AMC's Sharp Focus on Filing Compliance
By the end of last year, the AMC had already been particularly active in merger control, registering a substantial number of merger notifications and issuing 312 clearance decisions. Foreign-to-foreign deals accounted for a striking more than 65% of the clearances granted by the AMC. This trend reflects that foreign companies continue to notify their cross-border deals with the AMC, despite the ongoing war, to avoid future compliance risks.
The AMC has started to look more closely at the completeness of notifications, resulting in a higher number of filing rejections when the documents are deemed unsatisfactory by the authority. This heightened scrutiny is an indication that the AMC is no longer content with previous filing practices. Instead, the regulator expects applicants to be more attentive and compliant with local filing requirements, including local formalities. Such increased vigilance serves as a reminder that thorough and accurate submissions are now more critical than ever for those navigating the regulatory process in Ukraine.
The AMC is also placing greater emphasis on businesses that operate in the Russian Federation (the “RF”) and the Republic of Belarus (the “RB”). AMC officers request additional information on individuals and entities from the RF and the RB that are connected by control relations to the parties.
The AMC introduced certain important rules in 2017, and these rules are still relevant today. To secure merger approval, applicants are required to verify that the parties concerned do not appear on Ukraine's register of sanctioned enterprises. Interestingly, even if the parties or their related entities feature on this list, they have the option of seeking approval. In such instances, an explanation is required as to why the sanctions do not apply to the proposed concentration. After considering the explanation provided, the AMC exercises its discretion, on a case-by-case basis, to either reject the application or to proceed with its review in substance.
Based on prominent matters decided, the AMC has maintained its intent of escalating the level of fines imposed for merger control infringements in order to create a greater deterrent effect. Remarkably, out of 41 fines imposed for failure to notify in 2023, nearly a half were imposed for transactions where the targets/JVs were not active in Ukraine, thus, having no local nexus.
Historically, the highest fine for non-notification of foreign-to-foreign transactions have been approximately EUR 60,000, illustrated by the Microsoft/Skype gun-jumping case in 2011. However, in June 2023 the AMC imposed a substantial fine of approximately EUR 625,000 on Cheplapharm Arzneimittel GmbH for failure to notify a qualifying concentration – specifically, the acquisition of assets from Hoffman-La Roche, also in a gun-jumping context. In October 2023, the AMC imposed a EUR 650,000 fine on both BASF S.E. and LetterOne Holdings SA for establishing a joint venture (Wintershall DEA AG) without obtaining prior approval from the AMC. Although the joint venture had no local nexus, as it was not active in Ukraine, the fine may have been influenced by the fact that a related party of the joint venture was an investor in Nord Stream 2. In the first half of 2024, a notable case involved Sika AG and Sika International GmbH, where both companies were fined up to EUR 62,304 for the acquisition of the MBCC Group. The AMC imposed fines on both the parent company, Sika AG, and its wholly owned subsidiary, Sika International GmbH, marking the first application of joint and several liability in such cases.
These significant fines represent a clear departure from the pre-war era in which penalties for failure to notify ranged from EUR 6,000 to EUR 20,000 per event and underscores the AMC’s unambiguous position of zero tolerance in respect of merger contraventions. The magnitude of the fine in the above cases, being some 30 times higher than past cases, reflects that fines for such infringements are likely to continue to escalate.
Importantly, in accordance with the AMC’s wartime directives, the regulator will enforce the highest possible statutory fine, being 5% of the gross worldwide income, for any breach of merger control regulations when one of the involved parties is ultimately controlled by the RF or by individuals supporting aggression against Ukraine. A similar approach is adopted if the AMC has credible grounds to believe that an asset or share divestment is orchestrated to circumvent sanctions imposed on the basis of aggression against Ukraine.
In August 2023, the AMC completed a notable Phase II case involving NielsenIQ's acquisition of control over GfK, marking the first imposition of structural remedies for the first time ever, according to the AMC itself. Both companies provide marketing services in Ukraine, with NielsenIQ specializing in retail measurement services for fast-moving consumer goods (“FMCG RMS”) and customized market research services (“CMR”), while GfK offers non-FMCG RMS and consumer panel services (“CPS”).
Due to the significant market shares of both parties, except in the CPS sector, the AMC initiated an in-depth investigation. Throughout the Phase II investigation, the authority engaged with customers and competitors, conducting a detailed analysis as to whether FMCG RMS and non-FMCG RMS constituted a single market. The conclusion was that these two segments are indeed separate markets but that the potential adverse impact on competition, based on possible conglomerate effects, could only be mitigated by the divestment of a portion of GfK's business.
As a result, GfK was obliged to divest its Ukrainian CPS business within one year. This case, spanning almost a year in duration, was an example of the AMC’s commitment to maintaining a competitive landscape in Ukraine and its willingness to employ structural remedies when warranted.
