A new law expected to go into effect in January next year will have a significant impact on competition legislation in Ukraine.

On August 9, 2023, the Ukrainian parliament, the Verkhovna Rada, adopted draft law No. 5431 On Amendments to Certain Legislative Acts of Ukraine on Improving the Activities of the Antimonopoly Committee of Ukraine.

The adopted law is the first of several planned stages for reforming competition legislation and is aimed at bringing Ukrainian legislation into line with EU legislation and fulfilling the requirements of Article 256 of the Ukraine-EU Association Agreement.

The law introduces important changes regarding the legal status of the Antimonopoly Committee of Ukraine (AMCU), how it is funded, the right to conduct inspections, seize evidence, and it greatly enhances the AMCU’s ability to collect imposed fines. In addition, interesting changes have been made regarding the calculation of threshold indicators, and settlement and leniency procedures have been regulated in more detail.

The law has not yet been signed by the President and has not been published. It is expected to enter into full force and effect on January 1, 2024.

Basic changes:

1. Changes related to concentration control:

• Amendments have been made regarding the definition of a concentration, which is now considered to be an acquisition of ownership or management of interests (shares or shareholdings) that provides an opportunity to exert decisive influence, including reaching or exceeding 25 percent or 50 percent of votes in the highest governing body. This implies that an acquisition of 25 percent or 50 percent without the ability to exert a decisive influence will no longer require the AMCU’s clearance.
• It is specifically determined that only fully functional joint ventures require a merger clearance. On the other hand, non-fully functional joint ventures are considered concerted actions and may require a concerted action clearance.
• Issues related to the acquisition of control by banks as a result of foreclosure on a collateral have been settled. From now on, these procedures will only require a notification to the AMCU; previously, it was necessary to obtain a merger clearance.
• If a financial institution or entity that carries out activities with securities (for the purpose of further resale) acquires control, there is now a requirement to notify the AMCU.
• How threshold indicators are calculated has been changed. Specifically, under certain conditions, the seller’s financial indicators are excluded. In particular, if a target of acquisition/target of acquisition of control (taking into account the legal entities controlled by it) directly or indirectly has no assets and, at the same time, did not carry out economic activity in Ukraine during the last two financial years and in the current year, then the seller’s financial indicators are not taken into account (subject to termination of control after concentration).
• The fees for submitting applications for a concentration, concerted actions as well as for the issuance of opinions have been doubled.

2. Joint and several liability, as well as subsidiary liability for violators, has been introduced. For example, if persons in a group of companies committed actions or omissions that led to a violation, or if they have rights without which a violation would not have been committed, or they received or may receive advantages in terms of competition or other benefits, then a fine will also be imposed on them, and the obligation to pay it becomes joint and several.

If it is impossible to collect a fine because a violator was dissolved, brought to bankruptcy or has insufficient property due to decisions of its founders, then the successors and founders (participants, shareholders) who comprise the group are responsible.

This change creates a serious risk for companies when paying a fine to the AMCU.

3. A new mechanism has been introduced allowing for the AMCU to grant documents “executive document” status. Thus, the AMCU does not need to go to court to collect a fine, and it can be expected that actual collection of the AMCU’s fines will increase dramatically.

4. Improved settlement and leniency procedures.

• The case settlement procedure can be applied in instances of abusing a monopoly (dominant) position in the market or undertaking anticompetitive concerted actions (with some exceptions). In this case, the company may recognize and cease a violation, issue guarantees to eliminate the causes of such violations and the conditions that contribute to their occurrence, as well as eliminate the consequences of a violation (if any). In turn, the AMCU can reduce a fine by 15 percent.
• For the purpose of applying the leniency procedure, clear criteria have been established—what a violator must submit and how further cooperation may take place. A list of the instances where the leniency procedure cannot be applied has been provided and includes, for example, destruction, falsification or concealment of evidence or disclosure of one’s intention to refer a case to the AMCU.

Previously, this procedure did not work in practice; thus, the changes are aimed at improving effectiveness.

5. The AMCU’s evidence collection procedure is now detailed, including during inspections, and the AMCU has been vested with a broad array of rights.

A lawyer or a legal specialist (with whom the company has a contract) has the right to participate in the inspection. A lawyer or a legal specialist must arrive (at the premises where the inspection is being conducted) within three hours from the inspection start.

This could mean that companies must start preparing for the possibility of dawn raids, which have almost never been used in Ukraine. In this regard, companies will need to have appropriate internal instructions, conduct training for employees and conclude an agreement with a lawyer or legal specialist to receive assistance, if necessary.

6. The total timeframe for review of violation-related cases has been limited: Upon the new law’s effectiveness, it is up to five years in total (after deducting case-review suspension time).

7. The AMCU has been granted access to the entire list of state registers and databases. In addition, the AMCU is to create and maintain a Unified State Register of Companies Held Liable for Violations Related to Distorting the Results of Trading, Auctions, Contests and Tenders.

8. The law will increase the AMCU’s funding, and this funding will be transparent. Accordingly, this should serve as a guarantee of the AMCU’s enhanced independence.