Ukraine. Competition regulation and legislation
- the Law on Protection Against Unfair Competition dated 7 June 1996 No. 236/96-BP;
- the Law on Protection of Economic Competition dated 11 January 2001 No. 2210-III; and
- the Law on the Antimonopoly Committee of Ukraine dated 26 November 1993 No. 3659-XII.
No, there are no specific guidelines on competition law for the pharmaceutical industry. However, the AMCU in 2009 issued the information letter dated 17 February 2009 No. 21-15/02-1244, No. 54/01 which inter alia refers to peculiarities of application of article 15-1 of the Law on Protection against Unfair Competition that has recently become very relevant to the pharmaceutical sector.
In addition, in 2012 the AMCU determined standard requirements to concerted acts of business entities regarding joint scientific and research or design and experimental works. Compliance with such requirements allows exercising of such concerted acts without obtaining an approval of the AMCU (Order of the AMCU No. 557 dated 15 August 2012). The clinical trials of medicinal products are a kind of scientific and research work and therefore the provisions of Order No. 557 are also relevant to the pharmaceutical sector.
Further, a new tool which was introduced in late 2011 is relevant for promotional activities of pharmaceutical companies, which may apply in advance to the AMCU with respect to compliance with article 15-1 of the Law on Protection against Unfair Competition for AMCU's explanation of whether planned actions or advertisements constitute are legitimate. However, in practice this procedure is problematic: the AMCU may take up to one month to give its opinion; the request must include every detail and provide documentary evidence of advertisement claims; and there is no possibility to amend the text submitted for the AMCU examination and amendments require a new application. Because of the above, there is almost no AMCU practice on this and no unified approach to the AMCU's consideration of applications.
Under the provisions of the Law on Protection of Economic Competition for acts recognised by the law as anti-competitive concerted acts the AMCU may impose fines on a business entity of up to 10 per cent of its income from the sale of products (goods, works and services) for the latest fiscal year preceding the year in which a penalty is imposed. For instance, in 2012 the AMCU imposed a fine amounting in total to 128,000 hryvnas on five business entities for anti-competitive concerted acts resulting in bid rigging as to medicinal products.
Furthermore, in case such persons suffer harm as a result of such acts (or omissions), they may submit a claim to a court for compensation of such harm. The compensation of harm may include not only compensation for damages and other forms of reimbursement of property damage (pecuniary damage), but also compensation for moral damage (non-pecuniary damage). It should be noted that according to the Law on Protection of Economic Competition, persons found guilty of anti-competitive concerted action shall be liable to pay compensation of up to twice the amount of the harm suffered.
The first large-scale antimonopoly investigation on the pharmaceutical market was held at the end of 2009 during the flu epidemic in Ukraine. During this investigation the AMCU conducted 259 inspections throughout Ukraine and in 107 cases found signs of violation of competition legislation, related to unreasonable price rises for some medicinal products.
In 2011 the AMCU conducted an investigation in the market of medical services and medicinal products. The most widespread violations revealed by the AMCU related to unfair competition and, specifically, the provision of misleading information during advertising of medicinal products and dietary supplements. Another type of violation particular to the market of medical services and medicinal products at that time was abuse of dominance.
As regards 2012, the AMCU investigated 138 regional retail markets of medicinal products. As a result of the investigation, the AMCU has initiated 36 cases having signs of violations of the competition legislation. The most common violations on regional markets were abuse of dominance and dissemination of misleading information. In addition, in 2012 the AMCU has conducted deep investigation of 10 main wholesale players on the medicinal product market as to their compliance with the requirements of the competition legislation. The results of such investigation will be available in early 2013.
The AMCU will continue to focus its attention on the market involving sale of medicinal products in 2013. In particular, the AMCU has set itself the task of evaluating the market's competition conditions to improve market openness, removing unnecessary obstacles for business.
Under article 33 of the Law on Protection against Unfair Competition, business entities with the assistance of the Ukrainian Chamber of Commerce and Industry and other interested organisations may develop rules of professional ethics to be adhered to in competition for the relevant sectors of the economy. Such rules of professional ethics should be approved by the AMCU.
In 2008, 32 pharma companies in Ukraine signed the Memorandum on the Rules of Good Promotional Practice. The Rules are a form of an agreement between the signatories to refrain from using unfair methods of promotion of medicinal products, and are not a legislative act. Besides, although the above-mentioned rules were not approved by the AMCU, they still may be considered as fair customs established by the pharmaceutical market players.
Under article 36 of the Law on Protection of Economic Competition, the AMCU may commence infringement proceedings based inter alia on the application of business entities, citizens, associations, institutions and organisations concerning the violation of their rights as a result of acts or omissions that violate the legislation on protection of economic competition.
Source: Arzinger
In addition, in 2012 the AMCU determined standard requirements to concerted acts of business entities regarding joint scientific and research or design and experimental works. Compliance with such requirements allows exercising of such concerted acts without obtaining an approval of the AMCU (Order of the AMCU No. 557 dated 15 August 2012). The clinical trials of medicinal products are a kind of scientific and research work and therefore the provisions of Order No. 557 are also relevant to the pharmaceutical sector.
Further, a new tool which was introduced in late 2011 is relevant for promotional activities of pharmaceutical companies, which may apply in advance to the AMCU with respect to compliance with article 15-1 of the Law on Protection against Unfair Competition for AMCU's explanation of whether planned actions or advertisements constitute are legitimate. However, in practice this procedure is problematic: the AMCU may take up to one month to give its opinion; the request must include every detail and provide documentary evidence of advertisement claims; and there is no possibility to amend the text submitted for the AMCU examination and amendments require a new application. Because of the above, there is almost no AMCU practice on this and no unified approach to the AMCU's consideration of applications.
