Merger control in Ukraine: overview

Regulatory framework

1. What (if any) merger control rules apply to mergers and acquisitions in your jurisdiction? What is the regulatory authority?

Regulatory framework

Mergers and acquisitions, as well as establishment of an undertaking and appointments to corporate positions under certain circumstances, are subject to merger control in Ukraine.

Applicable laws and regulations include the:

• Law of Ukraine on Protection of Economic Competition 2001 (Competition Law).
• Law on the Antimonopoly Committee of Ukraine 1993 (Law on the AMC).
• Commercial Code of Ukraine 2003.
• AMC Resolution Approving the Regulation on the Procedure for Filing Applications with the Antimonopoly Committee of Ukraine for Obtaining its Prior Approval of the Concentration of Undertakings 2002 (Concentrations Regulation).
• AMC Methodology for Establishment of the Monopoly (Dominant) Position of the Undertakings on the Market 2002 (Monopoly Methodology).

Regulatory authority

The Antimonopoly Committee of Ukraine (AMC) is the primary state authority entrusted with ensuring protection of competition. In particular, it has powers to investigate and grant or refuse clearance for mergers (concentrations). If the AMC refuses to approve a concentration, the Cabinet of Ministers of Ukraine (CMU) may overrule that decision (see Question 7).

See box, The regulatory authority.

Triggering events/thresholds

2. What are the relevant jurisdictional triggering events/thresholds?

Triggering events

The Competition Law sets out the exhaustive list of transactions/events that are considered concentrations and may require prior merger clearance:

• Merger of previously independent undertakings or the takeover of one undertaking by another.
• Acquisition of direct or indirect control over an undertaking (including through the acquisition of a significant part of its assets, appointment of its managers and so on).
• Establishment by two or more undertakings of a new undertaking that will independently pursue business activity on a lasting basis and its establishment will not result in co-ordination of competitive behaviour of either:
• its parents;
• the new undertaking, on the one hand, and its parents, on the other.
• Direct or indirect acquisition(s) of control over participation interests where certain thresholds (25% or 50% of the votes in the highest governing body of the undertaking concerned) are reached or exceeded.

Ukrainian merger control rules define control as the ability to exercise decisive influence (including via blocking rights) on the strategic decisions related to the business activity of an undertaking. In particular, control is deemed to exist if an undertaking:

• Directly or indirectly holds or manages more than 50% of shares or votes in another undertaking.
• Is entitled to receive at least 50% of profit in another undertaking.
• Is authorised to appoint CEO, deputy CEO or more than 50% of the members of another undertaking's corporate bodies (or if the same persons hold positions of CEO, deputy CEO, the Chairman, the Deputy Chairman or more than 50% of members of said boards or committees in two undertakings.
• Otherwise controls another undertaking (through contractual arrangements, for example, management or joint activity).

The following are not considered concentrations:

• Establishment of a new undertaking aiming at or resulting in co-ordination of competitive behaviour of either its parents or of the new undertaking and its parents. This kind of establishment is generally regarded as a concerted practice.
• Acquisition of shares qualifying as a financial buyer transaction (that is, shares are acquired by a financial institution for the purposes of further resale within one year (extendable further), provided the acquirer does not exercise the voting rights attached to the acquired shares).
• Intra-group transactions (unless control links within the group were established in violation of the Ukrainian merger control rules).

The limitation period for the authority to take action in relation to mergers is five years after the merger has been completed.

Thresholds

A concentration is notifiable and requires prior approval of the Antimonopoly Committee (AMC) if all of the following thresholds are exceeded (Competition Law):

• The combined worldwide asset value, or turnover of the parties of the concentration (for the purposes of this chapter parties are considered as part of their corporate group), in the previous financial year exceeded EUR12 million.
• Each of any two parties had worldwide asset value or turnover in the previous financial year in excess of EUR1 million.
• The value of assets located in Ukraine, or Ukrainian turnover of either of the parties, in the previous financial year exceeded EUR1 million.

