Ukraine: Merger Control

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This country-specific Q&A provides an overview to merger control laws and regulations that may occur in Ukraine.

It will cover jurisdictional thresholds, the substantive test, process, remedies, penalties, appeals as well as the author’s view on planned future reforms of the merger control regime.

This Q&A is part of the global guide to Merger Control. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/merger-control

  1. Overview

    The principal law governing the Ukrainian merger control regime is the Law of Ukraine “On the Protection of the Economic Competition” (2001). Other relevant laws and regulations are as follows: the Law of Ukraine “On the Antimonopoly Committee of Ukraine” (1993); Regulation on Filing with the Antimonopoly Committee of Ukraine Applications Seeking a Prior Approval of the Concentration of Business Entities (2002); Methodology Applied to Determine Monopoly (Dominant) Market Position (2002); Rules Applicable to Proceedings on Applications and Cases on Violations of Competition Law (1994); and Guidelines on the Calculation of Fines for Violations of Competition Law (2016).

    The Antimonopoly Committee of Ukraine (AMC) is the primary state authority, which is responsible for the protection of the economic competition.

    The merger control notification is mandatory, if the financial thresholds are met. The transaction cannot be completed prior to its approval by the AMC.

    All thresholds are calculated on a group-level basis. The thresholds test is applied for the acquirer group and the target group including the seller group. The value of assets and turnover refer to the whole turnover and assets of the parties (not only those related to the relevant product/service market).

    Ukrainian competition law contemplates standard (45 calendar days) and simplified (25 calendar days) procedures for the consideration of the merger control notification. If the transaction may lead to a monopolisation and a detailed analysis of the transaction is required, the AMC may initiate a merger investigation (Phase II). Phase II may not exceed 135 calendar days.

  2. Is mandatory notification compulsory or voluntary?

    Notification is mandatory.

  3. Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?

    The transaction cannot be completed prior to its approval by the AMC.

    Nothing prohibits the parties to sign the transaction documents at any time. However, completion of the transaction (including the acquisition of shares or assets) is conditional upon the AMC merger control clearance, unless the transaction qualifies for an exemption. The exemptions are as follows:

    • establishment of an entity in order to coordinate the competitive behaviour between its parent entities or between the newly established entity and its parent entities. Such transaction, however, is considered as concerted actions (practices) and may require the parties to obtain a separate AMC concerted actions (practices) clearance;
    • acquisition of shares by a broker (or by a financial institution), if such acquisition is made for the further resale and the broker does not participate in managing the target. The broker must resell the shares within one year from the date of the initial acquisition;
    • intra-group transactions (provided that the control relations within the group were established in accordance with the merger control rules); and
    • acquisition of control over an entity or a part of it by a receiver or a state officer acting in his official capacity.

    In the case of public bids, the notification may generally be filed both before and after a public bid, unless special legislation provides otherwise. In any event, the notification must be filed not later than the expiry of 30 calendar days from the date of the announcement of the winning bidder.

    Derogations are not available. It is impossible to avoid breaching the prohibition by “carving out” Ukrainian assets and legal entities from the overall transaction.

  4. What are the conditions of the test for control?

    The following types of transaction are caught:

    • merger of entities or takeover of one entity by another;
    • direct or indirect acquisition of control over an entity or a part of it;
    • creation of a joint venture by two or more entities;
    • direct or indirect acquisition of shares if such acquisition results in obtaining (1) 25%, (2) more than 25%, (3) 50%, or (4) more than 50% of votes in the highest governing body of an entity.

    The parties must indicate the group of undertakings affiliated with them by the relations of control. As circumstances may require, the AMC may request the parties to provide additional documents and information with respect to the relations of control and recheck the parties’ position and arguments.

  5. What are the conditions on minority interest in your jurisdiction?

    The acquisition of less than 25% of shares in a company does not require a merger control clearance, if such minority interest does not ensure the control to the acquirer (including the negative control via veto rights under a shareholders’ agreement or other similar instruments). Under Ukrainian competition law, control is a decisive influence over business activity of an entity, irrespective of the form that such influence takes (including informal de facto control).

    The test for control is based on the ability to veto important decisions relating to the business activity of an entity (approval of the budget, business, strategic and development plans, appointment of senior management and key employees, ability to enter into certain types of agreements, etc.).

    Even if a minority interest (in the range of 25-49%) is acquired that does not ensure the control, such transaction is still reportable to the AMC.

  6. What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)?

    Ukrainian competition law provides for a “double-decker” thresholds system – two alternative thresholds. The merger control clearance is required, if:

    • the aggregate worldwide value of assets or turnover of the parties to concentration exceeds EUR30 mln, and the value of Ukrainian assets or turnover of at least two parties to the concentration exceeds EUR4 mln each; or
    • the aggregate value of Ukrainian assets or turnover of the target or at least one of the founders of a joint venture exceeds EUR8 mln, and the worldwide turnover of at least one other party to the concentration exceeds EUR150 mln.

