Just like many other countries, Ukraine has announced and started implementation of immediate measures aiming to restrain the COVID-19 outbreak. Although no amendments have yet been made to the competition laws, the Antimonopoly Committee of Ukraine (“the AMCU”) has particularly focused on prevention and monitoring business practices aimed at exploiting the situation around COVID-19. Thus, the markets of pharmaceuticals, medical face masks, PPE, sanitizers, medical devices, FMCG, and transport will be subject to the regulator’s attention.
At the local level, AMCU Kyiv District Office issued recommendations for retailers to avoid unreasonable increases of prices of essential commodities like medical face masks, sanitisers and non-perishable foods.
Also, this Office has launched an investigation against Ukraine International Airlines due to an alleged application of excessive pricing on flights before the government announced its intention to restrict regular international flights.
Furthermore, the AMCU is looking out for misleading advertisements like promotion of pharmaceuticals/dietary supplements on TV or Internet as a treatment against COVID-19.
In this context, the companies operating on the concerned markets should apply safe business practices in order to comply with the competition legislation. The following takeaways may be helpful in case of an urgent need to change the business strategies due to the pandemic.
- The AMC is now closely scrutinising any actions on the market that result or may result in a price increase in or deficit of goods or services in connection with the COVID-19 outbreak. Such actions may be regarded as anticompetitive concerted actions if undertaken by two or more market players or, as an abuse of a dominant position if undertaken by a market player who holds a dominant position on the relevant market (a general criterion of the market dominance is a market share of 30% or more but under certain circumstances a lower market share may trigger a dominant status as well). Both abuse of dominance and anticompetitive concerted actions are considered to be hard-core violations of the local competition law and may trigger significant fines.
- Before applying increased pricing or any other changes to the marketing terms of the goods, the companies need to make sure they have justified economic reasons for this (such as, for example, the supply shortage, unexpected breach of obligations by insolvent counterparties, boosting of the costs, etc.). The companies need to be ready to explain and provide evidence of such justified reasons to the AMCU if it starts investigating the matter. Notably, any parallel actions (i.e. when a company simply copies market behaviour of its competitors without any economic reasons behind this) are likely to be considered to be a breach of competition law.
- It is advisable to carefully monitor one’s market share during the COVID-19 quarantine period and ‘recovery’ period after it. A significantly increased market share may signalise to the AMCU potential competition law breaches by way of dominance abuse or anticompetitive concerted practices.
- Reviewing and, if needed, changing the internal antitrust compliance policies to adjust them to the COVID-19 period realities would be very much advisable.
- It is recommended to seek legal advice before the company takes any actions aimed at surviving the crisis where such actions may be interpreted as anticompetitive.
- If any restrictive covenants on the vertical or horizontal level need to be agreed, before doing this the parties need to analyse carefully if such do not create any risks from the competition law standpoint. If they do, the next step should be to check if such restrictive covenants may be exempted under AMCU regulations. If the answer is no, it is possible to apply for the AMCU approval of such. However, one needs to remember that the standard statutory review period of such applications is 3.5 months.
3. Abuse of market power
- Companies should pay attention to their advertising and promotion practices. Any advertising campaigns that directly or indirectly refer to COVID-19 circumstances, especially in the pharma sector, are being closely monitored by the AMCU to prevent any unfair competition practices (such as consumer misleading, etc.)
4. Merger control
- No special measures or amendments have been taken by the AMCU with regard to merger control procedures. All transactions are being considered and assessed in the ordinary course and within the deadlines, documented in the applicable law and bylaws. The AMCU claims it is working in its regular regime during the COVID-19 period (except for some changes regarding the possibility of personal meetings with the authority’s officers).