Approaching EU Competition Law

The main event of 2023 is the adoption of the Law of Ukraine On Amendments to Certain Legislative Acts of Ukraine Regarding the Improvement of Legislation on the Protection of Economic Competition and the Activities of the Antimonopoly Committee of Ukraine of 9 August, 2023. The provisions of the New Law entered into force on 1 January, 2024.

The new Law makes several significant changes to the Law of Ukraine On the Protection of Economic Competition, aimed both at improving the procedural aspects of consideration of cases by the Antimonopoly Committee of Ukraine, as well as at resolving some gaps in current legislation and practice.

It should be noted that the need for such changes is long overdue because the Law of Ukraine On Protection of Economic Competition” and the Law of Ukraine On the Antimonopoly Committee of Ukraine define in a very limited and basic way the procedure for considering a case, leaving a number of important issues outside the scope of their regulation. There was an attempt made in 2019 to adopt a similar law, but that normative act was never signed by the President of Ukraine.

What awaits business entities according to the New Law?

One of the main changes is the establishment of time limits for conducting an investigation by the AMCU. Up until now the investigation period was unlimited, which created a situation of legal uncertainty for companies. According to the New Law, the Committee now shall finish the investigation within three years from the date of its opening. In some cases, this term can be extended by another two years, but if a decision on the case is not made within the prescribed period, then it is case shall be closed.

Among other procedural innovations is that the New Law defines the procedural status of this type of evidence as electronic evidence and establishes a detailed procedure for seizing and confiscating items and things that may contain or are evidence in the case. The right of persons participating in the case to familiarize themselves with the case materials, including making copies and recording the case on technical devices, is also stipulated in the Law – which was a long-awaited change of most lawyers working on AMCU cases.

In addition, completely new regulation of the procedural status of the business entity inspection procedure was introduced. During an inspection, AMCU officials have the right to unimpeded access to a business entity’s premises, to seize documents and other material evidence, to select explanations, etc. The New Law clearly defines the rights and obligations of the both AMCU officials and the employees and representatives of a company. Such inspections are now allowed to be carried out by the decision of the commercial court – thereby making the procedural status of the inspection similar to a warrant search with appropriate restrictions and enforcement mechanisms – which is quite appropriate.

An interesting feature of the new inspection procedure is the right of the Committee to not notify the business entity on the opening of a case against it if an inspection is planned.

The New Law also stipulates the right of the Committee not to open a case if the applicant does not prove that the violator’s actions have harmed his interests or rights. In such case the applicant shall receive the corresponding notice from the AMCU and may argue his position before the decision on the case is made. Prior to the adoption of the New Law, the AMCU had the right not to open a case only if the person’s actions did not affect competition on the market (and the applicant had no possibility to influence this).

The other most important change of the New Law in the procedure was establishment of mandatory application of the Procedure for determining the amount of the fine imposed for the violation of the legislation on the protection of economic competition. The Committee has long been criticized for its inconsistent position in determining the amounts of fines. Despite the availability of the methodology for calculating the amount of fines, the corresponding document was recommendatory in nature and, therefore, the AMCU often deviated from its provisions without sufficient (or without any) justification. This became a real problem for business entities – because very often companies understood the legality of the AMCU’s decision on the case itself, but they categorically disagreed with the size of the imposed fine, considering it unreasonably and unlawfully high. However, it was impossible to challenge the exact amount of the fine in court due to the advisory nature of the methodology.

It should be noted that the corresponding Procedure for determining the amount of the fine imposed for violation of the legislation on the protection of economic competition has already been approved by the order of the AMCU dated 14.12.2023 No. 22-rp. As expected, its basic provisions are inherited from the previous methodology for calculating fines and, therefore, no significant changes in the amount of fines should be expected. At the same time, the mandatory application of the new Procedure will make the decisions of the Committee in this part much more predictable and transparent.

Another critical amendment of the New Law was the introduction of a “settlement” procedure that is completely new for Ukraine. This procedure is widely used in the European Union and has effectively proven itself as a way to speed up the consideration of complex cases (especially regarding cartels on the market), but it was not available in Ukraine until now. The essence of this procedure is that the Antimonopoly Committee of Ukraine and the defendant agrees before the final decision on the case is made, on the defendant’s voluntary recognition of all or part of the charges, for which a reduced fine to the tune of 15% is imposed on him. This approach enables, on the one hand, the saving of state funds and time, which would otherwise be spent on conducting investigations, disputes in courts, etc., and on the other hand, to reduce the sum of liability for the violator.

In accordance with the new Article 46-1, which was added to the Law of Ukraine On the Protection of Economic Competition in accordance with the New Law, it is assumed that a business entity may, before the Committee draws up preliminary conclusions on the case, turn to the AMCU with a statement on the application of the settlement procedure. After submitting the statement, consultations are held between the parties, settlement terms are agreed upon (including the amount of the fine that will be payable) and, in the event of agreement being reached, the corresponding agreement is signed.

An important feature is the fact that the New Law prohibits the AMCU from using any information obtained from the defendant during the settlement procedure in the event that a settlement was not reached.

The law also proposes to expand and improve the procedure for exemption from liability for violations in the form of concerted actions for persons who voluntarily appealed to the AMCU with recognition of violations. Prior to this, there was only a full exemption from liability for the first person who applied. The New Law, in accordance with modern European practice, additionally introduces partial exemption for the following persons, namely:

• reduction of the fine by 50% for the second person who applied;
• reduction of the fine by 30% for the third;
• 20% fine reduction for all others.

The New Law also introduces additional powers for the AMCU regarding the collection of fines for violations of the legislation on the protection of economic competition. According to the amendments, the Head of the AMCU or the Head of the territorial branch of the AMCU have the right, after the expiry of the period for payment of the fine (two months from the date of receipt of the decision), to issue an order for the collection of the fine, which is an enforcement document and can be transferred to the State Enforcement Service for the compulsory collection of the fine. At the same time, however, the interest in violation of the terms of payment of the fine can still only be collected by a court decision.

It should be noted that the new provisions also should significantly minimize the current scheme of evading the payment of fines. In the past, in the event of a significant fine being imposed on a company, the latter delayed the court procedures of appealing against the decision of the Antimonopoly Committee of Ukraine in order to use this time to “reset” the company’s assets and property. This led to the situation when by the time all court proceedings had ended, it was impossible to collect a fine since the violator had no property left at all.

The New Law contains a provision according to which in the event of the impossibility of a fine being collected due to the termination of the company in question, its bankruptcy or simply due to the fault of the founders (participants, shareholders), the latter will be jointly and severally liable for the payment of the fine.

The New Law contains other changes and improvements to the legislation related to certain problematic aspects of the Committee’s consideration of applications for concentration, the procedure of reviewing AMCU decisions under the administrative procedure and others.

In general, the amendments should be described positively – the business sector has been waiting for those changes for more than 10 years, and finally Ukrainian legislation in the field of economic competition protection has taken a significant step forward towards harmonization with the relevant corresponding modern EU regulations.