Following our policy of supporting our current and potential clients at all stages of their activity in Ukraine, we would like to draw your attention to the following:

  • Practice of the Antimonopoly Committee of Ukraine (hereinafter "the AMCU");
  • Recent news in the field of competition protection.

THE AMCU'S PRACTICE

Unfair Competition Violations (Dissemination Of Misleading Information)

The AMCU's offices have found and applied sanctions for the following violations:

  • A major Ukrainian producer of fish products was fined UAH 200 thousand for referring to tuna fish in the product name "Silver tuna" , though the product contained no tuna at all. When determining the amount of fine the AMCU's Interim Administrative Board considered the fact that the company stopped the violation in the course of investigation.
  • A major ice cream producer was fined UAH 50 thousand for using the name "Watermelon" and pictures of watermelon on the front of the ice packaging, though the product contained `no watermelon in its composition. The company stopped the violation and destroyed the remaining packaging for the above product.
  • A confectionery factory was fined by the AMCU's territorial office UAH 35 thousand for using the descriptions "cream" on the packagings of soft candy "sausage-shaped chocolate and cream bars with peanuts", "sausage-shaped chocolate and cream bars with peanuts" despite the absence of cream in the mentioned products.
  • A confectionery manufacturer was fined UAH 15 thousand by the AMCU's territorial office for using images of cans of condensed milk with the words "condensed MILK with sugar" and cans labeled "Honey" despite the absence of condensed milk and honey in the products.
  • A well-known dairy producer was fined UAH 50 thousand by AMCU's office for using the descriptions "Watermelon," "Kiwi-Mango," "Condensed Milk" , as well as images of slices of watermelon, kiwi, mango and cans of condensed milk on product packaging, despite the absence of the specified products in the ice cream.
  • The AMCU's territorial office fined a sausage producer UAH 50 thousand for using the names "Kyiv Servelat" and "Special Servelat" , which are traditional products and thus may deceive a potential consumer, who might think that the quality of the sausage is determined by the rules of state standards of Ukraine "Servelat". At the same time, the products were manufactured under a different standard, under which the production technology and recipe were changed, and the quality was lower, respectively. The producer stopped the violation.
  • The AMCU's territorial office fined a famous coffee producer for placing information about a promotional campaign valid until December 31, 2012 on product packaging, without specifying its period. Moreover, the products were in circulation after December 31, 2012, which mislead consumers.
  • The AMCU's territorial office fined an individual entrepreneur UAH 45 thousand, who ordered a contractor to produce alcoholic and non-alcoholic beverages, for distribution of false information. The beverage name contained the designation "Kvass" , whereas the product was a non-alcoholic low-calorie carbonated and flavored beverage. It contained no kvass wort concentrate, which is a basis in the production of real kvass. When determining the amount of fine, the AMCU considered the fact that the violation had been committed for the first time.
  • A company was fined by the AMCU's territorial office for placing the designations "the best ingredients", "produced under an American technology" on the packaging of corn sticks despite the lack of proof for such statements.
  • The AMCU's territorial office fined a producer of "Apple Vinegar" UAH 20 thousand for using the image of apples in product labeling. The office's decision is based on the fact that the company used no real apples in the product.
  • A company was fined by the AMCU's office UAH 50 thousand for using the designations "Maple", "Hazelnut", "Cinnamon" , which were placed on the front of labels for pastry and coffee, though the products contained no natural ingredients referred to. AMCU's office found that the specified products contained the flavors "Maple," "Hazelnut," "Cinnamon." Therefore, the products were just "maple-, hazelnut-and cinnamon flavored" syrups.
  • The AMCU's territorial office fined a cheese producer UAH 35 thousand for using the designation "with mushrooms" in the product that contained the flavoring mixture "Mushrooms," though the product contained no mushrooms.

Informational Violations (Non-Provision Of Information At AMCU's Request)

For failure to provide information at the AMCU's request, the following market operators were fined:

  1. A dairy producer – UAH 5 thousand;
  2. An agroindustrial enterprise – UAH 10 thousand;
  3. A dairy, eggs and sunflower oil producer – UAH 10 thousand;
  4. A winery - UAH 1 million;
  5. A dairy - 10 thousand;
  6. A creamery – UAH 1 thousand
  7. A dairy producer – UAH 10 thousand.

As a matter of fact, according to Article 52 of the Law of Ukraine "On Protection of Economic Competition" market operators may be fined up to 1% of income (revenue) from the sale of goods (works or services) for the last financial year preceding the year in which the fine is imposed for failure to provide or for providing incomplete or false information to the AMCU.

COMPETITION PROTECTION NEWS

POSSIBLE LEGISLATIVE CHANGES

Bill Of Ukraine "On State Aid To Business Entities"

On April 4, 2013 the Cabinet of Ministers agreed on the Bill of Ukraine "On State Aid to Business Entities" (hereinafter the Bill) as of March 21, 2013 developed by the Antimonopoly Committee of Ukraine.

According to the explanatory note the Bill is aimed at facilitating Ukraine's performance of obligations under the EU-Ukraine Cooperation and Partnership Agreement.

Among other things, the Bill defines the legal framework for the AMCU's monitoring of state aid provided to business entities.

Under the Bill, state aid to business entities is any form of support provided to business entities with the state or local resources, which distorts or threatens to distort competition by creating benefits for the production of certain goods or doing certain types of business.

The Bill introduces a principle under which any state aid to business entities shall be impermissible for competition, unless otherwise provided by the law.

