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Dr. Alexey Kot
Managing Partner, Antika Law Firm
Antika Law Firm
Innovation in Sphere of Protection of Economic Competition
Anumber of innovations in legislative regulation in the field of protection of economic competition, which remained unreformed for a long time, came into force in 2019.
The main event, certainly, was the adoption on 7 February 2019 of the Law of Ukraine On Amendment to Certain Legislative Acts of Ukraine to Ensuring the Principles of Procedural Justice and Improvement of the Proceedings Effectiveness in the Suits on Law Violation on Protection of Economic Competition (hereinafter — the New Law). This law still awaits the signature of the President of Ukraine, but we should expect this in the near future.
A number of key changes are amended by the New Law to the Law of Ukraine On Protection of Economic Competition, aimed at improving procedural aspects of consideration by the Antimonopoly Committee of Ukraine of a case on violation.
One of the important innovations is setting boundary time limits of carrying out an investigation by the Antimonopoly Committee of Ukraine (AMCU). According to the adopted law, the AMCU now has a strict period, depending on the category of violation, during which the investigation should be completed with the adoption of the appropriate decision. If the above-mentioned does not happen, the case is subject to closure due to the fact the violation was not proved.
In particular, the Law stipulates the following terms:
— For cases, connected with failure to provide the information, submission of false information, non-execution of the decisions of the AMCU, the creation of obstacles during inspections, etc. — six months from the date of the adoption of a decision on beginning consideration of the case;
— For cases on concentration without permission, on violation of conditions of concentration during the creation of the economic entity, for which the permit was granted, on violations stipulated by the Law of Ukraine On Protection against Unfair Competition — one year;
— For cases on anticompetitive concerted actions (cartels) — five years;
— For all other types of violation — two years.
For instance, more detailed description of the parties’ and defendants’ rights to a case are specified by the Law. In particular, it has a clearly defined right to ask the antimonopoly bodies and to get justified answers, the right to familiarize themselves with the case file (including the right to copy these materials), etc. It is vital that the time from which a person gets the right to get familiar with the case file is now formalized at the legislative level, specifically, from the date of adoption of preliminary conclusions in the case. Earlier, the lack of a well-established moment of the occurrence of this right often created conflict situations between the Committee and defendants in cases.
The New Law now establishes a minimum period of one month from the date of receipt of preliminary conclusions, during which objections should be filed (currently this period is 10 days), as well as the maximum period for which the term for submission of objections on the person’s application may be extended. This period is up to three months. On the one hand, this enables one to get familiar with the case file and prepare the preliminary conclusions, on the other, it is a warning of the possibility of abuse of the procedural rights by the person.
It is worth remembering the new right of participants in a case to discharge the officers of the AMCU or experts, interpreters in case of establishing the circumstances that cast doubt upon impartiality or objectivity. In particular, in connection with the existence of a conflict of interests in accordance with the Law of Ukraine On Prevention of Corruption. It should be mentioned that now the procedural document of the AMCU provided only the possibility of self-disqualification of the Authorized Government official who takes part in the case.
Another important novel is the provision regarding the new “settlement” institution for Ukraine. Its essence is that the anti-monopoly body and the defendant in the case agree on the voluntary recognition by the defendant of all or part of the charges, for which a reduced amount of fine is imposed. This approach allows, on the one hand, to save public funds and time that would be spent on investigation, disputes in courts, etc., and, on the other hand, to reduce the sum of liability for the offender.
According to the new Article 461 which is added to the Law of Ukraine On Protection of Economic Competition, the entity can at any stage of the case before the Committee draws up preliminary conclusions on the case, apply to the AMCU with an application for the settlement procedure. Following the request consultations are held between the parties, the terms of the settlement are agreed (in particular, the sum of the fine to be paid) and, in the event of an agreement being reached, the parties signs the relevant agreement. The agreement is subject to approval by the economic court in accordance with the jurisdiction rules and shall contain a condition for the unconditional recognition of the violations by the defendant in the case and the amount of the fine, which should be 20% less than the amount of the fine that would be calculated according to the general rules.
An important feature is the prohibition by the Law of appeal by the defendant against the decision of the Antimonopoly Committee of Ukraine in the part which he recognized in accordance with the terms of the settlement procedure. The conditions of the reached settlement cannot be recognized as information with limited access, and should be fully described in the relevant decision by the AMCU in the case.
Extension and improvement of the procedure for exemption from liability for violations in the form of concerted actions for persons who have appealed to the AMCU with the recognition of the violation are also proposed by the Law. Complete exemption from liability for the first person applying is currently provided.
The law, in accordance with modern European practice, also introduces partial exemption for further persons, namely:
— reduction of the fine by 50% for the second person who applied;
— reduction of the fine by 30% for a third person;
— reduction of the fine by 20% for all others.
The Law will come into force within three months from the date of its publication, in addition to the rules governing the settlement procedure, which will apply from 1 January 2020.
Among other important changes in antimonopoly regulation, it is worth noting Methodological Recommendations considering the use of the notion Control (hereinafter — the Guidelines) adopted on 1 November 2018 by the AMCU. This is another important explanatory document published by the AMCU in recent years. The notion of Control is one of the important terms of antimonopoly regulation, since it sets the bonds of character among economic entities, which allows them to be considered as a single group of companies. This notion relates to almost all activities of the antimonopoly sphere, from estimation of the market segment of the company/the group of companies to solving the question as to whether mergers and acquisitions should be regarded as concentration.
Before the Guidelines were adopted, the only description of the notion was presented in Article 1 of the Law of Ukraine On Protection of Economic Competition. Specific elements regarding the interpretation of this notion were included in Annex 5 to the Concentration Regulation in its previous edition.
In practice, only lawyers with extensive practice in antitrust matters, well aware of the Committee’s approach to interpreting the notion, had the opportunity to more or less precisely determine which companies would be considered by the AMCU as a single group.
The published Guidelines should make this issue clearer both for practicing lawyers and business entities. It is worth emphasizing the high quality of the published act. It is easy to understand. It contains defined and described principles used to determine the relationship between companies.
In addition, the act also contains examples of some more complex cases of control of the AMCU practice that facilitates understanding of the notion.
The Committee has done a great job in developing these Guidelines. Certainly, although they will be useful for a specialist in the field of antitrust policy, they have no significant influence on the resolving of cases. Most professionals are well aware of the concepts and principles described in the document. However, for internal lawyers and company compliance departments, this will be an important document both for reference, antimonopoly compliance and for the development of schemes in M&A agreements.