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REGULATIONS ON BLOCK EXEMPTIONS IN VERTICAL CONCERTED ACTIONS COME INTO FORCE
DLA Piper, Kyiv, Ukraine,
Thu, Dec 7, 2017
On 5 December 2017, a new regulation by the Antimonopoly Committee of Ukraine (hereinafter – the “AMCU”) on typical requirements for vertical concerted actions of undertakings has entered into force (hereinafter – the “Typical Requirements”). The document aims to bring block exemptions in vertical concerted actions in line with the best European practices and is an attempt to implement these new rules into the national legislation of Ukraine, in order to align with the European Commission Regulation No. 330/2010 dated 20 April 2010.
According to the requirements, restrictions in vertical agreements are not considered anticompetitive and, therefore, do not require the AMCU’s permit if they meet the following criteria:
- the market shares of the supplier and buyer on the markets where they, respectively, sell and buy the contract goods do not exceed 30%;
- established between an association of undertakings and its members or between such an association and its suppliers provided that (i) all members of such association are retailers and (ii) no individual member (taking into account control relations) of such association has a turnover in Ukraine exceeding EUR 25 million for the previous financial year;
- contain provisions concerning assignment to the buyer or use by the buyer of intellectual property rights, however subject to compliance with certain criteria;
- established between the parties to an independent contractor agreement, provided that the latter complies with certain requirements.
As a general rule, agency arrangements are not recognized as vertical concerted actions, provided that an agent does not bear the financial risks (or at least bears only insignificant commercial risks).
Vertical concerted actions are not allowed and require receipt of the AMCU’s if:
- concluded between competing undertakings, except for certain types of non-reciprocal vertical restrictions;
- contain hardcore vertical restriction that with some exceptions, including: (i) restrictions on a contract good’s resale price (except for maximum or recommended prices); (ii) restrictions on the territory or the range of customers for a contract good’s resale;
- envisage a non-compete obligation concluded for an indefinite period of time or in excess of five years;
- envisage an obligation of the buyer not to produce, buy, sell or resell the goods after the termination of the agreement (contract), although there are exceptions to this;
- envisage an obligation of a participant of a selective distribution system not to sell brands of particular competing suppliers;
- applied by market participants in parallel and the network of such vertical restraints covers more than 50% of the relevant market.
The adoption of the Typical Requirements is expected to significantly reduce the risk of being held liable for violations of the legislation on the protection of economic competition, will help to eliminate additional transaction costs and in general will improve the conditions for doing business in Ukraine.
NB. Vertical concerted action is any agreed competitive behavior of undertakings, regardless of its form, achieved between undertakings that do not compete in a single goods market and simultaneously have sale and purchase relations on the relevant goods markets (for example, a product manufacturer and distributor).