Igor Svechkar and Tetiana Vovk of Asters review the merger control regime in Ukraine

1. REGULATORY FRAMEWORK

1.1 What is the applicable legislation and who enforces it?

The Law of Ukraine on Protection of Economic Competition of 2001 (the Competition Law) is the main merger control legislation. It defines the notion of a concentration, sets out the basics of the domestic effects concept, notifiability thresholds, exemptions, principal procedural rules, and sanctions.

The Antimonopoly Committee of Ukraine (the AMC) is the primary state authority responsible for enforcement of merger control rules in Ukraine. In particular, it has powers to investigate and authorise or prohibit mergers, penalise for violations, and issue individual guidance.

1.2 What types of mergers and joint ventures (JVs) are caught?

The following transactions are considered concentrations:

  • mergers of independent undertakings or takeover of one undertaking by another;
  • direct or indirect acquisition of control over an undertaking (including through the acquisition or lease of assets or appointments to certain management or supervisory positions);
  • establishment by two or more independent undertakings of a new undertaking that will on its own pursue business activity on a lasting basis, while its establishment will not result in the co-ordination of competitive behaviour of either its parents or of the new undertaking, on the one hand, and its parents, on the other; and
  • reaching or exceeding of 25% or 50% of the votes in the highest governing body of an undertaking.

Except:

  • establishment of an undertaking, which qualifies as concerted practices;
  • acquisition of shares qualifying as a financial buyer transaction;
  • intra-group transactions; and
  • acquisition of control over an undertaking or its part by a trustee in a bankruptcy proceeding or the like.

2. FILING

2.1 What are the thresholds for notification, how clear are they, and are there circumstances in which the authorities may investigate a merger falling outside such thresholds?

There are two alternative thresholds: Turnover or assets-based (for the last fiscal year): the combined worldwide asset value or turnover of the parties exceeded €12 million ($13.3); and the value of each of at least two of the parties' total worldwide assets or turnover exceeded €1 million; and the value of assets or turnover of at least one party in Ukraine exceeded €1 million. Market share-based: either individual or combined market share of the parties in the market concerned or the adjacent market exceeds 35%.

There is no official clarification on application of thresholds to guide the parties in uncertain cases. For instance, it is unclear to which parent the turnover of a jointly controlled undertaking should be allocated. Ukrainian competition law does not differentiate between sole and joint control and in practice such a joint venture's turnover may be equally attributable in full to either parent. Also, the AMC may apply a 35% market share threshold to any product market where at least one party is active.

The authority has no powers to investigate mergers that fall below the thresholds.

2.2 Are there circumstances in which a foreign-to-foreign merger may require notification, and is a local effect required to give the authority jurisdiction?

The same notifiability tests apply irrespective of whether the mergers are domestic or foreign-to-foreign. Although the Competition Law only applies to transactions that have or may have effect on the economic competition in Ukraine (a kind of local effects concept), in practice such effect is presumed once the thresholds are met. In particular, the AMC may assert its jurisdiction even in cases where the local €1 million threshold is crossed by the controlling seller only (technically the seller's turnover is attributable to the target's).

2.3 Is filing mandatory or voluntary and must closing be suspended pending clearance? Are there any sanctions for non-compliance, and are these applied in practice?

The filing is mandatory. Once the notifiability thresholds are met, a transaction must be cleared prior to closing, unless it qualifies for an exemption (such as a financial buyer exemption).

Closing before clearance effectually amounts to closing without clearance and may entail: (i) a fine of up to five percent of the total worldwide turnover of the undertaking in the last fiscal year (in practice fines have ranged from €500 to €60,000); (ii) an AMC de-merger order or an order to restore the pre-merger state; or, (iii) a ruling to declare the transaction invalid by the court at the request of the AMC.

2.4 Who is responsible for filing and what, if any filing fee applies? What are the filing requirements and how onerous are these?

The notification is filed jointly by the parties directly involved in the transaction (for example, the purchaser and the target – or seller, in case of acquisition). However, the liability for closing of a notifiable transaction without clearance normally rests with the acquiring party. Filings with respect to hostile takeovers can be submitted by the acquirer only.

The filing fee is Hm5,100 ($245). The filing requirements are onerous on foreign-to-foreign transactions that have no or limited nexus to Ukraine. The disclosure requirements are extensive and burdensome (for example, they cover parties' activities in all product markets, not only relevant markets, seller group's composition and activities). However, it is usually possible to have these waived by the AMC.

3. CLEARANCE

3.1 What is the standard timetable for clearance and is there a fast-track process? Can the authority extend or delay this process?