    There is no market share threshold.

    All thresholds are calculated on a group-level basis (taking into account the relations of control). All entities, which are directly or indirectly controlled by the parent company, form a group of entities and constitute a single undertaking from a merger control standpoint. The thresholds test is applied for the acquirer group and the target group including the seller group.

    The thresholds refer to the whole turnover and assets of the parties (not only those related to the relevant product/service market). The thresholds are the same for all industries and sectors involved.

  7. How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?

    The value of assets and turnover are calculated for the calendar year (as of 31 December of the relevant year) immediately preceding the year of the notification to the AMC. All worldwide assets must be calculated. The Ukrainian assets include all groups of assets, which are directly or indirectly owned by the parties and located in Ukraine. The Ukrainian turnover includes all group sales in Ukraine (of residents of Ukraine and non-residents) and the sales of residents of Ukraine to other countries. The values of assets and turnover must be calculated based on the financial statements.

  8. Is there a particular exchange rate required to be used for turnover thresholds and asset values?

    The values of assets and turnover are calculated based on the official exchange rates set by the Ukrainian central bank (the National Bank of Ukraine) as of 31 December of the relevant year. As of 31 December 2015, the exchange rates were as follows: USD1 corresponded to UAH24.000667, EUR1 corresponded to UAH26.223129.

  9. Do merger control rules apply to joint ventures (both new joint ventures and acquisitions of joint control over an existing business?

    The Ukrainian merger control rules apply to JVs on a common basis. There are no separate thresholds for JVs.

  10. In relation to “foreign-to-foreign” mergers, do the jurisdictional thresholds vary?

    “Foreign-to-foreign” mergers (including the transactions with JVs) require a merger control clearance, if the above thresholds are met. In such case, the parties may file a merger control notification with the AMC within the framework of the simplified procedure (see our answer to question 5.4 for details of such procedure).

  11. For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?

    Not applicable.

  12. Additional information: Jurisdictional Test

    Not applicable.

  13. What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies?

    As a matter of practice, the AMC clears a predominant majority of transactions.
    If the AMC reveals that the proposed transaction may result in the monopolisation or substantial restriction of the competition in any Ukrainian market, it may apply divestment/behavioural remedies to the concentration participants, such as:

    • divestment of undertakings (assets, integral property complexes);
    • prohibition to increase prices without reasonable grounds;
    • prohibition to reduce the volume of production;
    • prohibition to create barriers for new competitors;
    • request to provide the AMC with certain data on the volume of production/supply during a specified time period, etc.

    If the AMC considers that the proposed transaction may severely negatively affect the domestic competition environment, it may refuse to grant the merger control clearance. In that event, the Ukrainian central government (the Cabinet of Ministers of Ukraine) may approve the transaction, if its positive effects and results for the public interest outweigh the negative impact of the restriction of the competition caused by the implementation of the transaction.
    Therewith, the Cabinet of Ministers cannot approve the transaction, if the restrictions provided by the transaction:

    • are unnecessary for reaching the aim of the concentration; or
    • constitute a threat for the domestic market economy system.
  14. Are non-competitive factors relevant?

    No, the AMC considers the transaction only from the competition standpoint.

  15. Are there different tests that apply to particular sectors?

    There are no sector specific tests.

  16. Are ancillary restraints covered by the authority’s clearance decision?

    A merger control clearance does not cover any ancillary restraints (such as non-competition agreements within the framework of the proposed transaction), which are usually considered as concerted actions (practices) and may require obtaining a separate AMC concerted actions (practices) clearance.

  17. For mandatory filing regimes, is there a statutory deadline for notification of the transaction?

    The parties must submit a merger control notification before closing of the transaction. There is no such procedural step as an initial notification letter submitted prior to submitting the filing.

  18. What is the earliest time or stage in the transaction at which a notification can be made?

    A merger control notification may be filed with the AMC at the stage when the parties agree key commercial terms of the transaction (structure of the transaction, purchase price and the number of shares to be purchased reflecting on votes, etc.), which must be reflected in the draft of the binding transaction document.

  19. What is the basic timetable for the authority’s review?

    Ukrainian competition law contemplates standard (45 calendar days) and simplified (25 calendar days) procedures for the consideration of a merger control notification.

    Standard procedure

    During the initial period of 15 calendar days after the filing, the AMC decides whether to accept or reject the merger control notification on technical grounds, and during the next 30 calendar days the AMC considers the notification on merits.