There is also a market share test, which applies independently. AMC clearance is required if either individual or combined market share of the parties in the market concerned or the adjacent market exceeds 35%.

See Question 16 in relation to proposed changes.

Notification

3. What are the notification requirements for mergers?

Mandatory or voluntary

The parties to the concentration must obtain the Antimonopoly Committee's (AMC) approval of the notifiable concentration before closing (see Question 2).

Timing

The law does not set any specific deadlines for filing a notifiable concentration. The only requirement is that AMC approval is obtained before the implementation of the concentration. The exception is made for a case of a tender/bid process where a notifiable concentration should be filed within 30 days after a winner of a tender/bid is announced (this obligation was originally designed for Ukrainian privatisation procedures to allow closing prior to clearance in certain cases).

Formal/informal guidance

Parties to a transaction may refer to the AMC for formal guidance (in the form of a non-binding preliminary opinion) on whether the concentration is notifiable, or whether the clearance is likely to be granted or refused. Informal discussions with the AMC's officers are usually possible, although the law does not expressly provide for this.

Responsibility for notification

The parties to a transaction are jointly responsible for notifying. However, the AMC may agree to accept a notification filed by one of the parties in the following circumstances:

• Hostile takeovers.
• If there is a lack of co-operation between the parties (recently, the AMC has been increasingly reluctant to accept notifications filed by one of the parties with reference to this circumstance).

Relevant authority

The AMC is the relevant authority. However, if the AMC prohibits the concentration, it may still be approved by the Cabinet of Ministers (CMU) (see Question 7).

Form of notification

The parties must submit a written notification with the contents and annexes required under the Concentrations Regulation. There is no prescribed form of notification. Some information must also be submitted in electronic form using special software developed by the AMC for that purpose.

Filing fee

The filing fee is UAH5,100 per one notifiable event (there may be multiple events depending on the transaction structure).

Obligation to suspend

The parties must suspend implementation of the transaction until AMC clearance is granted. In addition, they must refrain from any actions that may restrict competition and make restoration of the initial state of affairs impossible (for example, through pre-clearance "gun-jumping").

Procedure and timetable

4. What are the applicable procedures and timetable?

The merger review procedure includes the following steps:

• Preview period. The Antimonopoly Committee (AMC) has 15 calendar days to decide whether the notification is complete and can be forwarded for the substantive review (Phase I). If the AMC considers the notification incomplete, it is rejected and should be resubmitted.
• Phase I review. This stage involves a substantive review and assessment by the AMC of whether the concentration can be approved or whether there are potential grounds to prohibit the concentration or conduct an in-depth review, in which case Phase II is initiated. The assessment must be completed within 30 calendar days following acceptance of the notification for substantive review. During this period the AMC will either issue the clearance or initiate Phase II.
• Phase II review. Phase II review involves a close analysis of the transaction and the associated competition concerns, examination of expert opinions and other additional information. Although the review period is limited to three months from its initiation, in practice it may take longer if additional documents, information and/or expert evidence are required (the relevant AMC requests may stop or even restart the clock). During this period the AMC will either issue the clearance (either conditional or unconditional) or adopt a decision prohibiting the concentration.

If prior to or on the date when Phase I period or Phase II period expires the AMC has failed to adopt any decision on the concentration, clearance by tacit consent is deemed to have been granted, though the AMC does not normally clear by tacit consent.

For an overview of the notification process, see flowchart, Ukraine: merger notifications.

Publicity and confidentiality

5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?

Publicity

The Antimonopoly Committee (AMC) can (but is not required to) disclose certain general information on the transaction and the parties, the nature of the transaction, the relevant markets and so on. The AMC can also publish (usually on its website) other information regarding the transaction to the extent it was not marked confidential by the parties (and the relevant confidentiality request is satisfied by the AMC) (see below, Confidentiality on request). The AMC tends to make public those investigations that are likely to attract public attention, comments and opinions.