There is no fast-track or simplified review process. The regular merger review procedure includes the following stages (preview and Phase I are mandatory).

The preview period (15 calendar days) consists of a formal check where the AMC decides whether the filing is complete and can be passed for the review on the substance.

In the Phase I review (up to 30 calendar days), the AMC makes an assessment on the substance. In particular, it analyses the parties' standing, the overall market situation, and effects of the transaction on the market. Phase I closes with the AMC decision to either clear a concentration or to initiate the Phase II review.

The Phase II review (up to three months) is initiated if there are grounds to prohibit the concentration or an in-depth investigation is required. The authority takes a closer look at the transaction and competition concerns that were identified during Phase I. To finalise the review, the AMC normally collects expert opinions from other governmental authorities and competent private agencies, and requests additional information and documents from the parties. The Phase II statutory review period is limited, but in practice it may be suspended or even restarted each time the AMC receives additional input.

3.2 What is the substantive test for clearance, and to what extent does the authority consider efficiencies arguments or non-competition factors such as industrial policy or the public interest in reaching its decisions?

A concentration can be authorised by the AMC if it does not result in monopolisation or substantial restriction of competition on the Ukrainian market or a significant part of it. Also, the authority may clear an initially problematic transaction if the parties offer agreeable remedies to alleviate competition concerns.

However, the Cabinet of Ministers of the Ukraine may still approve a transaction that was prohibited by the AMC if positive effects of such a transaction on public interest outweigh the negative impact of the restriction of competition, unless such restriction: (i) is not necessary for achieving the purpose of the concentration; or (ii) jeopardises the market economy system.

3.3 Are remedies available to alleviate competition concerns? Please comment on the authority's approach to acceptance and implementation of remedies.

In cases raising competition concerns, the AMC may still issue a clearance that will be conditional upon the parties' obligation to undertake certain actions mitigating such concerns. Such remedies may be behavioral (for example, to refrain from certain actions) or structural (for example, divestitures), although in practice the authority appears more likely to accept behavioural rather than structural remedies.

The issue is not regulated comprehensively; there are no specific requirements to remedies or procedures for their approval. In practice, remedies are usually offered in Phase II when competition concerns are already identified and are negotiated with the authority on a case-by-case basis. It is also a usual practice to impose a reporting obligation as regards the implementation of remedies.

4. RIGHTS OF APPEAL

4.1 Please describe the parties' ability to appeal merger control decisions – how successful have such challenges been?

Under the Competition Law, AMC decisions may be appealed in whole or in part to the commercial court. However, due to a legal ambiguity, administrative courts also adjudicate in such claims. Generally, in practice, Ukrainian courts do not review substantive competition issues such as market definition, the standing of an undertaking in the market or the considerations for determining the level of fines. Judicial review in competition cases remains rather unpredictable due to lack of specific expertise and uniform approach in the area.

 

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Igor Svechkar
Asters
Kiev

About the author

Igor Svechkar is a partner heading Aster's competition practice. He has been focusing on competition law for more than 15 years and has developed one of the largest competition law practices in Ukraine. He advises clients on various competition issues, including merger control, concerted practices, and dominance.

Svechkar is a holder of ILO Client Choice Award 2011-2013 (Competition, Ukraine); ranked as the top expert for antitrust by Chambers Europe 2015, Best Lawyers 2016, Ukrainian Law Firms 2014 Handbook, The International Who is Who of Competition Lawyers and Economists 2014, and the Guide to the World's Leading Competition and Antitrust Lawyers/Economists 2014.

Svechkar has advised large international clients, such as Ansell, Bunge, Caterpillar, Coca-Cola, Deer & Co, Eni, Ford, General Electric, GlaxoSmithKline, LVMH, L'Oreal, Merck, Microsoft, Molson Coors, Nissan, Novartis, Onexim, Pfizer, Procter & Gamble, Sony Pictures Entertainment, Telenor, and YSL.


Tetiana Vovk
Asters
Kiev

About the author

Tetiana Vovk focuses on merger control, concerted practices, dominance, and competition compliance and has more than 10 years' relevant experience. She regularly represents clients before the Antimonopoly Committee of Ukraine in merger cases and investigations. Since 2008, Vovk has been listed in the Best Lawyers Directory as a recognised expert in antitrust.

Vovk's transactions include: representing Allianz, Bucyrus, Mitsubishi Chemical, Telenor, Novartis, Amcor, Teva, Microsoft, Seagate, Finmeccanica, General Electric, and many others in merger cases before the AMC. She has also advised L'Oreal Ukraine on various competition compliance matters.