Closer Look at Competition Law Reform
Looking more closely at the previewed competition law reform, it is clear that this transformative initiative was long-anticipated and eagerly awaited by a wide spectrum of stakeholders. After several revisions and amendments, it was approved by the Parliament and took effect on January 1, 2024.
The reform introduced key changes, including updates to merger control regulations, strengthening the AMC’s institutional capabilities, expanding the procedural rights of parties involved in infringement cases, and improving the transparency and predictability of the AMC’s operations.
Merger Control Updates
Filing thresholds
The financial thresholds in merger control were amended insofar as the target entity is concerned. As a result, the amended regulations broaden the application of the merger control framework to encompass scenarios in which only the acquiring party has assets or generates turnover of EUR 8 million in Ukraine, provided the target has at least EUR 150 million in global turnover. The revised tests are formulated as follows:
Test 1:
- Assets or turnover in Ukraine of at least two parties exceed EUR 4 million, and
- Combined global assets or turnover of all parties exceed EUR 30 million.
Test 2:
- Assets or turnover in Ukraine of at least one party exceed EUR 8 million, and
- Global turnover of at least one other party exceeds EUR 150 million.
Seller attribution rule
In the past, the criteria for filing under both tests involved the consideration of all affiliated entities for each of the parties, including the controlling seller. This tenet of Ukrainian merger control law, referred to as the “seller attribution rule”, had been criticized by international organizations and national competition agencies across different jurisdictions.
Consequently, in the recently adopted amendments, the AMC introduced specific conditions under which the calculation of the seller’s Ukrainian turnover can be excluded from the threshold testing. This rule is applicable only if control relations between the seller and the target will cease to exist as a result of the transaction, in particular when:
- the target holds no assets in Ukraine, and
- the target has not engaged in any activities in Ukraine during the last two fiscal years and the current year. It is important to note that the term “active in Ukraine” is not defined and is expected to be broadly interpreted to encompass various forms of business activity, and potentially extending to non-commercial activities.
In other words, the seller's figures shall not be considered in acquisitions where the target has no activity or presence in Ukraine. This change clarifies that merger clearance is not required for transactions that lack a significant nexus to the Ukrainian market.
Abolishing clearance for non-controlling minority stake
From the beginning of 2024, the acquisition of non-controlling interests, resulting in the acquirer holding 25% or 50% of a target’s voting rights, is no longer considered a distinct category of concentration and such acquisitions do not trigger notification obligations in Ukraine. Importantly, however, the overarching concept of a “concentration” still encompasses:
- Mergers between unrelated undertakings;
- Acquisitions of control in various forms, including negative control, and transitions from joint control to sole control or vice versa, over an undertaking, part of an undertaking, or a business as a going concern; and
- The establishment of fully operational joint ventures.
Joint ventures in Ukraine are subject to distinct treatment compared to the regulations in the EU and careful consideration is required when determining filing obligations in Ukraine.
Anti-avoidance provision for serial transactions
The amended law introduced an entirely novel anti-avoidance mechanism for Ukraine’s merger control framework. Under this mechanism, transactions occurring within a two-year timeframe involving the same parties and meeting the criteria for a “concentration” will be consolidated into a single transaction. The effective date for this consolidated transaction will be determined by the date of the most recent transaction. This proactive measure seeks to deter attempts to circumvent threshold requirements by conducting a series of smaller acquisitions.
Non-compete restrictions and other concerted practices
Non-compete agreements and other forms of business coordination between undertakings, such as the formation of a non-full-function joint venture, may still require approval from the AMC for concerted practices. This remains applicable regardless of whether the core transaction itself triggers merger notification obligations.
Filing fee
From January 2024, the filing fees for merger applications have doubled to approx. EUR 950 (equivalent to UAH 42,500). In the case of non-compete filings and other concerted practices, the fee has increased to approx. EUR 500 (equivalent to UAH 25,500).
Other refinements
Additional changes include harmonizing terminology with EU regulations, as well as minor refinements in fast-track procedures and exemptions applicable to financial institutions.
Strengthening the AMC’s Institutional Capacity
Expansion of the AMC’s Rights and Powers to Collect Information and Evidence
The AMC now has unprecedented access to statewide and local databases, confidential notarial acts, and banking information, including access to individual bank accounts. This enhanced authority substantially elevates the AMC’s effectiveness and efficiency in identifying violations and in conducting investigations.
The right of the AMC to Conduct Inspections with Approval from the Commercial Court
The first phase of the competition law reform introduced a new procedure for the AMC’s inspections. The AMC now has authority to carry out inspections of private properties, vehicles, and other assets owned by individuals, provided that these individuals are considered as “undertakings,” and there are reasonable grounds to believe that evidence related to competition law violations may be found in these locations. Importantly, such inspections and certain procedural actions (examination, sealing, arrest or seizure of property) require prior authorization from a commercial court, marking a notable departure from the previous procedure, in terms of which the AMC did not require such authorization. The AMC may execute these inspections in collaboration with the police, other law enforcement agencies, and customs authorities, without any requirement for advance notice.