In addition, under the Law on Access to Public Information enacted in 2011, the AMC must disclose its decisions (except for the parties' confidential information). To date, this provision has been implemented by the AMC through publishing short announcements regarding its decisions and major investigations.

On the receipt of a merger notification, the AMC can disclose general information on the transaction and the parties involved if either:

• The authority believes that third parties may object to the transaction.
• Phase II review is initiated (see Question 4).

On issuing a decision, the AMC can disclose other information regarding the transaction and/or the parties within the scope agreed with the parties.

In practice, the AMC normally publishes on its website short notes within one to three business days following issuance of the decision. It may be possible to negotiate with the AMC that they refrain from publication or at least postpone it until the transaction becomes public.

Automatic confidentiality

Automatic confidentiality does not apply to any information.

Confidentiality on request

Merger filings submitted with relevant confidentiality marks are treated by the AMC as confidential and cannot be disclosed to the public except with the express written consent of the parties to the concentration or as outlined above (see above, Publicity). The AMC may require the parties to justify why confidentiality is claimed over a particular piece of information contained in the notification and, if not satisfactorily substantiated, the parties' confidentiality request may be rejected.

Rights of third parties

6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?

Representations

Third parties (for example, competitors and customers of the notifying parties) can be involved during the Phase II review if the notified transaction may significantly affect their rights and interests. The law is generally silent on whether and how third parties must show an interest in the transaction. The decision on their involvement is up to the discretion of the Antimonopoly Committee (AMC). The law also does not distinguish between different classes of third parties with respect to the rights they have.

Document access

Third parties participating in an investigation have the right to access case materials, except for confidential information (see Question 5) and/or other information, disclosure of which may infringe on the interests of the other parties involved or hinder further review of the case.

Be heard

Third parties can submit their observations relating to, among other things, the notified transaction and its impact on the market. The AMC must take these observations into account when deciding on the case.

Substantive test

7. What is the substantive test?

The Antimonopoly Committee (AMC) approves the concentration if it does not lead to monopolisation (creating or strengthening the party's monopoly/dominant position) or substantial restriction of competition on the Ukrainian market or a significant part of it. Otherwise, the transaction will be prohibited unless the parties offer sufficient remedies.

If the AMC identifies the grounds to prohibit the transaction, it opens Phase II investigation (see Question 4). There is also another test for opening Phase II: the AMC may open it if an in-depth review is required. In practice, the AMC may use this formal ground, among others, if the parties fail to provide additional information requested (usually informally) within Phase I.

Ukrainian competition laws define monopolistic (dominant) position and set out the relevant benchmarks, which are:

• Above 35% market share if held individually.
• Above 50% if held collectively by not more than three undertakings.
• 70% if held collectively by not more than five undertakings.

However, no further guidance is provided on, among other things, how effects of the maintenance of dominance should be assessed or the borderline beyond which restriction of competition becomes substantial. Therefore, each transaction is assessed on a case-by-case basis.

Even if the AMC prohibits the concentration, the Cabinet of Ministers may still permit it if its positive effects for the public interest outweigh the negative impact of the restriction of competition, unless that restriction:

• Is not necessary for achieving the purpose of the concentration.
• Jeopardises the market economy system.

8. What, if any, arguments can be used to counter competition issues (efficiencies, customer benefits)?

The Antimonopoly Committee (AMC) may take account of economic efficiencies (such as modernisation and rationalisation of production, purchase or sales, technical and product standards, promotion of technical, technological or economic development and so on) when reviewing the notification. However, in cases posing serious competition concerns, adequate remedies are required.

Efficiencies are likely to be taken into account by the Cabinet of Ministers, which may authorise a transaction that has been prohibited by the AMC (see Question 7).

9. Is it possible for the merging parties to raise a failing firm defence?

The Antimonopoly Committee may take into account a failing firm defence. However, in cases posing serious competition concerns adequate remedies may be required.

