Antitrust Law Aspects in Ukraine

Ukraine, like other European countries, developing a market economy on their territory, has incorporated antitrust regulations and legal mechanisms in its legislation to regulate and support competition, as well as rules to ensure fair competition. An integral part of the competition control is the control exercised by the Antimonopoly Committee of Ukraine over M&A transactions both in Ukraine and abroad, which may also affect Ukrainian domestic markets.

Concentrations

Pursuant
to Article 22 of Law of Ukraine On the
Protection of Economic Competition of 11 January 2001 (hereinafter referred
to as the “Competition Law“), the
following shall be considered as concentration:

1.     merger
   of economic entities (all the assets and liabilities of the merging companies
   are transferred to the new company);
2.     affiliation
   of an economic entity to another entity (an economic entity acquires all the
   assets and liabilities of another company);
3.     acquisition
   of control;
4.    acquisition
   of control directly or through other persons over one or several economic
   entities or over parts of economic entities by one or several economic
   entities, in particular by means of:

    assets,
i.e.:

•        
  direct or indirect acquisition of assets in the form
  of an integrated property complex or a structural subdivision of an economic
  entity; conclusion of rental, leasing and concession agreements;
•         
  acquisition of the right to use assets in the form of
  an integrated property complex or a structural subdivision of an economic
  entity;
•         
  acquisition by other means, in particular the purchase
  of assets of a liquidated economic entity;

b)    appointment
to key positions, i.e.:

·        
appointment or election of a person – occupying one or
several positions of a chairman, deputy chairman of the supervisory board, the
board of directors or the mentioned positions at other supervisory or executive
boards, e.g. directorate, of other economic entities – as a chairman, deputy
chairman of the supervisory board, the board of directors or of other
supervisory or executive boards of the economic entity;

·creation of a situation where there is the coincidence
of more than half of the members of the supervisory board, the board of
directors, other executive or supervisory boards of two or more than two
economic entities;

establishment of an economic entity by two or more
than two economic entities that will independently carry out economic
activities in the long run, whereas the mentioned formation does not result in
the co-ordination of competition behavior between economic entities, having
established the economic entity or between them and the newly-established
economic entity;

·       
direct or indirect purchase or acquisition (by other
means) of the right to use shares (stock), which ensures attaining or exceeding
25 or 50% of the votes at the higher management board of the relevant economic
entity.

Which
transactions are subject to prior approval by the Ukrainian antitrust
authorities?

A
concentration is notifiable and requires a prior approval of the Antimonopoly Committee
of Ukraine where the following assets and/or turnover thresholds are exceeded
by the companies involved.

In the Ukrainian competition law, the above-mentioned
situations are considered as economic concentration which may affect
competition. Economic concentrations are subject to a prior approval by the
Antimonopoly Committee of Ukraine. The thresholds set out in Article 24 of the
Competition Law are met in the following cases:

I) (1) if the total cost of assets or the total sales
of the participants in concentration, with relations of control being taken
into account, in the last financial year, including those abroad, exceed the
sum equivalent to EUR 30 million while (2) the assets or the sales of at least
two participants in concentration, with relations of control being taken into
account, exceed the sum equivalent to EUR 4 million;

II)
the sales, in Ukraine only, of at least one participant in concentration, with
relations of control being taken into account, in the last financial year (1)
exceed the sum equivalent to EUR 8 million while (2) the assets, both in
Ukraine and/or abroad, of another participant in concentration, with relations
of control being taken into account, in the last financial year exceed the sum
equivalent to EUR 150 million.

Who is
considered to be a participant in concentration?

Pursuant to Article 23 of the Competition Law, the following shall be
considered as participants in concentration:

• economic entities with respect to which a merger or
  affiliation is being carried out;
• economic entities which acquire or intend to acquire
  control over another economic entity, as well as economic entities with respect
  to which control is being acquired or must be acquired;
• economic entities whose assets (property), shares
  (stock) are being acquired (as property) or received for use, lease, leasing or
  concession and their buyers (acquirers);
• economic entities which are or intend to be the
  founders of a newly-established economic entity. An economic entity whose assets
  (property) or shares (stock) are contributed to the share capital of the
  newly-established economic entity shall also be considered as a participant in
  concentration where one of the founders is a body of executive power, a body of
  local self-government, a body of administrative and economic management and
  control;
• individuals and legal entities linked with the aforesaid
  participants in concentration by relations of control, which gives grounds to
  consider these individuals and legal entities and the relevant participants in
  concentration as a corporate group.

Prohibition of Concentrations

Concentrations may be not authorized by the
Antimonopoly Committee only in the following cases:

• a
  concentration results in the market monopolization,
• a
  concentration results in the monopolization of a market significant part,
• a
  concentration results in the substantial restriction of competition on the
  whole market,
• a
  concentration results in the substantial restriction of competition in a market
  significant part.

If the Antimonopoly Committee prohibits the
concentration, the participants in concentration may still apply for a
ministerial approval.

Sanctions for failure to notify

If a transaction that is subject to merger control is
not notified to the Antimonopoly Committee, it shall be automatically
considered a competition law violation. If the Antimonopoly Committee finds
out, it may impose fines on the purchaser. The implementation of a transaction
that is subject to merger control without the relevant authorization by the
Antimonopoly Committee may entail a fine of up to 5% of the participant/company
turnover, with relations of control being taken into account, in the last
financial year preceding the year when such an authorization should have been applied
for.

If the company did not make any sales in the last
financial year or if it does not provide information about the performance per request
of the Antimonopoly Committee, the latter may impose a fine of up to 20,000 tax-deductible
minimum citizen incomes (UAH 340,000, equivalent to approx. EUR 12,000).