Providing such aid shall be prohibited. Moreover, if provided, it should be returned to the State Budget

Under the Bill, State aid shall be deemed permissible, if rendered:

  1. to provide consumers with important social goods;
  2. to compensate persons affected by man-made emergencies and natural disasters for damage.

In addition, state aid may be deemed permissible under the AMCU's separate resolution, if rendered:

  1. to provide the social and economic development of regions with low living standard or high unemployment;
  2. to implement national programs or solve social and economic problems state-wide;
  3. ensure the development of certain economic activities or business entities operating in selected economic zones;
  4. to support and preserve the national cultural heritage.

In accordance with the Bill, state authorities that provide aid to business entities are required to give an appropriate notice thereof to the AMCU. After that, the AMCU will analyze the permissibility of such aid.

Therefore, the Bill complicates the procedures for obtaining state aid, which, in turn, may have a positive impact on the development of competition in the market.

Possible Amendments To The Law Of Ukraine "On Protection Of Economic Competition"

On March 19, 2013 the Parliament of Ukraine registered a bill on amending the Law of Ukraine "On Protection of Economic Competition" No. 2570 (hereinafter the Bill).

The Bill provides for a more detailed procedure for the AMCU's exercise of its powers in conducting inspections of market operators. As stated in the explanatory note to the Bill, the proposed amendments are aimed at increasing transparency in the AMCU's enforcement activities, as well as at strengthening the procedural guarantees for those involved in the proceedings.

First of all, the Bill details the existing rights and powers of the AMCU. Thus, the right to conduct an inspection in accordance with the amendments proposed includes:

  • the right to obtain written explanations from persons in the course of inspections (the current wording of the Law provides only for the AMCU's authority to submit a request for information);
  • the right to freely enter the premises, vehicles or other possessions of inspected entities (currently, there is only the right to inspect premises);
  • the right to require the production or delivery of documents, objects or other media (the current wording of the Law provides for the exclusive right to withdraw such objects);
  • to require the production of proof of a person's identity and position.

In addition, the Bill introduces the AMCU's new powers previously not specified by other legislation, namely the following:

  • the right to use photography or filming, audio or video recording, or other technical software and hardware;
  • the right to seal premises for up to 10 days (it should be noted that this right does not overlap with the AMCU's authority to seize property; seizure applies to objects, documents or other media, but not to premises);
  • the right to forbid persons that stay in the premises during an inspection to move objects, documents or other media, or to work at the computer;
  • the AMCU's right to require certain persons to leave the premises (other than the director or acting director or persons providing legal assistance to them).

Some powers introduced by the Bill raise some doubts. In particular, the AMCU's authority to seal premises for up to 10 days can lead to production stoppage.

THE AMCU'S NEWS

The AMCU's Report For 2012

On March 12, 2013 the AMCU held a meeting to approve the AMCU's report for 2012.

First of all, the AMCU's representatives noted the positive trend to a decreased level of monopolization in the food market. It was also noted that the trade market showed better structural prerequisites for competition, more than 75% of the goods being sold in markets with a competitive structure. In turn, the same factor in the agricultural sector was almost 60%.

In 2012, the AMCU received over 6 thousand applications and appeals concerning competition violations. Having considered the same, the AMCU conducted 1,035 inspections, which is 15 percent less than last year.

Upon the results of the previous year, the AMCU has stopped 5,820 violations, which is 30 percent more than in 2011.

According to the report, the agribusiness market ranks second among all markets by the aggregate number of competition violations. In addition, agribusiness ranks first in terms of violations in the form anti-competitive concerted practices and unfair competition.

It should be noted that the AMCU declared the food market a priority market 2012, which was reflected in comprehensive investigations into the specified market. Moreover, the AMCU has also determined the food market as a priority market 2013. Therefore, it will continue to examine the specified market closely.

Specifics Of Labeling Children's Products

The AMCU ordered the manufacturers to stop distributing false statements on labels of products regarding their appropriateness as children's food.

The AMCU found that manufacturers of products use the designation "Children's" on labels of products without confirming their compliance with the special requirements of state standards for meat products recommended for pre-school and school-aged children.

Under GSTU 4436:2005 cooked sausages "Children's", "Children's creamy," "Children's" sausages are recommended by the Ministry of Health for children, which provides for more stringent requirements for the composition of such products and raw stock. At the same time, manufacturers of sausages used the name "Children's" for mass consumption products.

In this context, the AMCU ordered several companies to bring their product labeling into line with the GSTU requirements.

We draw the market operators' attention to the need for conformity of products bearing the designation "Children's" with the state standards of Ukraine.

The AMCU Required Producers Not To Increase Prices For Eggs Due To Easter Holidays

The AMCU provided its recommendations on prices for eggs during the May holidays to the main producers - poultry farms and specialized food retail chains.

In particular, the AMCU noted that the product was at risk of unjustified price increases on the Easter eve due to a significant increase in demand.

Thus, higher prices for eggs during the May holidays can be viewed by the AMCU as an antitrust violation and is undesirable.

The AMCU Ordered A Bread Manufacturer To Decrease Prices

Early this year a major bread producer informed that the price of "social" bread had to be increased by UAH 0.5 due to the lack of sufficient grain stock from the Agrarian Fund.

However, the AMCU noted that the concerned lack was not a ground for increasing the bread price, as the company was provided with production supplies from other sources.

After the AMCU's notice the company undertook to reduce the prices for bread to the previous level.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.