Mandatory Fine Collection by the AMC without Involving the Court
The AMC is now empowered to issue orders for the collection of fines without the need to initiate court proceedings. This procedural innovation accelerates the fine enforcement process, making it more efficient.
Enhanced Mechanism for Ensuring Accountability for Violations
The revised law established joint and several liability for the payment of fines for competition law violations. This provision allows the AMC to hold companies that are part of a single undertaking accountable for the payment of fines. As mentioned above, the AMC has already applied this concept in merger control infringement.
Broadening Procedural Rights for Parties in Infringement Cases
Time Limits on Infringement Investigations
A maximum review period of three years now applies for infringement cases investigated by the AMC, with a discretionary extension of up to two additional years permitted in certain circumstances. If after this cumulative five-year period no infringement finding or fine has been imposed, the case must be formally closed.
Introduction of the Procedure for Determining Fine Amounts
Instead of relying on non-binding recommendatory explanations, the procedure for determining fine amounts is now established by the AMC through a regulatory act. This shift aims to provide a more structured and legally binding framework for calculating fines. It also introduces transparency by requiring the AMC to justify the level of the fine imposed. Additionally, it creates conditions for affected parties to challenge fines in court, enhancing the overall fairness and accountability of the penalty imposition process.
Upgrading the Leniency Procedure
Another key development is Leniency Regulation, which provides clearer regulatory framework conditions, greater transparency, and predictability for the existing leniency program. The revised law has enhanced the leniency system by introducing the possibility of reductions in penalties for applicants who cooperate with the AMC, even if such applicants are not the first to approach the regulator. Such applicants can potentially receive a reduction of up to 50% of a fine that could have been imposed for competition law violations. The extent of the reduction will depend on the sequence of their applications, encouraging companies to come forward and cooperate with the AMC, even if they are not the first to report violations.
Implementation of a Settlement Mechanism
Following the competition law reform, the AMC adopted the Settlement Regulation, to formally introduce a procedure to areas previously being considered as grey area under the law, such as cases concerning of alleged abuse of dominance and anticompetitive concerted practices cases. Parties involved in such cases may enter into an agreement admitting the infringement and may obtain a 15% reduction of the potential fine. This settlement procedure provides a mechanism for resolving competition law violations through cooperation and admission of wrongdoing, potentially leading to more expedient and mutually agreeable outcomes for both the authorities and the parties involved.
Enhancing Transparency and Predictability of AMC’s Operations Mandatory Disclosure of AMC Operations
The updated law mandates the AMC to publish certain information about its activities on its official website. This information includes details about market inquiries, meeting agendas, decisions, recommendations, infringement cases initiated, cases related to concentrations, and concerted practices cases. This change enhances transparency and provides stakeholders with a clearer picture of the AMC’s operations and active cases.
Clarification of the Right to Provide Feedback and Raise Objections on Hearing Records
Under the revised provisions, the AMC is obliged to provide hearing minutes within three days. Participants in these hearings have the right to examine the minutes and submit objections, comments and/or explanations. This seeks to enhance transparency and procedural fairness by allowing participants to confirm that their position is accurately documented.
Limitation on the Time Period for Challenging the AMC’s Decisions
The AMC is now required to provide a reasoned decision if it chooses to refuse to initiate an infringement case based on a complaint from a market participant.
No Retroactive Effect of the Law
The changes to the legislation do not apply to cases or actions that existed before their adoption. As a result, actions that are no longer considered infringements under the updated law are not eligible for amnesty or exemption from fines. This means that the AMC will continue to investigate and potentially impose fines for infringements that occurred before January 1, 2024, based on the rules and regulations that were in place at the time of the violation.
What to expect next
The freshly adopted amendments to the law mark a substantial transformation in Ukraine's antitrust landscape, aligning it more closely with European Union standards. Both the business community and the AMC itself are already adjusting to these changes, shaping novel market practices, which may appear to be challenging but not impossible during the ongoing war in Ukraine.
Moreover, the AMC is not losing its tempo, already having presented the second phase of Ukrainian competition law reform in July 2024. This next phase establishes a framework for the AMC to collaborate with the European Commission and other competition authorities. In addition to anticipated changes in material law, the reform will regulate the exchange of information and mutual assistance in merger investigations. For example, the AMC will be able to request restricted-access information from the European Commission and other agencies.
Clearly, there is still much work to be done and time needed to finalize and implement this second phase of the reform. However, the AMC remains fully committed and is actively working towards aligning local regulations and best practices with EU standards.
