The Antimonopoly Committee’s Investigations in 2009
In 2009 the Antimonopoly Committee of Ukraine (AMCU), which is authorized to protect business competition, proved that its influence over different economic sectors of Ukraine is skyrocketing.
Investigations of infringements under competition law of Ukraine became the mechanism for achievement of such growth during the economic crisis. In 2009 investigations were initiated in the markets of such important economic sectors as energy, pharmaceuticals, agriculture, commerce, telecommunications etc. and the majority was brought to a conclusion. The AMCU insisted on the priority of consumer rights in each particular case.
Both the number of commenced investigations and the rate of penalties imposed on offenders by the Committee are rising. In 2009 the AMCU imposed fines on the participants of the fuel market in Boryspil international airport amounting to UAH 265 million (nearly USD 32 million) which constitute the top fine in the AMCU’s history. The managers and owners of the fined firms were not the only ones to be shocked, as other prospective actors of investigations in different sectors of Ukrainian economy were also astonished.
In 2009 the AMCU received and considered over 6 thousand requests submitted by individuals and business entities, which is 48% more than in 2008. In total the AMCU halted 3971 transgressions of competition law, that is 22% more in comparison with the same period in 2008. In particular, the AMCU investigated 1502 abuses of dominance, 608 anticompetitive collusions, 734 anticompetitive actions of government bodies and 180 incidents of unfair competition, among which about 40% — distribution of deceptive advertisements by entrepreneurs. The total sum of fines in 2009 amounted to UAH 289,6 million and in 2008 to UAH 13,3 million.
The investigation procedure is governed by general acts, namely, On Antimonopoly Committee of Ukraine, On the Protection of Economic Competition, On Protection against Unfair Competition, as well as by regulations or decisions issued by the Committee itself.
The AMCU’s Powers and Authorities
The investigatory powers of the AMCU are very similar to those of a special service. Particularly, the Committee has the right to require from entities as well as from government bodies, local governments, and their officials the information, including that with restricted access; to conduct inspection of office premises and vehicles, seize and arrest items, documents and other information media, which may appear to be evidence or the source thereof in a case, despite its whereabouts, etc.
The AMCU’s Investigation Bodies
Cases on violations of the competition law are investigated by: the Committee; the Committee’s standing and provisional administrative boards; the Committee’s commissioners; the administrative board of the Committee’s territorial office.
The Commissioners’ Functions
The key figures of the AMCU’s investigations are the commissioners. The latter: (a) consider the applications on breach of competition law; (b) render decisions, issue orders and provide conclusions on the qualification of actions, pursuant to the legislation; (c) execute protocols, consider and issue resolutions in cases regarding administrative offences; (d) inspect companies, government bodies, and other entities; (e) call officials and employees of companies and government bodies, etc. to provide explanations to the cases under investigation on breach of competition law.
Obligation to Provide Information
The law establishes strict rules of data reporting procedure upon the AMCU’s request and failure to report the information requested by the AMCU entails severe responsibility, namely fines.
Commencement of Investigation
The AMCU’s investigations are conducted pursuant to well-regulated procedures which are per se regarded as quasi-judicial administrative procedures. The AMCU commences the investigation for breach of competition law upon:
- applications on violations of rights by activity or inactivity submitted by business entities, citizens, unions, institutions, organisations;
- request by government bodies, local authorities, administrative and business management and control bodies;
- its sole discretion.
The Order On Commencement of Investigation is the first important procedural document executed by the AMCU in the event of determination of any evidence of breach of the competition law.
Participants
Just as in legal proceedings, participants are the parties (petitioner and defendant), third parties and their representatives.
Inspections
The inspection is a principal administrative procedure enabling the AMCU to obtain necessary information, collect evidence and provide preliminary conclusions. The AMCU’s inspections may be either scheduled (conducted only once a year) or unannounced.
In each particular case the terms of inspections and composition of the Commission are approved with regard to the investigated subject and expected volume of work. Terms of inspections are restricted neither by law nor by any other regulation. The AMCU’s practice is the evidence of the Committee’s ability to provide quick inspection (for instance, within two months) dealing with incredibly complex matters. In other cases the inspection may continue for long time.
The inspection shall be performed by the Commission appointed by the AMCU’s chairman or the AMCU’s office. At the same time, the Commission shall be entitled to easily enter the entities and organizations, have access to all documents and other materials, demand oral and written explanations from management staff, withdraw written and material evidence (including documents, articles or other information media). Moreover, the AMCU is entitled to demand articles of associations and local regulations, accounting and financial statements, business agreements (the list is not exhaustive).
The AMCU is a unique government agency entitled to request and obtain such a range of documents to examine. Last year a considerable amount of decisive actions were observed in the AMCU’s practice with regard to obtaining required information. Therefore, in the majority of cases computer files of almost all officials were removed. Over 235 000 000 lines of figures were demanded and obtained on digital media, while investigating the activity of a pharmaceuticals distributor based on just one inquiry.
The AMCU has at its disposal rather effective leverages to obtain information even if businesses and organizations do not cooperate with the AMCU in terms of data provision. The AMCU may impose a fine of up to 1 percent of income from the sale of products or services for the year preceding the one that the fine was imposed in. For instance, such a fine may be imposed for: (a) refusal to submit information by due date; (b) submission of incomplete information; (c) submission of inaccurate information; (d) obstruction for evidence collection by the AMCU’s officers. Practice shows that the AMCU’s fines for mentioned violations are not very large: from UAH 50 000 to 100 000.
At the end of the inspection the certificate containing the analysis, conclusions and recommendations on all matters under inspection shall be issued upon request. The Commission’s head sums up the presented materials and draws up the inspection act in duplicate in the established form. The inspection act, except for some cases, shall contain:
- the inspection results on all the issues provided by the plan of inspection;
- objective estimation of the activity of the object under inspection with respect to observance of the Law on the Protection of Economic Competition;
- recommendations on case initiation concerning infringement of the On the Protection of Economic Competition Act, etc.
In case where in the course of investigation the inspection has established signs of infringement of the competition law, the chairman of the Committee, the office and his deputy consider the presented materials and resolve the issues with regard to:
(ŕ) Provision of recommendations and proposals to the authorities, local governments, agencies of administrative and economic management and control, business, and associations involved in barring the actions, which have signs of infringement of the On the Protection of Economic Competition Act, elimination of the underlying reasons for these infringements and conditions conducive to such infringements, and associations dealt with introduction of measures to eliminate consequences of these infringements where an infringement has been barred.
(b) Drafting of legislative instruments that regulate the development of competition, antitrust policy and economy demonopolization.
(c) Delivering the materials on infringements showing signs of crime to the law-enforcement agencies.
(d) Consideration of the issue on commencement of the investigation concerning infringement of competition law.
The investigation may be terminated with the adoption of a decision (including a provisional decision). The maximum size of penalty imposed for infringements of the Competition Act may amount to 10% of a business entity’s income from sale of goods (services) for the last fiscal year preceding the year in which the penalty is imposed.
Upon the statement of persons, who have participated in the investigation, the decision may be revised. The party to investigation may address the AMCU with a motion to revise the decision. Such revision is theoretically possible. However, in practice the revision of the decisions adopted by the AMCU on reducing or cancelling penalties is most doubtful.
The party to the investigation may also file an action with the court to overturn a decision adopted by the AMCU. There is currently a conflict between two branches of judicial authorities. According to the administrative code of judicial practice, AMCU cases shall be considered in the administrative courts, as well as in economic courts as prescribed by specific legislation. An overall rise in investigations can be expected in 2010.