Which authorities investigate and decide on pharmaceutical mergers and the anti-competitive effect of conduct or agreements in the pharmaceutical sector?
The AMCU may investigate and provide permission on mergers and decide on the anti-competitive effect of conduct and agreements.What remedies can competition authorities impose for anti-competitive conduct or agreements by pharmaceutical companies?
In accordance with the Law on Protection against Unfair Competition, the AMCU may impose fines on a business entity of up to 5 per cent of its income from the sale of products (goods, works and services) for the fiscal year preceding the year in which a penalty is imposed. In 2012 the AMCU imposed the largest fine for misleading advertising of medicinal products on a local manufacturer of medicinal products – Farmak, PJSC. The fine amounted to 7.6 million hryvnas.Under the provisions of the Law on Protection of Economic Competition for acts recognised by the law as anti-competitive concerted acts the AMCU may impose fines on a business entity of up to 10 per cent of its income from the sale of products (goods, works and services) for the latest fiscal year preceding the year in which a penalty is imposed. For instance, in 2012 the AMCU imposed a fine amounting in total to 128,000 hryvnas on five business entities for anti-competitive concerted acts resulting in bid rigging as to medicinal products.
Can private parties obtain competition-related remedies if they suffer harm from anti-competitive conduct or agreements by pharmaceutical companies? What form would such remedies typically take and how can they be obtained?
Business entities, individuals, associations, institutions and organisations may file a claim to the AMCU as a result of acts or omissions determined by the Law on Protection of Economic Competition and the Law on Protection against Unfair Competition as violation of such legislation.Furthermore, in case such persons suffer harm as a result of such acts (or omissions), they may submit a claim to a court for compensation of such harm. The compensation of harm may include not only compensation for damages and other forms of reimbursement of property damage (pecuniary damage), but also compensation for moral damage (non-pecuniary damage). It should be noted that according to the Law on Protection of Economic Competition, persons found guilty of anti-competitive concerted action shall be liable to pay compensation of up to twice the amount of the harm suffered.
May the antitrust authority conduct sector-wide inquiries? If so, have such inquiries ever been conducted into the pharmaceutical sector and, if so, what was the main outcome?
In accordance with the Law on the Antimonopoly Committee of Ukraine, the AMCU may conduct investigations of the market, determine the commodity market boundaries and position, including monopoly position, of the business entities on this market, and take relevant decisions.The first large-scale antimonopoly investigation on the pharmaceutical market was held at the end of 2009 during the flu epidemic in Ukraine. During this investigation the AMCU conducted 259 inspections throughout Ukraine and in 107 cases found signs of violation of competition legislation, related to unreasonable price rises for some medicinal products.
In 2011 the AMCU conducted an investigation in the market of medical services and medicinal products. The most widespread violations revealed by the AMCU related to unfair competition and, specifically, the provision of misleading information during advertising of medicinal products and dietary supplements. Another type of violation particular to the market of medical services and medicinal products at that time was abuse of dominance.
As regards 2012, the AMCU investigated 138 regional retail markets of medicinal products. As a result of the investigation, the AMCU has initiated 36 cases having signs of violations of the competition legislation. The most common violations on regional markets were abuse of dominance and dissemination of misleading information. In addition, in 2012 the AMCU has conducted deep investigation of 10 main wholesale players on the medicinal product market as to their compliance with the requirements of the competition legislation. The results of such investigation will be available in early 2013.
The AMCU will continue to focus its attention on the market involving sale of medicinal products in 2013. In particular, the AMCU has set itself the task of evaluating the market's competition conditions to improve market openness, removing unnecessary obstacles for business.
Is the regulatory body for the pharmaceutical sector responsible for sector-specific regulation of competition distinct from the general competition rules?
There is no special regulatory body responsible for sector-specific regulation of competition for the pharmaceutical industry.Can antitrust concerns be addressed with industrial-policy type arguments, such as strengthening the local or regional research and development activities?
The main industrial-policy arguments concern state policy programmes or concepts of state development. For instance, in recent years the government of Ukraine has promoted and indirectly implemented the concept of import substitution of medicinal products with domestic ones. The concept provides for privileges and benefits (tax, customs, etc) for local medicinal products' manufacturers and for research and development. In light of the above the AMCU would rather clear conduct including mergers and acquisitions and anticompetitive agreements, which otherwise would have been deemed violations, if they lead to:- improvements in production, purchase or disposal of goods;
- technological and economic development;
- development of small and medium-sized entrepreneurs;
- optimisation of export or import of goods;
- development and application of uniform technical standards for the goods; and
- rationalisation of production.
To what extent do non-government groups play a role in the application of competition rules to the pharmaceutical sector?
In accordance with the Law on Protection against Unfair Competition, unfair competition is any act of competition contrary to commercial and other fair customs in business activity.Under article 33 of the Law on Protection against Unfair Competition, business entities with the assistance of the Ukrainian Chamber of Commerce and Industry and other interested organisations may develop rules of professional ethics to be adhered to in competition for the relevant sectors of the economy. Such rules of professional ethics should be approved by the AMCU.
In 2008, 32 pharma companies in Ukraine signed the Memorandum on the Rules of Good Promotional Practice. The Rules are a form of an agreement between the signatories to refrain from using unfair methods of promotion of medicinal products, and are not a legislative act. Besides, although the above-mentioned rules were not approved by the AMCU, they still may be considered as fair customs established by the pharmaceutical market players.
Under article 36 of the Law on Protection of Economic Competition, the AMCU may commence infringement proceedings based inter alia on the application of business entities, citizens, associations, institutions and organisations concerning the violation of their rights as a result of acts or omissions that violate the legislation on protection of economic competition.
Source: Arzinger
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