2021 was indeed an active year for the Antimonopoly Committee of Ukraine (AMCU). It seems that antitrust enforcement did not slow down during another pandemic year but even, in fact, accelerated. The agency closed a number of investigations, having imposed million-dollar fines on players from a variety of markets. Below you may find the top trends in Ukrainian antitrust enforcement. They are worth keeping an eye on, especially for companies having or planning a business presence in Ukraine.
Antitrust Fines Are Reaching a Record High
Continuing the trend of the last several years, fines for antitrust infringements are increasing drastically. In recent years, the AMCU has imposed a number of record fines for such antitrust infringements as abuse of dominance practices (the 2016 case against Gazprom, USD 3.5 billion fine), anticompetitive practices (the 2019 case against tobacco market players, USD 235 million fine), and gun-jumping (the 2021 case against sugar manufacturer, USD 2.4 million fine), to name a few. Apart from imposing fines on companies, the AMCU has also returned to the application of structural remedies as a sanction in abuse of dominance cases. It is worth noting that it has not applied this type of sanction since 1995. The practice restarted in 2019 when the AMCU not only fined a company belonging to the Ostchem group for abuse of a dominant market position but also ordered the group’s split.
The AMCU Is Expanding and Deepening Its Market Expertise
Such traditional markets as energy & oil, pharmaceuticals, retail, and transport & infrastructure have always been under the spotlight of the AMCU. However, in the last several years, the agency has expanded its expertise by investigating a lot of new markets such as tobacco, mineral fertilizers, molasses of starch corn and glucose syrups, liquid chlorine, and many others. Apart from studying new markets, since the start of the pandemic, the AMCU has also delved into socially sensitive markets, e.g., pharmaceutical and healthcare, food, fuel, telecommunications, transport, to name a few.
It should be noted that, in contrast to world-leading competition agencies, the AMCU has not yet advanced into digital antitrust. In fact, there has been no investigation or scrutiny into the digital market commenced by the agency so far. At the same time, in 2021, the agency announced its intention to initiate a study of the market for advertisements in social media.
Foreign-to-Foreign Transactions Primarily Trigger a Ukrainian Notification
Due to the very low notification thresholds for merger filings in Ukraine, the number of merger clearances for foreign-to-foreign transactions issued by the AMCU is increasing – and so is the number of filing rejections issued because notifications are found incomplete. Significant changes to the current merger control thresholds are expected in 2022. Among other things, a newly announced draft law, which envisages Ukrainian antitrust law reform, proposes the exclusion of the selling group’s figures if the transaction leads to its loss of control over the target. If the parliament adopts the draft law, the number of foreign-to-foreign mergers filed in Ukraine is expected to decrease.
Bid Rigging Is Increasingly Investigated and Punished
In recent years, investigating bid-rigging (in other words, conspiracies in public procurements) has been the main focus of AMCU’s activities. According to the AMCU, such cases constitute about 50% of all anticompetitive concerted practices investigated. Fines imposed for this category of infringements are increasing. To date, the record fine for bid-rigging (USD 31 million) was imposed in 2019 on the participants of food service procurements. It should be noted that the fine is not the most unpleasant outcome for those caught bid-rigging when compared to a three-year ban by the AMCU from participation in public procurements.
The Forecast for 2022
The agency has several major market investigations and studies pending: poultry, sugar, cement, sodium hydrochloride, sulfuric acid, to name a few. We anticipate it will finish some of the mentioned investigations and studies, in 2022, and will present its results to the public. In early February 2022, the AMCU announced its market priorities for the year. These are energy & oil, banking & finance services, seaports and rail freight, and construction materials, among others.
Besides, in 2022, businesses should be prepared for the anticipated Ukrainian antitrust law reform, which includes numerous amendments to the investigation’s procedure, leniency, and settlement, as well as the merger control regime.
By Timur Bondaryev, Managing Partner and Co-Head of Antitrust & Competition, and Anastasiia Panchak, Associate, Arzinger
This article was written before the advent of the war in Ukraine and was originally published in Issue 9.2 of the CEE Legal Matters Magazine on March 1, 2022. More current articles on developments in Ukraine can be found in our #StandWithUkraine section. If you would like to receive a hard copy of the magazine, you can subscribe here.