AMCU's activities. Results and plans

At the web conference of the Antimonopoly Committee of Ukraine on the results of 2012, Mr. Vasyl Tsushko, Head of the AMCU, said that the AMCU had livened up its work in all areas. Thus, in 2012 the AMCU authorities examined more than 6.5 thousand applications about competition violations. This is 37% more than in 2011.

According to preliminary information, the amount of fines imposed in 2012 was in excess of UAH 687 million, which was 9 times more than in 2011.

An important development in the field of state regulation of competition has been the newly adopted concept of the State Program of Competition Development for 2014-2024.

The AMCU's website reported that 1075 inspections of business entities and government authorities for compliance with competition law are going to be held in 2013.

According to the AMCU's plans, the total number of investigations might be no less than 600 cases, while the expected number of recommendations for termination of violations is 1010. In addition, the AMCU intends to examine 730 merger applications and 65 applications about concerted actions of participants in different markets. Also, the AMCU's report states that its experts are going to discuss 2100 draft regulations on competition during 2013 and to issue 2800 proposals to promote competition in markets.

In addition, the AMCU's experts have conducted more than 500 investigations in different markets and have started investigation in new areas, namely a large-scale investigation into retailers' activities and fish and seafood markets.

The AMCU began an investigation into the Ukrainian caramel market

During a press-conference, Mr. Vasyl Tsushko, Head of the AMCU, said that the purpose the investigation had not been to impose fines, but to develop and protect competition. He explained that the investigation had been due to an application of citizens in relation to increased prices for confectionery products, and had been connected with some proceedings initiated on the grounds of dissemination of false information about confectionery products. The AMCU has requested the largest caramel manufacturers to provide information, which shall be collected and analyzed in the course of investigation to study the situation on the market.

Furthermore, Mr. Vasyl Tsushko held an operational meeting with representatives of the Association "Ukrkondprom" to address the greatest concerns of the confectionery market participants.

Mr. Vasyl Tsushko called the confectionery market participants to develop common rules of professional work in the market in order to prevent competition violations.

In order to elucidate the rules of competition law and to provide appropriate advice, Mr. Vasyl Tsushko invited the Association to arrange a number of joint events, such as a round table with the participation of regional market participants to address the issues of prevention of competition violations.

Energy drinks manufacturer reacted to the decision of the AMCU's Donetsk Bra nch

Pursuant to the obligation imposed by the AMCU's Donetsk regional branch, the controlled business entity took steps to stop and prevent further cases of unfair competition.

As it was, the company producing energy drinks specified no term of action related to Euro 2012, spreading thereby incomplete information. In addition, the company declared prizes - 50 invitations to the championship, which were never delivered.

Thus, to comply with the AMCU's decision, the company destroyed the remnants of promotional labels and seized the remaining promotional products at outlets in the amount of 472 bottles.

To prevent violations, the company issued an order on compulsory coordination of all label models with the legal department. In addition, the company paid the winners compensation in the amount of UAH 1,200.

The AMCU's Practice

1. Unfair competition (dissemination of misleading information)

The AMCU identified the following violations and applied the following sanctions:

  • A large drink producer was fined with UAH 3 million for placing the label "Approved by the Ministry of Health of Ukraine" on product packaging, though such approval had never been obtained. In addition, the packages of pomegranate and multivitamin nectars bore inscriptions "800 g pomegranate - 1 liter of pomegranate juice" and "1 kg of exotic fruits - 1 liter multivitamin nectar," though less fresh fruit was processed.
  • Another producer (Sevastopol) was fined with UAH 68 thousand for placing false information on the packaging of butter regarding its composition, mass fraction of fat and that it was made under GOST 4399:2005 "Butter."
  • An enterprise (Dnipropetrovs'k) was fined with UAH 25 thousand for placing an inscription "with bacon" and an image of a slice of bacon on the packaging of bread crisps, though only bacon flavor was used in the product.
  • A company (Chernihiv) was fined with UAH 34 thousand for placing inscriptions "with strawberries", "strawberry", "pineapple", "lemon" and images of the said berries and fruits on the packages of the sweets "Madagascar", though they were not contained in the products.
  • A producer (Dnipropetrovs'k) was fined with UAH 50 thousand for placing the word "light" on packages of rusks without specifying the content of the said information, though the product did not meet the consumer properties declared by the producer in terms of fats, carbohydrates and energy value, but, contrariwise, was rich in calories, carbohydrates and energy value.
  • An enterprise (Kyiv) was fined with UAH 3.5 thousand for placing the inscription "with baked milk" on a product packaging, though the product contained only the natural identical flavor "baked milk" instead of real baked milk.
  • A bread producer (Dneprodzerzhinsk) was fined with UAH 10 thousand for placing the inscription "Sweet roll with condensed milk" on a product packaging, though the product contained a lactiferous condensed cooked product with plant oil "Iriska" instead of condensed milk different in composition.
  • A company was fined UAH with 20 thousand for using the words "Milanese Cervelat" in the name of a product, which could deceive a potential consumer, who might have thought that the quality of the sausage was determined by the rules of state standards of Ukraine, though it was produced based on technical specifications.
  • A major producer was fined with UAH 50 thousand for placing false information on labels of soft drinks of its own production.
  • A producer was fined with UAH 5 thousand for using the name "Moskovskaya" in the production of sausages, though the properties of the sausages did not meet the requirements of GSTU 4435:2005 "Smoked sausage. General technical specifications."
  • A company (Kyiv) replaced the name of its product "Wild strawberries and cream" with "Wild-strawberry morning" upon the AMCU's request, as the product was only flavored with "Wild strawberries and cream."
  • A distillery was fined with UAH 100 thousand for using the description "ABSOLUT" and the bottle design, which had been already used in the economic activities of its competitor, namely of the foreign company "Absolut Company AB" (Stockholm, Sweden).

