Penalties Imposed by AMCU During the War: the Highest Fines

Oleksandr Fefelov, Partner, Head of Antitrust and Competition Practice

Source: Yurydychna Gazeta

Antimonopoly Committee of Ukraine’s activities during the war is among the pressing issues widely discussed within the expert community. Discussions primarily revolve around sanctions imposed on business entities under martial law, highlighting the Committee’s continuing relevance.

Businesses are forced to compete in conditions of significant staff shortages, broken logistical links, limited raw material access, and power outages as a result of the war. On the other hand, adherence to fair competition rules is one of the factors that keep the economy afloat. Under the existing force majeure conditions, the AMCU continues to fulfill its obligations to ensure compliance with existing competition rules by requiring business entities to comply. The Committee’s sanctions policy is a prime example of such coercion.

Typical violations sanctioned by the AMCU

Among the violations stipulated by Article 50 of the Law of Ukraine “On Protection of Economic Competition” and Article 21 of the Law “On Protection from Unfair Competition”, the following can be distinguished:

• anticompetitive concerted actions (mainly distortion of bid, auction, competition, tender results);
• concentration without obtaining the relevant AMCU authorization, if such authorization was necessary;
• abuse of monopoly (dominant) position;
• failure to fulfill a decision, previous AMCU bodies’ decisions or their fulfillment not in full;
• so-called information violations (failure to submit information to AMCU within the established deadlines, incomplete submission, submission of unreliable information);
• unfair competition (mainly violations under Article 4 and Article 15.1 of the Law of Ukraine “On Protection from Unfair Competition”).

According to the AMCU’s annual reports, the dynamics of growth in the number of cases, fines, and total amounts can be clearly observed. In 2021, the AMCU issued 485 decisions imposing fines amounting to approximately UAH 7.2 billion. The majority of these fines were related to anticompetitive concerted actions, abuse of monopoly positions, and unfair competition. In 2022, with the onset of a full-scale war, the activities of the AMCU experienced some disruptions, resulting in reduced attention to its work. That year, only 203 decisions were made, with fines totaling UAH 557.9 million. However, by 2023, the AMCU had significantly increased its activity, issuing 651 decisions and imposing fines totaling nearly UAH 2.6 billion. The trend of increasing fine amounts has continued into the current year.

In 2023, the majority of fines were imposed for violations under Article 6 of the Law (antitrust concerted actions), with bid rigging accounting for 1,020 decisions. Other notable violations included 130 cases of abuse of the monopoly (dominant) position under Article 13, 43 cases of unfair competition, and 148 cases of failure to comply with AMCU decisions. Additionally, fines were imposed for unauthorized concentrations, concerted actions, or failure to meet permit conditions. In total, 1,562 violations were recorded, prohibited, or recognized in 2023. This figure approaches the pre-war level of 1,672 violations recorded in 2021, demonstrating that the AMCU has largely returned to pre-war performance levels in addressing violations.

Regarding the markets where violations were detected, the majority were in construction and building materials (37.5%), followed by industry (13.7%), the agro-industrial complex (10%), healthcare and medical products (7.4%), housing and utilities (4.4%), and the fuel and energy sector (1.7%). However, when considering the size of the fines imposed, the fuel and energy sector dominated, accounting for 76.6% of the total fines. The remaining sectors collectively accounted for just 23%.

One notable example is the imposition of one of the largest fines—UAH 1.444 billion—on three companies within the Naftogaz group in 2021 for abusing their monopoly (dominant) position in the national natural gas market. The AMCU identified discriminatory pricing practices by Naftogaz group companies when signing wholesale contracts for gas resale to the population.

Additionally, two companies were fined UAH 139.1 million for distorting the results of 16 tenders related to ventilator procurement during the acute phase of the COVID-19 pandemic.

Another case involved UAH 54.2 million in fines for collusion between two companies during their participation in three public procurement procedures for aviation fuel for Antonov in 2020.

Collusive bidding

AMCU pays special attention to the detection of so-called bid rigging during public procurements, which are the main violations of the economic competition legislation in both 2023 and 2024. Such a number of violations looks strange, as information about such cases is constantly covered in the media and at various special events, and the number of cases is not getting smaller.

I believe it is not superfluous to remind those who are directly involved in the preparation and participation in public procurements of the main indirect evidence that the AMCU most often uses to prove collusion:

• similarity in tender offers design;
• use of the same communication means;
• location in the same premises;
• loans and other financial transactions;
• the existence of an implicit or explicit control relationship;
• “common” personnel;
• “joint” economic activities.

It is important to note that in most cases the main problem for business entities is not the fine itself. Instead, it is the inability of violators to participate in public procurement procedures in the future (within three years).

Fine amount determination

The specific fine amount is calculated according to AMCU Order No. 22-RP dated 14 December 2023. First, the base amount of the fine is determined, which is adjusted depending on the presence of circumstances that are taken into account when determining the amount of the fine (increase or decrease its amount compared to the base amount).

For example, the amount of the fine may be reduced if the defendant ceased illegal actions (inaction) before the day of sending a notice with preliminary findings on the case, compensated for the damage caused by the violation or eliminated the consequences of the violation before the day of AMCU’s decision, and cooperated with the authority during the consideration of the case. In addition, force majeure circumstances related to martial law may also be considered.

It is clear that in any case the fine amount will not be higher than the maximum amount provided for in Article 52 of the Law “On Protection of Economic Competition” and/or Article 21 of the Law “On Protection from Unfair Competition”. Also, do not forget that the maximum fine imposed by the interregional AMCU branch is currently 68,000 UAH.

