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

1. UNFAIR COMPETITION VIOLATIONS (DISSEMINATION OF MISLEADING INFORMATION)

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

  • A major drinks producer was fined UAH 136 thousand for placing information about the terms and timelines of a promotional offer on the inside of a promotional drink label (instead of its outside face), thus making that information unavailable to consumers purchasing the promotional drink. As far as the prize pool was limited, information that prizes for those participating in the promotional campaign were "guaranteed", in case they had sent the required number of unique codes, was also deemed a violation.
  • A meat processing plant was fined UAH 40 thousand for placing the product name "cooked veal sausage with cream" on the label of the same product, though its actual composition contained no cream at all. While determining the amount of fine, the AMCU's territorial department took into account the fact that the company's violation had been a first-time one and had been consequently terminated as the producer had started adding cream to the sausage.
  • The company was fined UAH 15 thousand for spreading false information about consumer properties of soy chops called "soy chicken chops" and "soy bacon chops", though they contained no bacon or chicken. The company ceased the violation and began using only the new labels "spicy chicken-flavored soy chops" and "spicy bacon-flavored soy chops" instead.
  • A company was fined UAH 12 thousand for spreading false information about consumer properties on packagings of candy and sweet rolls "Raspberry", "Banana", "Apricot", "Lemon", "Peach", "Barberry", "Mint", "Orange" of own production by placing pictures of fruits and berries and using their names in the product names despite of their lack in the actual product composition.
  • A creamery was fined UAH 10 thousand for placing false information about the type of product, its composition and compliance with the state standards. The company placed information about the product type "butter" and the product composition "cow's milk cream" and its compliance with DSTU 4399:2005 on product packaging. According to the results of laboratory tests, vegetable oil was found in the product samples. That was contrary to the requirements of DSTU 4399:2005, under which butter must be made from cow's milk and its products only. Thus, the AMCU's territorial department concluded that the information on the product packaging was false and misled consumers.
  • A company was fined UAH 10 thousand for passing a vegetable cream mixture for milk. The producer specified on the packaging that the mixture contained vegetable cream without specifying what plants it was made from. At the same time, the term "cream" is traditionally used in the meaning of a pure milk product only. Therefore, the company violated the requirements of the Law of Ukraine "On Milk and Dairy Products", which prohibits the manufacturers to use dairy product names in product names, if the latter are made from raw materials of non-dairy origin.
  • A company was fined UAH 8 thousand for placing false information about consumer properties of products on their labels. In particular, a product label stated the name "tomato paste" and provided information on the content of 25% dry tomato substance. However, laboratory tests showed that the percentage of dry soluble substances in the product was only 18%. Moreover, under the State Standards, a product containing from 12% to 20% of dry tomato substance should be called "tomato puree" (not "tomato paste").
  • A producer of concentrate for making jelly was fined UAH 8 thousand for placing the designations "cranberry", "lemon", "pineapple" and their pictures on its packaging without such fruit being contained in the product.
  • A company was fined UAH 5 thousand for selling smoked sausage called "Moskovskaya". According to state standards the name "Moskovskaya" refers to the traditional range of sausages manufactured under certain technological instructions and recipes. In addition, the name "Moskovskaya" is missing in the list of names of sausage products provided for in DSTU 4435:2005 "Smoked Sausages. General Specification". The AMCU's territorial department decided that the use of that name influenced consumers' intentions regarding the purchase of the product and could lead to the achievement of improper advantage in competition.

2. INFORMATION BREACH (FAILURE TO PROVIDE INFORMATION AT THE AMCU'S REQUEST)

A bread-baking plant was fined UAH 20 thousand for failure to provide information at AMCU's request.

We would like to emphasize that according to Article 52 of the Law of Ukraine "On Protection of Competition" market operators may be fined for a failure to provide or provision of incomplete or false information to the AMCU. The amount of such fine may be up to 1% of income (revenue) of an entity from the sale of goods (works, services) for the last financial year preceding the year in which the fine is imposed.

3. ABUSE OF MONOPOLY

  • AMCU fined two state veterinary hospitals UAH 3 thousand and 2 thousand, respectively, for fixing economically unreasonable tariffs for the veterinary and sanitary inspection of products of animal and plant origin.
  • Several sanitary-epidemiological stations were fined for illegal collection of additional funds for issuing expert opinions of sanitary and epidemiological inspections.

