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Competition

The main legislation that regulates competition in Ukraine is the Law of Ukraine “On the Protection of Economic Competition” dated January 11, 2001, and the Law of Ukraine “On Protection from Unfair Competition” dated June 7, 1996.

State control of compliance with competition legislation and its enforcement is the responsibility of the Anti-Monopoly Committee.

The Law “On the Protection of Economic Competition” regulates three main areas:
• anti-competitive collusion (cartels, oligopolies, etc.);
• abuse of dominant position;
• concentration of undertakings.

Anti-competitive collusion

The law stipulates that certain actions are considered to be anti-competitive collusion and are, therefore, prohibited: concerted actions, that is, concluding agreements in any form among companies, taking decisions in any form by alliances and other collusion on the part of enterprises, which results or may result in the prevention, elimination or restriction of competition.

Collusion shall be considered as anti-competitive if it specifically involves:
• setting prices or other conditions with respect to the purchase or sale of goods;
• restricting production, technical and technological development, and investment or establishes control over these;
• distributing markets or sources of supplies based on territory, assortment, sales or purchase volumes, or other features;
• distorting the results of bids, auctions, competitions, tenders;
• removing other companies from the market or restricting their entry into or exit from the market;
• applying different conditions to equivalent agreements concluded with other companies, which establish a competitive disadvantage for certain companies;
• concluding agreements providing that other companies assume additional obligations whose content or whose terms of customs in trade and other fair practice in entrepreneurial activities have nothing in common with the subject of these agreements;
• substantially restricting the competitiveness of companies on the market without objective reason.

These provisions are not applied to any voluntary concerted actions on the part of SMEs, that is, companies whose turnover of value of assets does not exceed EUR 500,000 for the purpose of joint acquisition of goods (bulk purchasing).

Concerted actions may also be permitted by the AMC if the participants can prove that the concerted action facilitates:
• an improvement in the production, purchase or sale of goods;
• technical, technological, and economic development;
• the rationalization of production;
• the optimization of export and import of goods;
• the elaboration and application of unified technical conditions or standards for goods.

Anti-competitive concerted actions without the permission of the AMC shall entail liability. Specifically, the AMC may impose fines worth up to 10% of the revenue of the previous fiscal year of the participants to anti-competitive collusion.

Abuse of dominant position

The law defines a monopoly or dominant position as a situation when a company has no competitor on the market or when market share of that company exceeds 35% where serious competition is not evident.

A dominant entity cannot abuse its dominant position, that is, it cannot perform any action that restricts or limits competition by other companies or infringes on consumer interests. These actions of an entity in a dominant market position shall be considered violations:
• setting such prices or other conditions for the purchase or sale of a product that would be impossible were there substantial competition on the market;
• applying different prices or other different conditions in equivalent agreements with companies without objective reasons;
• concluding agreements with additional obligations that have nothing in common with the subject of the agreement;
• limiting production, market or technical development and thereby causing damage to other companies;
• partly or completely refusing to purchase or sell goods when there are no alternative sources of sale or purchase;
• substantially restricting the competitiveness of other companies on the market without objective reasons;
• setting up barriers to market entry or exit or removing other companies from the market.

The Anti-Monopoly Committee of Ukraine may impose fines worth up to 10 % of the revenues of the previous fiscal year for abuse of dominant position.

Concentration of undertakings

These actions are considered a concentration of undertakings that require prior approval by the AMC, if stipulated thresholds are exceeded:
• mergers;
• direct or indirect acquisition of control of one company over another, in particular by means of:

1.      direct or indirect purchase of assets;

2.      the appointment to a top executive position of a person already holding a similar position in another company; a situation where more than 50 % of the members of a supervisory council, board, or other supervisory or executive body hold similar positions in other companies;

3.      the establishment of a new company by two or more companies;

4.      a direct or indirect acquisition of shares that gives or exceeds 25 % or 50 % of votes in top executive bodies.

Prior AMC consent for concentration is required when:
• the total asset value or total turnover of all, including international, participants in the concentration for the last fiscal year exceeded EUR 12 million euro, while:
• the total asset value or total turnover, including international, of at least two participants in the concentration exceeds 1 million of each; and
• the total asset value or total turnover of goods in Ukraine of at least one participant in the concentration exceeds 1 million;
• the market share of any participant in the concentration exceeds 35 % and the concentration is taking place in this or a related market.

The AMC shall determine its consent to a concentration within 45 days of filing. The state fee for applying to the AMC is around US $1,000. Should a concentration be undertaken without consent of the AMC, the Committee may levy fines in the amount of up to 5 % of the revenue of the previous fiscal year from all participants in the concentration.

Protection against unfair competition

Unfair competition is deemed to be any action in relation to competition that contradicts trade and other fair conditions of commercial activity. The Law “On Protection from Unfair Competition” outlines three types of infringements:

  1. The abuse of a company’s business reputation including:
    • unlawful use of another’s trademarks, advertising, or packaging;
    • unlawful use of goods made by other manufacturers;
    • copying the outward appearance of goods, and
    • comparative advertising.
  2. Setting up obstacles to companies and gaining unlawful advantage in competition, including:
    • discrediting other companies;
    • buying and selling goods, carrying out works, and performing services with a mandatory assortment;
    • instigating boycotts against a company;
    • instigating a supplier to discriminate against a buyer or customer;
    • instigating a company to abrogate a contract with a competitor;
    • bribing a supplier’s employees;
    • bribing a buyer’s or customer's employees.
  3. The unlawful collection, disclosure and use of commercial secrets.

The law establishes culpability for unfair competition, including civil, administrative and criminal liability.