    Simplified procedure

    During the initial period of 15 calendar days after the filing, the AMC decides whether (1) to accept or reject the merger control filing on technical grounds, and (2) to satisfy or reject the plea on considering the merger control notification within a framework of the simplified procedure.

    If the AMC shares the parties’ view that the transaction qualifies for the simplified procedure, the AMC will have additional ten calendar days after the expiration of the initial period to consider the merger control notification on merits.

    If the AMC considers that the transaction does not qualify for the simplified procedure, the AMC will reject the merger control filing. In that event, the parties must file a new merger control notification, which will be considered within the framework of the standard review procedure.

  20. Under what circumstances the basic timetable may be extended, reset or frozen?

    In exceptional circumstances, if the proposed transaction may lead to the monopolisation and the detailed analysis of the transaction is required, the AMC may initiate a merger investigation (Phase II). In such case, the total period from the start date of Phase II until the date of a decision may not exceed 135 calendar days.

  21. Are there any circumstances in which the review timetable can be shortened?

    Other than a possibility to apply the simplified procedure (25 calendar days), as described below, there are no legal grounds to speed up the consideration period.

    Simplified procedure for the consideration of a merger control notification is applied in the following cases:

    • only one party to the concentration is active in Ukraine; or
    • combined market share of the parties to the concentration does not exceed 15% on an overlapping market or 20% on a vertically related market.

    As a matter of practice, occasionally the AMC may grant a merger control clearance faster than within the prescribed timeframes. However, it greatly depends on the workload of the AMC.

  22. Which party is responsible for submitting the filing? Who is responsible for filing in cases of acquisitions of joint control and the creation of new joint ventures?

    The merger control notification must be signed by representatives of both parties (purchaser and target). From the transactional perspective, it is commonly accepted practice that the obligation to obtain a merger control clearance rests on the purchaser.

    In case of the creation of new JVs the obligation to obtain the merger control clearance rests on all founders.

  23. What information is required in the filing form?

    In general, the Ukrainian competition law requires submission of a considerable amount of information, including the following:

    • detailed description of the transaction;
    • general description of the purchaser group, the target group and the seller group, and their activities worldwide;
    • relations of control of the parties, the UBOs of each party (if applicable);
    • details of the parties and all affiliated undertakings (non-residents and residents of Ukraine), which are active in Ukraine or have been active in Ukraine during the last two years and in the most recent reporting period of the current year;
    • calculation of the total value of assets and turnover for the last financial year;
    • the market data in respect of the relevant market(s); and
    • very detailed and scrupulous economic feasibility study (EFS) of the transaction, etc.

    The AMC has quite wide discretion to request any relevant additional information at any time within the framework of the consideration period.

    If the transaction qualifies for the simplified procedure (see our answer to question 5.4 above), the parties must provide the AMC with the same information as under the standard procedure (however, in less detailed manner), except for the EFS. Instead of the EFS the parties must only provide a brief information regarding the purpose of the transaction and planned results for each party.

  24. Which supporting documents, if any, must be filed with the authority?

    The following documents must be filed with the AMC:

    • powers of attorney from the parties, which must be notarised and apostilled, with the Ukrainian translation;
    • draft of the Articles of Association of a JV, if applicable;
    • certificate of incorporation/good standing/extract from the trade register (if the parties are non-residents of Ukraine only), which must be notarised and apostilled, with the Ukrainian translation;
    • copies of passports and tax identification numbers (if the applicants are individuals);
    • scheme of the relations of control of the parties (before and after the implementation of the transaction);
    • share purchase/shareholders’ agreements, which must be notarised and apostilled, with the Ukrainian translation, or their final drafts;
    • documents proving the sources of the financing of the acquisition (annual report/financial statements of the purchaser/loan agreement (or its final draft), which must be notarised and apostilled, with the Ukrainian translation.

    All the above documents must be true, accurate and valid as of the date of the merger control notification.

  25. Is there a filing fee? If so, please specify the amount in local currency.

    The filing fee is UAH20,400 (approximately €700).

  26. Is there a public announcement that a notification has been filed?

    The AMC does not publish a merger control notification.

  27. Does the authority seek or invite the views of third parties?

    As a matter of practice, the AMC never invites views of third parties, if the transaction does not raise any competition issues.

    If the AMC reveals that the proposed transaction may result in the monopolisation or substantial restriction of the competition in any Ukrainian market, during the review period it may communicate with other state bodies, concerned entities (main competitors, supplies and customers of the concentration participants), and engage various experts.

  28. What information may be published by the authority or made available to third parties?

    The parties may file the merger control notification in a confidential mode. At the same time, the parties must clearly indicate the documents and information, which contain confidential information/commercial secrets with the respective substantiation. In that event, the AMC will not publish any confidential documents/information.