Particular attention should be paid to the fact that from 2024 the AMCU’s decision to impose a fine is already an enforcement document, i.e., unlike in previous years, it does not need to submit to court to collect the fine.

Also, avoiding payment of the fine by liquidation or bankruptcy of the violator has become problematic since 2024. Now the Law introduces joint and several liability of economic entities for payment of AMCU fines. That is, if it is impossible to collect a fine imposed by the AMCU from a person due to termination of the violation, bringing it to bankruptcy or insufficiency of its assets due to the fault of its controlling participants, shareholders, then the legal successors of the violation, its founders (participants, shareholders, group) are jointly and severally liable to pay the fine imposed by the AMCU.

In what ways can the fine be reduced?

Traditional ways include the Committee’s review and verification of the decision, as well as judicial appeal of the decision.

Under an appropriate procedure (leniency), the infringer can also be entirely exempted from liability for participation in anticompetitive concerted practices if certain conditions discussed earlier are met.

As of 2024, a case settlement procedure (settlement) was introduced whereby business entities are offered to reduce investigation time and reduce fines by 15%. The defendant in a case has the right to apply to the AMCU for settlement. The settlement procedure is implemented by signing an agreement between the AMCU and the defendant on a pre-agreed draft.

Social and economic effects of fines during war

In a climate where businesses face significant losses, compounded by the pressure of investigations, cases, sanctions, and the challenging process of judicial appeals against AMCU decisions, the impact on economic entities is profound. However, the absence or weakening of regulation and oversight of competition rules would undoubtedly result in a significant decline in the overall economic and social landscape. Unchecked and unpunished violations could lead to cartel collusion, posing risks such as artificial shortages of goods or services and harmful pricing practices.

A balanced approach to AMCU activities would be logical. On the one hand, it should prevent the formation or strengthening of monopolies and cartels. On the other hand, it must consider the challenging wartime conditions under which businesses operate – often just to survive. While ensuring a high standard of compliance with fair competition rules, it is equally critical to avoid the closure or suspension of businesses that contribute to the economy by providing jobs and paying taxes. Businesses now look for support and assistance rather than punitive measures that could destroy. Of course, this support must be contingent upon strict fair competition rules. Some compromises might also be considered, such as postponing fine collection until after the war. Additionally, the sheer volume of investigations may not always reflect their practical necessity at this moment, and prioritization of efforts could lead to more effective outcomes.

AMCU’s role in protecting competition in Ukraine is undeniably significant. However, when compared to competition authorities in other countries, a noticeable disparity emerges in the number of investigations conducted. The AMCU handles far more cases than its European counterparts, where authorities tend to prioritize high-profile and impactful matters. European regulators focus on significant cartels, abuse of monopoly positions, and mergers and acquisitions – cases that have a tangible and substantial influence on specific markets.

The competition authorities in other countries are autonomous in determining which cases merit attention. For example, countries such as Germany investigate 100-150 cases annually with a focus on large cartels, mergers and abuse of dominance, France carries out 80-120 investigations per year with a focus also on massive M&A, competition issues in the digital economy, Spain handles 50-90 cases per year with a focus on abuse of dominance and consumer protection, Italy handles 50-90 cases per year, and the UK examines up to about 100 cases annually with a focus on M&A, large cartels, and consumer protection.

The reasons for the significantly lower number of cases handled in other countries are basically as follows:

• prioritization, which allows resources to be directed to cases with significant market impact;
• legislative rules and mechanisms ensure priorities can be prioritized, avoiding unnecessary effort and overburdening agencies;
• greater competition advocacy and business awareness of the dangerous consequences of infringements, a proper attitude to competition law compliance reduces the number of infringements and consequently investigations;
• constant development of the law, which allows to respond promptly to changes in the economic and social spheres.

At the same time, in Ukraine we have about 1000 cases per year, many related to minor, and often even minor violations.

The reasons for this are known to all competition protection experts:

• legal and regulatory peculiarities, when Ukrainian law requires the AMCU to respond even to minor violations, which in EU countries usually do not fall under antitrust regulation;
• institutional peculiarities, when AMCU offices and structural subdivisions respond to almost all complaints or self-discovered violations;
• AMCU has to deal with cases of social and economic importance (price increases, supply conditions, etc.), but not significant from the point of view of competition protection. It is also quite common for some competitors to initiate investigations against others with the primary purpose of gaining competitive advantages for themselves.

Solutions to address this disproportion are well-known and already being implemented, notably through legislative reforms. The second phase of competition law reform is underway, aligning Ukraine’s regulations with EU best practices. This reform will enable the AMCU to focus on addressing the most critical violations, reducing pressure on businesses. It will also ease the Committee’s workload. The anticipated result is a more effective enforcement system. A key aspect of the reform includes the proposed use of enforcement measures such as recommendations, undertakings, and voluntary commitments instead of fines. These alternative measures are expected to yield positive outcomes. For example, employing recommendations instead of imposing strict sanctions, and avoiding the unnecessary creation of hurdles for businesses in cases unrelated to specific applications or violations, will likely be welcomed by the business community. Moreover, enhancing competition advocacy and increasing business awareness about competition rules – and the consequences of violations – are equally crucial.

Competition advocacy should emphasize educational initiatives. It is not always pure profit-driven motives that lead to primitive collusion in tenders, which have reached alarming levels. Many individuals and entities need regular education on such practices. With better awareness, cases and fines can be significantly reduced.

Accelerating the implementation of the second phase of competition law reform is critical. Adapting legislation to European standards will improve competition rule enforcement effectiveness. In turn, this will enhance competition protection quality and contribute to a substantial decrease in violations.