Remedies, penalties and appeal

10. What remedies (commitments or undertakings) can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?

The Antimonopoly Committee (AMC) clearance decision can be made conditional on the parties' undertaking to perform, or refrain from performing, certain actions aiming to remove or mitigate the negative impact of the concentration on the market competition, which may be either:

• Structural (for example, divestitures).
• Behavioural (for example, restrictions on use or management of certain assets or price increases).

Remedies and the relevant procedures are not comprehensively regulated by Ukrainian laws and are usually negotiated with the AMC on a case-by-case basis. Although remedies may be offered at any time after the submission of the merger notification, in practice, remedies are usually offered and discussed during Phase II (see Question 4).

Remedies normally cannot be accepted to prevent the initiation of Phase II review or to obtain a conditional Phase I clearance. Once the AMC identifies competition concerns, procedurally it is required to open Phase II.

When issuing a conditional clearance, the AMC may also impose reporting requirements to monitor compliance.

11. What are the penalties for failing to comply with the merger control rules?

Failure to notify correctly

Failure to notify can lead to a fine of up to 5% of the company's turnover worldwide in the year immediately preceding the year when the fine is imposed.

The fine can be imposed on the entire corporate group of the company whose actions or omissions have led to violation of the Competition Law. This allows the Antimonopoly Committee (AMC) to fine immediately any local subsidiaries of the parties and improves the AMC's chances of the successfully collecting fines.

In addition to the financial penalties, parties may be subject to any or all of the following sanctions:

• Ban on the companies' cross-border activities with Ukraine, if the parties refuse to pay the imposed fine. This can be imposed by the Ministry of Economy of Ukraine at the AMC's request.
• Third party damages claims (double the amount of actual damages sustained).
• Invalidation of the transaction.
• Reputational issues (information about the imposed fine is usually published by the AMC on its website) (see Question 5).

Additionally, the parties can face possible complications with Ukrainian clearance of future transactions, as the AMC may scrutinise them more closely.

As regards notifying incorrectly, the following may lead to a fine of up to 1% of the infringer's turnover in the year immediately preceding the year when the fine is imposed:

• Failure to timely provide requested information.
• Provision of incomplete information.
• Submission of false information to the AMC.

There is no criminal or administrative liability for individuals, except that a state official may incur a nominal administrative fine if he fails to provide information to the AMC as required by law.

The law also envisages personal administrative liability of a company's officers interfering with the AMC's investigations. However, an efficient mechanism for implementation of this norm is not been created to date.

Implementation before approval or after prohibition

Implementation before approval entails virtually the same liability as failure to notify at all. However, in practice, closing a non-problematic transaction before clearance but after the filing was made receives a more favourable treatment by the AMC than an omission to file. Closing after prohibition may entail more severe sanctions (see below, Failure to observe).

Failure to observe

Failure to observe the AMC decision prohibiting a concentration, or only partial compliance with it, may result in a fine of up to 10% of the party's turnover in the year immediately preceding the year when the fine is imposed.

Failure to observe the AMC decision that imposes certain obligations on the parties to the concentration may result in a fine of up to 5% of their turnover in the year immediately preceding the year when the fine is imposed. The fine may be based on the global turnover of the infringing party on a group level (see above, Failure to notify correctly).

In addition, the CEO (or a top manager) of the infringing party may be subject to a nominal administrative fine for failure to implement the AMC decision or its untimely implementation.

12. Is there a right of appeal against the regulator's decision and what is the applicable procedure? Are rights of appeal available to third parties or only the parties to the decision?

Rights of appeal

Any Antimonopoly Committee (AMC) decision can be appealed by the parties or third parties within two months following the receipt of the decision.

Procedure

It remains uncertain whether administrative or commercial courts have jurisdiction over appeals. As a matter of practice, commercial courts usually assume jurisdiction and render a final judgment.

