – a fine up to 5 per cent of consolidated earnings of the company during an accounting year preceding the year when the sanction is imposed.
failing to submit information to the Antimonopoly Committee of Ukraine or its regional offices within terms specified by law or by a head of the relevant antimonopoly authority, submitting incomplete or inadequate information, impeding check-ups, revisions, seizure of property, documents and other items containing information; or mistreating a firm that submitted a report of infringements of competition regulations to the antimonopoly authority - a fine up to 1 per cent of consolidated earnings of the company during an accounting year preceding the year when the sanction is imposed.
Hence, the antimonopoly regulation is primarily aimed at development of effective mechanisms for the state control and protection of the commercial activities. Having understood the fundamental principle on which activities of the Antimonopoly Committee of Ukraine are based businesses operating in Ukrainian market can efficiently enjoy their rights and greatly benefit from the state mechanisms for protection of their interests in their relationships with competitors and monopolists as well as the state and local authorities.Dr Alexey KOT Partner SALKOM Law Firm
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Реєстраційне свідоцтво: КВ №11467-340Р від 7 липня 2006 р.
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