4. ANTICOMPETITIVE CONCERTED ACTIONS

  • Two individual entrepreneurs were fined UAH 12 thousand for bid rigging in the procurement of food for school children.
  • Two other entrepreneurs were fined UAH 5 thousand for bid rigging in the procurement of fresh and frozen meat.

RESULTS OF THE AMCU'S ACTIVITIES IN 2012 AND PLANS FOR 2013

On March 12, 2013 Mr. Vasyl Tsushko, Head of the AMCU, held a meeting of the AMCU to review and approve the AMCU's Annual Report 2012.

Mr. Rafael Kuzmin, the AMCU's First Deputy Head, noted that in 2012 the AMCU put an end to almost 30% more violations than in 2011. About 50% of the violations were stopped by providing recommendations, which allowed to quickly eliminate the identified violations. The economic benefit amounted to more than UAH 1 billion in 2012.

In addition, the AMCU set priorities for 2013, including the following:

  • taking comprehensive steps aimed at the prevention, detection and suppression of violations of legislation on competition protection on the socially important markets,
  • monitoring services markets in the lease of agricultural land of all forms of ownership,
  • drafting the Bill of Ukraine "On the National Program of Competition Development in Ukraine 2014-2024 and on increasing cooperation with the Organization for Economic Cooperation and Development (OECD)," for Ukraine to acquire the status of an associated member of the OECD Competition Committee.

Mr. Vasyl Tsushko, Head of the AMCU, emphasized that active and fruitful cooperation with deputies, committees of the Parliament of Ukraine, leading competition authorities of the world and international experts in the field of competition would improve the competitive environment in Ukraine.

COOPERATION IN PRICE CONTROL BETWEEN PRODUCERS OF FLOUR, BREAD AND BAKERY PRODUCTS AND RETAILERS IN DONETSK REGION

On January 28, 2013 the Donetsk Regional State Administration, the AMCU's Donetsk regional territorial department, the Sector of the State Inspectorate for control over the prices for flour, bread and bakery products in the Donetsk region, and retailers signed a Memorandum of Understanding and Cooperation.

According to the provisions of the Memorandum the parties thereto undertook the following commitments:

1. Regional producers of flour, bread and bakery products undertook to ensure the steady consumer supply of flour, bread and bakery products in the required quantity and range in compliance with national quality standards for the mentioned products, and to avoid unreasonable increases in wholesale and retail prices for bread and bakery products;

2. Retailers undertook:

  • not to apply systems of payments, bonuses or other allowances for product placement in retail chains to regional producers of flour, bread and bakery products; to provide guaranteed availability of bread and bakery products in stores in required quantities;
  • not to exceed 10% of the limiting trade (supply and sales) mark-ups to producer's wholesale prices for bread enjoying strong consumer demand in the region (formerly, the limiting mark-up was 15% according to the Order of the Donetsk Regional Administration No. 67 dated June 05, 2008);
  • to ensure the payment for the supply of bread and bakery products that are in high demand within a period not exceeding 10 calendar days.

3. The AMCU's Donetsk regional territorial department undertook:

  • to facilitate the development of fair competition on the market of flour, bread and bakery products;
  • to exercise state control over the compliance with legislation on competition protection in preventing, detecting and suppressing violations:
    1. on the part of market operators - in the form of anticompetitive concerted actions, abuse of monopoly (dominance) or unfair competition;
    2. on the part of authorities, local governments, bodies of administrative and economic management and control - in the form of anticompetitive practices;
  • to control the compliance with legislation on competition protection on related markets having a direct impact on the markets of flour, bread and bakery products;
  • to provide recommendations to businesses, local state authorities and local governments to prevent violations of legislation on competition protection, as well as to stop actions or omissions that may have a negative impact on competition.

The governor of the Donetsk region said that the signing of a similar memorandum in April 2012 helped to prevent a significant increase in prices for social kinds of bread in the Donetsk region. He also expressed his hope that Memorandum 2013, just like the previous one, will promote equitable regulation of wholesale and retail prices for flour and bakery products.

At the same time, the Chairman of AMCU's Donetsk regional office noted that in 2013, as in the past years, the market of bread and bakery products and its related markets (wheat, bakery flour, retail) would be closely monitored by AMCU's Donetsk regional office. Every actual increase in prices for bread will be studied at all stages of price formation, both in the procurement of raw materials for production and in selling products through large retail chains.

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.