Слияние иностранных компаний может потребовать разрешения Антимонопольного комитета Украины (АМКУ), например, в случае наличия в Украине дочерней компании хотя бы одной из сливающихся иностранных компаний. Причем одна сделка M&A (слияния и поглощения) может потребовать нескольких разрешений АМКУ. Этим и другим вопросам антимонопольного (конкурентного) права и посвящено детальное исследование, предпринятое автором настоящей публикации. Например, исследуется оговорка о недопущении конкурентных действий. При этом автор уделяет внимание не только украинскому национальному праву, но и праву Европейского Союза. В заключение автор приходит к выводу о том, что в украинском конкурентном праве имеются пробелы и противоречия, которые необходимо учитывать при заключении сделок слияния или поглощения.
Foreign-to-foreign transactions
Companies with a business presence in Ukraine should be aware of the extraterritorial application of Ukrainian competition law. In simple words foreign-to-foreign mergers could be subject to Ukrainian merger clearance provided at least one of the parties involved has a subsidiary or sales in Ukraine.
Similar to competition laws of some other countries, Ukrainian competition law has extraterritorial application. Even in case neither party to the transaction is a Ukrainian company and the transaction is implemented outside of Ukraine, clearance of the transaction with the Ukrainian Antimonopoly Committee (the AMCU) could be required. Foreign-to-foreign transaction would require prior clearance if (i) it falls within the definition of “concentration”, and (ii) financial/ market share thresholds are met.
Ukrainian law provides several types of transactions or actions which are deemed to be a concentration. Apart from the most frequent one — acquisition of shares, it also includes mergers, acquisition of assets, position overlapping and other cases. There are a number of exceptions, i.e. cases which shall not be treated as a concentration. In particular, such exceptions cover transactions by financial and securities trading companies, intra-group transactions, acquisition of shares and assets in the process of liquidation of companies, etc.
If the transaction/action falls within the definition of concentration provided in the On Protection of Economic Competition Act of Ukraine, in order to determine whether clearance of such concentration is required, a check should be carried out to see whether the concentration meets financial and market share thresholds that trigger clearance requirement.
It is well known that Ukrainian law establishes rather low financial thresholds for concentration clearance. Moreover, for the purposes of threshold calculation turnover of all companies within one group shall be aggregated. For instance, a target’s turnover shall be aggregated with the seller’s group turnover for the purpose of threshold calculation. There are two types of thresholds that may trigger clearance requirement: the first is based on turnover figures and the second is based on market share. If either of the thresholds is met, the clearance of the concentration is required.
Analysis of cross-border M&A transactions, which is performed to determine whether merger clearance in Ukraine is required, often lead to a conclusion that clearance is required. For instance, even if only one party to M&A transaction has either sales or subsidiary in Ukraine with turnover or assets value exceeding EUR 1 million per year, such a transaction would satisfy one of required criteria of the thresholds based on turnover figures. The other required criteria, which is that global assets/turnover of all parties exceed EUR 12 million and global assets/turnover of each party exceed EUR 1 million, are usually easily met by foreign companies. It should also be noted that it does not matter which party to a transaction has those sales in Ukraine exceeding EUR 1 million. For example, it can be a subsidiary of the seller which has nothing in common with the transaction or target’s business.
This means that we have a counterintuitive situation: transaction takes place outside Ukraine, target is located outside of Ukraine, transaction would not affect Ukrainian market but the parties still must apply to the AMCU, collecting and providing the latter with a huge volume of information and lose 45 days waiting while the AMCU clears the transaction. And although such transactions are usually cleared without any complications, the theoretical risk that AMCU refuses clearance still exists.
Littera occidit, spiritus autem vivificat1
Deeper analysis of Ukrainian competition law allows a conclusion to be drawn on the existence of a contradiction between a merger clearance assessment test, on the one hand, and formal requirements as to which transaction shall require merger clearance, on the other. Indeed, according to the On Protection of Economic Competition Act of Ukraine, the AMCU provides its permit for concentration in case such concentration will not lead to monopolization or substantial limitation of competition at the market as a whole or in part thereof. Put simply, analysis by the AMCU, which should be done with the purpose of either permitting or prohibiting a transaction, should be focused mainly on the resulting market share of all participants to the concentration: if A, having a market share
of 30%, acquires B, which has a share of 25%, as a result of such acquisition the market will face a new dominant player with combined share of 55% instead of two strong former competitors. The necessity for assessment and merger clearance in this case is obvious. However, following formal-istic approach the parties should go to the AMCU even in case only one of them is acting in Ukraine. Coming back to our example, if A having a market share of 30% acquires B having a market share of 0% (because it does not act in Ukraine at all), the AMCU will still analyze the possible effect which such transaction may have in Ukraine. And the parties must provide economic justification and prove that such transaction will not lead to monopolization on the Ukrainian market, despite the obvious result of mathematical addition of 30+0=30.