The applicable Ukrainian procedural codes regulating commercial/administrative court proceedings establish a two-month term for consideration of cases in each first instance and appeal instance and a one-month term for review on cassation, as well as review of the case by the Supreme Court of Ukraine (to which the cassation court's award may be appealed). However, from a practical perspective, these terms are rarely met due to courts' heavy workload, necessity of conducting additional investigations, collection of documents and information and so on. Therefore, the review on appeal may last for up to several years. Expedited review is not available.

Generally, the court can suspend the AMC decision until the final judgment is rendered. However, to protect the public interest or prevent the possible negative impact of the violation(s), the AMC can declare that the decision cannot be suspended.

Third party rights of appeal

Third parties can appeal an AMC decision (see above, Rights of appealand procedure).

Automatic clearance of restrictive provisions

13. If a merger is cleared, are any restrictive provisions in the agreements automatically cleared? If they are not automatically cleared, how are they regulated?

Restrictive provisions, including ancillary restraints, such as non-compete or other negative covenants, are not automatically covered by the Antimonopoly Committee merger clearance decision. They usually qualify as concerted practices and require a separate anti-trust clearance.

Regulation of specific industries

14. What industries (if any) are specifically regulated?

Generally, no industry is specifically regulated. However, some industry-specific requirements may apply, in particular there are special rules for calculation of thresholds for banks and insurance companies.

15. Has the regulatory authority in your jurisdiction issued guidelines or policy on its approach in analysing mergers in a specific industry?

There are no industry-specific guidelines or policy.

16. How are joint ventures analysed under competition law?

There is no formal legal definition of a joint venture. Under the Competition Law a joint venture may be considered a concentration or concerted practice, in which case the relevant general rules apply.

A joint venture is considered a concentration if it meets the following criteria:

• It is established by two or more independent undertakings.
• It can independently pursue business activity on a lasting basis.
• Its establishment does not result in co-ordination of competitive behaviour of its parents or the joint venture, on the one hand, and its parents, on the other.

A concentration is notifiable and requires prior approval of the Antimonopoly Committee (AMC) if the relevant thresholds are exceeded (see Question 2, Thresholds).

A joint venture is considered a concerted practice if it is established with an objective of, or results in, co-ordination of competitive behaviour of its parents or the joint venture, on one hand, and its parents, on the other. Establishment of such joint venture is prohibited per se if it results or may result in prevention, elimination or restriction of competition, though the parties may apply for the AMC anti-trust clearance.

17. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to merger investigations? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information, remedies/settlements)?

The Antimonopoly Committee can co-operate with regulatory authorities from other jurisdictions, including by transferring the information to foreign competition authorities where the relevant international treaty exists. Confidential information can be provided to a foreign competition authority, but only if that authority:

• Will use the information exclusively for carrying out its duty.
• Can ensure that no disclosure for other purposes occurs.

The law does not expressly provide for co-operation relating to remedies or settlements.

18. What notable recent mergers or proposed mergers have been reviewed by the regulatory authority in your jurisdiction and why is it notable?

The Antimonopoly Committee of Ukraine does not disclose any information on the substance of recent or notable mergers.

19. Are there any proposals for reform concerning merger control?

The main proposals for merger control reform concern the following:

• Merger control. The previous draft law aiming to amend merger control thresholds was withdrawn. There are currently no other draft laws relating to merger control registered with Parliament.
• Transparency. On 13 February 2015, the draft law on ensuring transparency of the activity of the Antimonopoly Committee of Ukraine (AMC) was submitted to the Parliament. The draft law requires the AMC to publish its full decisions (excluding confidential information) on review of the applications for the approval of both mergers and concerted practices and on violations of competition laws on its official website within 30 days of the decision. They will also publish the resolutions on initiation of the merger Phase II reviews within 10 days of the resolution. When submitting confidential information to the AMC, the draft law requires the parties to provide a grounded justification for confidentiality, as well as a non-confidential version of the information.