Ukraine. Anti-competitive unilateral conduct

In what circumstances is conduct considered to be anti-competitive if carried out by a firm with monopoly or market power?

Under article 13 of the Law on Protection of Economic Competition, the abuse of monopoly (dominance) position on the market includes acts or omissions of a business entity with monopoly (dominance) position, which led to or may lead to prevention, elimination or restriction of competition. The abuse of a monopoly (dominant) position on the market is prohibited.

The Law on Protection of Economic Competition establishes a non-exclusive list of activities deemed to be recognised as abuse of monopoly (dominance) position on the market:

• fixing of such prices or other terms of purchase or sale of goods, which would be impossible under substantial competition on the market;
• application of different prices or various other conditions to equivalent agreements with business entities, sellers or buyers without objectively justified reasons;
• stipulating that in order to conclude an agreement a business entity should assume additional obligations, which by their nature or in terms of trade and other fair customs in entrepreneurial activities are not related to the subject of the agreement;
• restricting manufacturing, markets or technical development, which caused or may cause damage to other business entities, buyers or sellers;
• partial or complete refusal to purchase or sell goods with no alternative sources of their sale or purchase;
• substantial restriction of the competitiveness of other business entities on the market without objectively justified reasons; and
• creation of entry (exit) market barriers or removal from the market of sellers, buyers or other business entities.

When is a party likely to be considered dominant or jointly dominant?

As per part 1 of article 12 of the Law on Protection of Economic Competition, the business entity holds a dominant position on a relevant market if such business entity:

• has no competitors on this market; or
• faces insignificant competition due to restricted opportunities of other business entities for access to purchase raw materials, sale of commodities, or due to the market access barriers for other business entities, availability of privileges or other circumstances.

A business entity's position is regarded as a monopoly (dominant) if:

• its market share is 35 per cent or more and it cannot prove that it experiences significant competition; or
• its market share is 35 per cent or less, but it does not experience significant competition due to the comparatively low market shares of competitors.

It is considered that each of two or more business entities has monopoly (dominant) position if concerning certain types of commodity they do not compete between themselves or in the case of insignificant competition, and in respect of them, taken together, one of the above-mentioned conditions of part 1 of article 12 is fulfilled.

The position of each of several business entities is regarded as a monopoly (dominant) if:

• the aggregate share of no more than three business entities that have the largest shares of the relevant market exceeds 50 per cent; or
• the aggregate share of no more than five business entities that have the largest shares of the relevant market exceeds 70 per cent.

The AMCU by the Decree No. 49-r dated 5 March 2002 approved the Methodology of Determination of Business Entities' Monopoly (Dominant) Position on the Market, which establishes the procedure of determination of the monopoly (dominant) position of a business entity on the market and intended for the analysis of activities of business entities, groups of business entities and consumers as to the production, sale or purchase of goods, services or works at national and regional markets.

Can a patent holder be dominant simply on account of the patent that it holds?

The patent holder receives monopoly from the state for usage and protection of its intellectual property rights. However, such a monopoly characterises per se solely the position of the patent holder as to its invention, but the ownership of a patent does not automatically grant a monopoly (dominant) position to the patent holder in terms of the competition legislation.

To what extent can an application for the grant of a patent expose the patent owner to liability for an antitrust violation?

Basically, application for the grant of a patent does not create any risks with respect to competition and is not likely to expose the patent owner to liability for an antitrust violation. At the same time, the initiative to establish liability for unfair acts related to submission for registration of intellectual property which would deliberately violate completion rules is actively discussed (eg, procrastination of the generic's launch on the market by misuse of intellectual property rights). However, for the time being, there is no enforcement practice in this area.

To what extent can the enforcement of a patent expose the patent owner to liability for an antitrust violation?

Enforcement of a patent can expose the patent owner to liability for antitrust violation if the patent is of questionable legal force and its enforcement can have a negative effect on the market or competition on the market of relevant goods or if such enforcement leads to some anti-competitive practices or artificial distortion or restriction of competition on the relevant market. However, provided that the enforcement of patent does not exceed the scope of legitimate rights of a patent owner, such acts shall not be considered a violation of antitrust legislation.

To what extent can certain life-cycle management strategies expose the patent owner to liability for an antitrust violation?

A life-cycle management strategy which led or may lead to prevention, elimination or restriction of competition may expose the patent owner to liability for antitrust violation.

Do authorised generics raise issues under the competition law?

Authorised generics per se do not raise issues under the competition law. However, once generics are authorised and are marketed, their entry on the market as a rule leads to significant drop of prices for the products on the market concerned. Thus the right owners tend to procrastinate the period of their leading position on the market and move the moment of launch of the generics to the market. Thus, if there are some agreements related to marketing of the generics which affect the price regulation, such agreements are likely to raise competition issues.

To what extent can the specific features of the pharmaceutical sector provide an objective justification for conduct that would otherwise infringe antitrust rules?

The general rules of competition legislation are applied to the pharmaceutical sector.

Has there been an increase in antitrust enforcement in the pharmaceutical sector in your jurisdiction? If so, please give an indication of the number of cases opened or pending and their subject matters.

Even though there is no official data on the number of antitrust enforcements in 2012, we assume that the number has increased in comparison with 2011 taking into account the attention of the AMCU on the pharmaceutical sector and the experience of previous years. In 2011 there was a significant increase in antitrust enforcement in the sector compared with the preceding year. Whereas in 2010 the number of enforcements on the pharmaceutical market was approximately 180, in 2011 the number has increased to 280.

As noted above, in 2012 the AMCU has conducted the investigation in the retail and wholesale trade in medicinal products. While there is data available on the number of cases initiated by the AMCU as regards the retail markets, there is no official data in relation to wholesale trade. Such data will be available in 2013.

As a result of the investigation of 138 retail regional markets, the AMCU has initiated 36 proceedings on violation of the competition legislation, among which:

• six cases have concerned abuse of dominance;
• three cases, the anti-competitive actions of local self-government authorities;
• one case, the anti-competitive concerted actions of business entities; and
• nine cases, the dissemination of misleading information.

As to price violations of the competition legislation, the most common violation on regional markets is abuse of dominant position by means of overpricing. Moreover, the following non-price violations have been identified: dissemination of untrue information about low prices, incomplete information about peculiarities of a product's sale and discounts thereto, etc.

At this time, the AMCU is strengthening its position as one of the key regulators of the pharmaceutical market. Therefore, in 2013 a substantial increase in investigations of the pharmaceutical market is expected.

Is follow-on litigation a feature of pharmaceutical antitrust enforcement in your jurisdiction? If so, please briefly explain the nature and frequency of such litigation.

While the violation of the Law on Protection of Economic Competition may be established exclusively by a decision of the AMCU, compensation for damages may be enforced in a follow-on litigation procedure. In addition, there is a tendency to appeal the decisions of the AMCU in the courts. However, as of this date, there is no official data on the frequency of such litigation.

Source: Arzinger