This situation seems to be inconsistent and therefore it would be reasonable to raise a question on amending the law. To be fair Ukraine is not a unique country which has such contradiction in its competition law. Similar provisions used to be contained in competition laws of other countries. For example, in Germany relevant amendments establishing financial/market share thresholds of at least two participants to the concentration acting on the German market were introduced only couple of years ago.
Coming back to Ukraine we know that there have been several draft laws amending thresholds for merger clearance. At least one draft eliminated such inconsistency. However, none of them progressed or is expected to be adopted in the near future.
How many permits are required for one M&A transaction?
Indeed, how many permits from the Antimonopoly Committee can a single M&A deal require? The answer is not so obvious.
Certainly if one party-purchaser acquires 100% of shares in one company-target from another party-seller there must be one permit for concentration. However, in practice M&A deal may relate to a business which is been acquired and such business may include several target companies. And in this case despite there being only one share purchase agreement, one seller and one purchaser, one price which is being paid for the business in question and, lastly, which business occupies a single market share, the Antimonopoly Committee would require separate applications for each target company and a separate fee should be paid by the parties to the AMCU for each target company. In our practice such “multiple-targets” deals could include dozen of targets which results in duplication of applications. Of course the applicants provide all the information, documents, and justification in one application while all other applications contain reference to the first one (so that there is no need at least to duplicate all the annexes and enclosed documents). But this requirement of the Antimonopoly Committee of Ukraine also seems strange and inconsistent and, as such, requires adjustment.
Non-compete provisions: be cautious!
Another issue is related to some additional obligations which could be contained in the share purchase agreement or in other transactional documents. The most often detected provisions relate to non-compete obligations of the parties (however, there could also be other types of such additional obligations). Indeed, very often a purchaser acquiring 100% of some business wants to be sure that the seller would not use money received from the purchaser and would not open a new mirror business luring employees and clients from the sold company. The seller presumably has a good understanding of the market, close client relations and loyalty of personnel, so potentially the risk for the purchaser resulting from such scenario is rather high. And in order to mitigate this risk the parties to the M&A usually include non-compete provisions into the transactional documents which prohibit the seller from performing similar activity during a certain fixed period of time.
Such restrictions are directly related to the implementation of concentration, given the above reasons such restrictions are logical and could be adjusted. In some other countries and in the European Union such provisions are named as “restrictions directly related and necessary” to concentration which term replaced the one used earlier — “ancillary restraints”. And according to merger control legislation, e.g. the EC Merger Regulation2, it is presumed that a decision declaring a concentration compatible with the common (European) market “shall be deemed to cover restrictions directly related and necessary to the implementation of the concentration”. This means that the competition authority, while analyzing the concentration, takes such restriction into account when taking a decision on whether to permit or prohibit given concentration, so noncompete provisions are cleared automatically by competition authorities in the process of their assessment of concentration.
In Ukraine we face another situation: non-compete provisions are not covered by a permit for concentration. They, being considered as anticompetitive concerted practices, require a separate permit from the Anti-monopoly Committee of Ukraine. In terms of documents and information required for such additional submission, they are mainly the same as for concentration. However, a separate application, additional fee and some additional documents from all parties to whom the non-competition clause applies would be required.
The law also provides a longer period for issuance of a permit for concerted practices.
Conclusion
The above provided are just a few examples of gaps or inconsistencies of Ukrainian competition law. The circumstances described above should be carefully analyzed by the parties to the M&A and their advisers in order to comply with effective law. However, given the reasons described above it would be expedient to take them into account when amending the law, eliminating burdensome and unnecessary requirements so that the Antimonopoly Committee of Ukraine could focus on the key circumstances which could indeed affect competition on the Ukrainian market.
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1 The Letter kills but the Spirit gives Life” (lat.). This Latin expression from Bible is one of the basic principles of jurisprudence requiring that one must follow the spirit of law rather than its letter.
2 Council Regulation (EC) No 139/2004 of 20 January 2004 On the Control of Concentrations between Undertakings (the EC Merger Regulation).
Автор:
Galyna P. ZAGORODNIUK is a legal director, head of Competition Law practice with DLA Piper Ukraine
Источник:
The Ukrainian Journal of Business Law. – 2013. – № 7-8. – Р. 20 – 22.