2. Informational violations (fai lure to provide information at the AMCU's request)

A number of companies were fined for failure to provide information at the AMCU's request. In particular, during the last week of December 2012 the AMCU fined more than 20 companies with a total of UAH 1.4 million for failure to provide information at the request of the AMCU. The fines ranged from UAH 1 thousand to 300 thousand.

The toughest sanctions were imposed on one of the poultry farms (UAH 40 thousand fine), a manufacturer of dairy products (UAH 70 thousand fine), and a major retailer (UAH 300 thousand fine).

3. Abuse of monopoly One of the bakeries was fined with UAH 68 thousand for unjustified increases of bread prices.

Practice of the Supreme Administrative Court of Ukraine

On December 13, 2012 the Supreme Administrative Court of Ukraine hereinafter "the SACU") issued a ruling in the lawsuit of a producer against the AMCU.

The company filed a lawsuit against the AMCU for the annulment of the decision according to which the plaintiff was obliged to stop using design elements in the production and sale of cakes, which looked similar to the corresponding elements of a competitor's cake brand, and according to which the plaintiff was fined with UAH 40 thousand.

Lviv Regional Administrative Court ordered a merchandising examination, which revealed that though cakes had a similar appearance their packagings were very different, which excluded the possibility that consumers would mix the products in their minds. In addition, the expert examination concluded that the use of the designation "Female" was not enough to mix such products in the minds of consumers as consumer packagings of the cakes contained other evident differences.

However, the trial court did not support the expert conclusions and dismissed the claim.

Lviv Administrative Court of Appeal ruled to reverse the decision of the trial court and adopted a new ruling which canceled the AMCU's decision as unlawful.

Having considered the joint appeal of the AMCU and a competing manufacturer, based on Article 220 of the Code of Administrative Procedure of Ukraine, the SACU noted that the evaluation of evidence reliability is not within the competence of the court of cassation, whereas conclusions of a merchandising expertise accepted as evidence by the court of appeal cannot be questioned.

Thus, the SACU upheld the decision of Lviv Administrative Court of Appeal stating the use of design elements in the plaintiff's cake production, despite the apparent similarity to the design elements of cakes produced by a competing manufacturer, was not a violation of competition law.

However, the market operators would better closely monitor compliance with the rules of competition law to avoid potential penalties, which may be imposed by the AMCU, as well as other adverse effects.

Control over milk procurement from individual farms

Khmelnytsky Regional Territorial Department of the AMCU obliged 12 dairies to conclude relevant agreements with individuals when purchasing milk in the said region.

The AMCU found that a number of market participants, in spite of the legal requirements, do not enter into contracts with individuals when purchasing milk for processing.

Contractual relationship with the population is provided for in the Regulations on the procurement of raw milk from agricultural producers of all forms of property or from individual farms. The particular attention of the AMCU's Department in Khmelnytsky region to the above issue is due to the fact that, as of 2011, Khmelnytsky region occupies the 3d place in terms of milk procured by entities for industrial processing, 80% of which are purchased from individual farms.

Bill on the state monopoly for the production and sale of alcohol, alcoholic beverages and tobacco products

On December 12, 2012 the Parliament of Ukraine registered the Bill on the state monopoly for the production and sale of alcohol, alcoholic beverages and tobacco products.

According to the Bill such production shall be allowed only at specialized state-owned enterprises, which excludes the existence of private producers.

At present the Bill is handled by the Parliamentary Committee. However, there are no reasons to believe that it will be passed into law.

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