Ukraine: new approach to the fining policy of the Ukrainian competition authority

On 15 September 2015 the Anti-Monopoly Committee of Ukraine (the “AMC”) issued a recommendatory guidance note regarding the application of fines for breach of the competition laws of Ukraine (“Guidance Note”) aimed at making the fining policy more transparent, consistent and proportional to the violation for which the penalty is imposed.

What was before the Guidance Note: maximum statutory fines

As a reminder, until now, only the maximum amount of penalties for the violation of the competition laws were established by the Law of Ukraine on Protection of Economic Competition and Law of Ukraine on Protection from Unfair Competition. These maximum amounts are quite considerable - 10% for anticompetitive concerted actions (including cartels) and abuse of dominant position, 5% for gun-jumping, 1% for the failure to provide information per request of the AMC. The AMC is authorised to impose such a fine calculated on the basis of the perpetrator’s global group turnover/assets for the financial year preceding the year of the fine.

Until the Guidance Note was published, the authority had a very broad discretion in determining amount of the fine to be levied in each case. Its fining policy was inconsistent and, in many cases, the amount of the fines was disproportional to the seriousness of the violation committed.

New approach to calculation of the fine

The Guidance Note is aimed at creating a transparent set of guiding principles to be used by the AMC when imposing the fines. A clear fining policy is also very helpful for businesses to estimate the negative consequences of their behaviour on the market and prevent possible violations.

A new recommended approach to be used by the AMC when determining amount of the fine which process includes two phases:

Phase 1: Calculation of the basic amount of the fine for each perpetrator;

Phase 2: Adjustment of the basic amount of the fine considering mitigating or aggravating circumstances.

In exceptional cases, where a violation has had a particularly adverse effect on competition and it is necessary to establish a deterrent effect through the fine, the AMC can impose the fine in an amount bigger than that provided under the Guidance Note, but in any case within the maximum statutory amount.

Basis for calculation of the fine

Generally, the basis for calculation of the fine should be the total revenue (turnover) of the perpetrator, without exclusion of the discounts, indirect taxes, value of the returned goods, derived under the violation of the competition laws during the entire period of such violation but for no more than for five years (statute of limitation for violations of the competition laws).

On whom the fine should be levied within one group?

If the violation was committed by several related entities belonging to one group, the fine is imposed on:

• the entities that directly committed the actions/inactivity that constituted the violation;
• the entities that received or could receive advantages in competition or any other advantages in connection with the violation

Basic fines

The amounts of the recommended basic fines depend on the seriousness of the violation and can be calculated as a % of the perpetrator’s turnover or, for moderate violations, set as a fixed amount.

The table below shows a recommended range of the fines for most commonly repeated violations.

The basic amount of the fine cannot exceed two thirds of the maximum statutory fine.

Partial amnesty for the past failures to obtain merger control clearance

Entities which have failed to obtain merger control clearance from the AMC for any past transactions will have a reduced fine of UAH 20,400 (approx. EUR 850) imposed if they apply to the AMC for retroactive clearance within six months from publication of the Guidance Note (i.e. by 15 March 2016). If the infringer applies to the AMC for retroactive merger clearance within the next six months (i.e. from 15 March 2016 until 15 September 2016), the reduced fine will be fixed at the level of UAH 102,000 (approx. EUR 4,200).

If the reduced fine is bigger than the basic fine, a fine in that lesser amount will be imposed.

Aggravating circumstances increasing the fine

The basic amount of the fine is increased up to 50% cumulatively in the case that the following aggravating circumstances are established:

• initiating of, or management over, the actions/inactivity that constitute a violation;
• creating obstacles in the investigation of the case by the AMC;
• refusal to cooperate with the AMC.

The basic amount of the fine shall be increased up to double the amount for continued or repeated violations (where such were established by the AMC).

Mitigating circumstances decreasing the fine

The basic amount of the fine is decreased up to 50% cumulatively if the perpetrator provides to the AMC evidence of the following mitigating circumstances:

• perpetrator stopped the violation voluntarily;
• perpetrator compensated damages caused by the violation or otherwise removed negative consequences of the violation before the AMC decision on the case;
• where the party that failed to obtain merger control clearance for a transaction voluntarily applied for such a clearance before the AMC started investigation of the case;

other mitigating circumstances of which the list is not exhaustive and there is evidence that perpetrator has taken measures to remove or mitigate negative consequences of the violation.