    The AMC publishes its decisions on merger control notifications on the AMC’s official website within ten business days following the adoption of the respective decision. The decisions contain general information regarding the participants to the concentration and do not contain any confidential information/commercial secrets.

  29. Does the authority cooperate with antitrust authorities in other jurisdictions?

    The AMC cooperates with antitrust authorities in other jurisdictions in general. The full list of the cooperation agreements is not publicly available. As a matter of practice, the AMC does not cooperate with antitrust authorities in other jurisdictions in respect of any specific transactions.

  30. What kind of remedies are acceptable to the authority? How often are behavioural remedies accepted in comparison with major merger control jurisdictions, such as the EU or US?

    If the AMC reveals that the proposed transaction may result in the monopolisation or substantial restriction of the competition in any Ukrainian market, it may apply divestment/behavioural remedies to the concentration participants, such as:

    • divestment of undertakings (assets, integral property complexes);
    • prohibition to increase prices without reasonable grounds;
    • prohibition to reduce the volume of production;
    • prohibition to create barriers for new competitors;
    • request to provide the AMC with certain data on the volume of production/supply during a specified time period, etc.

    The AMC may apply the divestment remedies only in exceptional cases, if the proposed transaction may result in the monopolisation or substantial restriction of the competition in any Ukrainian market.

  31. What procedure applies in the event that remedies are required in order to secure clearance?

    If the AMC informs the parties to the concentration that they may not be granted an approval, they have 30 calendar days (extendable at the parties’ request) to offer the AMC remedies they are willing to undertake, in order to eliminate negative effects on the competition. As a rule, the AMC informs the parties that remedies are required within the framework of Phase II.

  32. What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?

    For a failure to obtain the merger control clearance before closing the transaction, the AMC may impose penalties of up to 5% of the turnover of parties to the transaction from their worldwide sales for the year preceding the year when the penalties are imposed.

    As a matter of practice, the AMC usually imposes penalties only on the purchaser.

    If a JV is formed without a merger control clearance, the AMC will impose fines on all founders.

    As a matter of the latest practice, the AMC imposes fines in accordance with its guidelines on the calculation of fines for violations of the competition law initially adopted in 2015. The guidelines, although non-binding, set a two-level system of fine calculation: basic amount and aggravating/extenuating factors. We are unaware of any cases when the AMC imposed the maximum permitted fines – the fines are usually of a much less scale.

    Furthermore, a failure to obtain a merger control clearance of the AMC before closing the transaction may also result in the transaction being held invalid through the court proceedings, only if the transaction has resulted in the monopolisation or substantial restriction of the competition. To the best of our knowledge, the AMC has never resorted to this remedy in practice.

  33. What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?

    For providing incomplete or misleading information in the merger control notification or in response to the AMC’s additional request, the AMC may impose penalties of up to 1% of the worldwide turnover of the party, which provided incomplete or misleading information.

  34. Can the authority’s decision be appealed to a court? In particular, can third parties who are not involved in the transaction appeal the decision?

    The AMC’s decisions may be appealed to commercial courts within two months following the receipt of the decision. Third parties who are not involved may also appeal the AMC’s decisions. The timeframe for the consideration of an appeal depends on case-by-case basis and may roughly be between two and five months for instance.

  35. What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?

    2015-2016 was a very fruitful period for the Ukrainian competition law and its regulatory framework. The Ukrainian Parliament and the AMC addressed the long-expected requests of the European Union, Ukrainian business community and foreign investors and introduced essential legislative changes, which are aimed at the overall improvement of the domestic competition law. In particular, a new system of the financial thresholds was introduced (as described in our answers to section 3). The previous financial thresholds were much lower.

    On 15 September 2015 the AMC adopted guidelines on the calculation of fines for competition law violations (as restated on 9 August 2016). In addition to addressing the issue of fines, the guidelines also provide for the amnesty for the companies, which performed a concentration without the AMC clearance and reached the AMC with a respective amnesty application before 15 September 2016. In this case the companies will have to pay a fixed fine in the amount of 6,000 tax-exempt minimum incomes (currently UAH102,000 or approximately EUR3,500), which is much less than most of them would have paid outside of the amnesty procedure.

  36. Are there any future developments or planned reforms of the merger control regime in your jurisdiction?

    We expect the merger control regime to be further made more business-friendly. In particular, the primary milestones in the future are (1) to develop the guidelines on the calculation of fines for violations of competition law, which will have a legal binding nature; (2) to adopt the ‘effects doctrine’; and (3) to adopt the mechanism under which the merger control clearance will cover non-competition agreements within the framework of the notified transaction.