Ukraine. Anti-competitive agreements

[May 21st, 2013] What is the general framework for assessing whether an agreement or practice can be considered anti-competitive?

Under article 6 of the Law on Protection of Economic Competition, anti-competitive concerted acts are acts which have led or may lead to prevention, elimination or restriction of competition and are related to:

• setting of prices or other conditions of purchase or sale of goods;
• restriction of production, commodity markets, technical and technological development, investments or the establishment of control over them;
• allocation of markets or sources of supply based on territory principle, range of goods, volumes of sale or purchase, sellers, buyers or consumers or by other means;
• bid rigging;
• application of different conditions to equivalent transactions with other business entities, which put the latter at competition disadvantage;
• conclusion of agreements on condition that other business entities assume additional obligations which by their content or in accordance with trade and other fair customs of entrepreneurship are not related to subject of these agreements; and
• substantial limitation of the competitiveness of other business entities on the market without objectively justified reasons.

Describe the nature and main ramifications of any cartel investigations in the pharmaceutical sector.

According to the competition legislation, anti-competitive concerted acts shall be deemed to have taken place in a product market where similar acts (or omissions) are being carried out by undertakings, which have led or may lead to prevention, elimination or restriction of competition, provided that analysis of the situation in the product market negates any objective reasons for implementing such acts.

As stated above, some pharmaceutical market players took advantage of the epidemiological situation and essentially increased prices of flu medicines in the past years.

Therefore, in order to prevent potential seasonal increase of prices for flu medicines, the AMCU at the end of 2012 recommended to 15 business entities, including the 10 largest domestic manufacturers and leading wholesale distributors of flu medicines to refrain from an economically unjustified increase in prices and creating artificial deficiencies of medicinal products.

Besides, many anti-competitive concerted acts are uncovered by AMCU in the bidding field within public procurement procedures. The conclusions of the AMCU on violations are usually made following similar mistakes or common features in the presentation of bidding documents which give reasons to believe that the bidders have exchanged information to rig the bid.

To what extent are technology licensing agreements considered anticompetitive?

Technology licensing agreements are not considered anti-competitive as long as the scope of the agreement does not exceed the scope of IP rights, like the term and territory of the licence, type of activity, sphere of use of the IP object, minimal volume of production.

To what extent are co-promotion and co-marketing agreements considered anti-competitive?

Ukrainian competition legislation makes no special reference to co-promotion and co-marketing agreements, thus the general rules are applicable.

The most typical antitrust violations within co-promotion and co-marketing agreements are price fixing and allocation of markets (eg, private and public markets, regional and all Ukrainian markets).

What other forms of agreement with a competitor are likely to be an issue? Can these issues be resolved by appropriate confidentiality provisions?

Cross-licensing agreements may become an issue if the agreement scope exceeds the scope of IP, the IP products are exclusive on the relevant market and these significantly distort competition. Agreements on postponing the entry of a generic product onto the market may also become an issue from a competition law perspective if such agreement leads to an increase in the product's prices. Similar agreements that can lead to price regulation, or can restrict or block entry to the market of other products or competitors, are also questionable. In general, confidentiality provisions in the agreement cannot prevent the application of the competition legislation.

Under the Law on Protection of Economic Competition, a person who committed anti-competitive concerted acts, but voluntarily informed the AMCU and submitted information of essential importance for taking a decision on the case earlier than the other parties to the collusion is, as a general rule, relieved from liability for committing anti-competitive concerted acts.

Which aspects of vertical agreements are most likely to raise antitrust concerns?

In general, the competition legislation of Ukraine prohibits any agreements which led or may lead to prevention, elimination or restriction of competition. Major antitrust issues of vertical agreement are price fixing, exclusivity clauses and market sharing by geographical region.

To what extent can the settlement of a patent dispute expose the parties concerned to liability for an antitrust violation?

In general, settlement of a patent dispute does not expose the parties to liability for an antitrust violation, unless such settlement ends in the form of an agreement, such as a cross-licensing agreement, which can lead to abuse of dominant position, price regulation, restriction of production, markets, goods, limitation of technological development, distribution of markets or sources of supply, restriction of access to the market of other commercial entities, levy of additional restrictions incompatible with the subject of the agreement and similar consequences that can have negative impact and significantly distort the competition on the relevant market.

If the outcome of the settlement establishes restrictions of production, markets, goods, technical-technological development, sets control over these, or causes removal of competitors or setting the prices for the patented product concerned, etc, then it may be regarded as concerted action and thus subject the parties to liability for antitrust violation.

Besides, provided that a dispute settlement takes place within court proceedings, the parties must submit the executed amicable agreement for the court's consideration. The court considers the terms of the agreement as to their compliance, inter alia, with competition legislation of Ukraine. If provisions of an amicable agreement break the law or infringe rights and interests of any party as well as third parties, the court denies such an agreement.

Source: Arzinger