Ukraine Launches New Phase of Competition Legislation Reform

On 9 August 2023, the Ukrainian Parliament adopted the Draft Law on Amendments to Certain Legislative Acts of Ukraine on Improving the Activities of the Antimonopoly Committee of Ukraine (AMCU) No. 5431 (Law). Currently, the Law has been sent to the President for the signature and is scheduled to take effect on 1 January 2024. The Law introduces important and long-awaited amendments to competition legislation.

The main changes concern the following aspects:

1) Merger control

It is expected that as a result of the adopted changes, certain transactions outside Ukraine will not require a merger clearance from the AMCU.

The financial threshold indicators for concentrations have not been altered, but the procedure and conditions for their calculation have undergone the following changes:

• The financial threshold of EUR 8 million of asset value/turnover in Ukraine becomes applicable to any participant in the concentration, and not only to the Target as it was before. Accordingly, the threshold indicator of EUR 150 million of worldwide turnover becomes applicable to any other participant of the concentration, and not only to the Buyer.
• The approach regarding the need to attribute the assets/turnover of the exiting seller to the Target is changed. Indicators of business entities, with which control relations are terminated for the Target as a result of concentration, will not be taken into account.

The conditions for the application of this rule are that Target and the legal entities controlled by it do not have (i) assets on the territory of Ukraine, and (ii) they have not carried out economic activity in the current year and during the last two years.

The list of cases to be considered as a concentration has been specified and supplemented:

• The acquisition of shares that ensure reaching/exceeding 25/50% of the votes in the highest management body of the business entity has been excluded as a separate instance of concentration.

Besides, the ways of acquisition of control over a business entity which are considered concentrations have been expanded. In particular, they include the acquisition of shares, which provides the opportunity to exert decisive influence, including reaching or exceeding 25/50% of the votes in the highest management body of the business entity.

However, in the absence of clarifications from the AMCU and established practice, the specified wording leaves a certain ambiguity.

• A new term "fully functional economic activity" is introduced. Such activity will be the basis for recognizing the creation of a business entity by two or more business entities as a concentration.

If fully functional economic activity is established for a long period, such creation of a business entity will be considered a concentration, otherwise it is deemed a concerted actions.

2) Consideration of cases and bringing to responsibility

The procedure of conducting inspections and collecting evidence has been significantly improved, the authority of the AMCU has been strengthened, and the relevant procedures have been more clearly regulated:

• On the basis of a court decision, AMCU will have the authority to have access to premises and places of information storage, inspect them, seize objects and data carriers, seal premises and places of information storage.

The procedure for consideration of cases of AMCU is also enhanced, the implementation of the settlement procedure and the updated leniency procedure should contribute to the effectiveness of AMCU and the improvement of competition in the markets:

• A settlement procedure is introduced in cases of anti-competitive concerted actions and abuse of a monopoly (dominant) position in the market in the form of a settlement agreement between the defendant and AMCU. The result of the settlement in the case is a reduction of the fine by 15%.

The Law introduces the subsidiary and joint liability for violation of competition legislation. These measures strengthened the enforceability of AMCU’s decisions and paid fines to the state budget:

• Successors and founders (participants, shareholders) of the defendant, who have the right to give instructions binding on the defendant and belongs to the same group will bear subsidiary liability for fine payment, if collection of the fine is impossible due to the dissolving, bankruptcy, or insufficient property because of the decisions of its founders (participants, shareholders).
• If several business entities that comprise the same group committed acts that led to the violation of competition legislation by such a group, and/or received or may receive advantages in competition or other benefits, they share a joint responsibility for paying the imposed fine.