The Long awaited Exemption of Concerted Actions on ... - Asters

It has always been a task <strong>of</strong> a competition
regulator to provide for a
predictable legal regime and balance
it against the need for individual
assessment in each controversial
case. <strong>The</strong> same is true for specialization
concerted actions in situations <strong>of</strong>
horizontal cooperation.
in the Notice <strong>of</strong> the European Commission
2001/C 3/02 as: “A cooperation is
<strong>of</strong> a ’horizontal nature’ if an agreement
or concerted practice is entered into between
companies operating at the same
level(s) in the market. In most instances,
horizontal cooperation amounts to cooperation
between competitors. It covers,
for example, areas such as research
and development (R & D), production,
purchasing or commercialization”.
<strong>Concerted</strong> actions on specialization
(production) are a form <strong>of</strong> horizontal cooperation.
In national legislation, such
Oleh I. Furmanchuk is an associate
with Asters
horizontal concerted actions <strong>of</strong> undertakings
that provide for the concentration
<strong>of</strong> efforts and resources <strong>of</strong> their individual
participants on production (distribution)
<strong>of</strong> certain goods that contributes to
the improvement (rationalization) <strong>of</strong> the
production, purchase or distribution <strong>of</strong>
goods, thereby being allowed pursuant to
Article 10 Part 1 <strong>of</strong> the On the Protection
<strong>of</strong> Economic Competition Act <strong>of</strong> Ukraine, if
the attendant conditions <strong>of</strong> such actions
competition in the market or a considerable
part <strong>of</strong> it.
<strong>The</strong> Antimonopoly Committee <strong>of</strong>
Ukraine (AMCU) may determine standard
requirements for concerted actions.
Those actions complying with the requirements
do not need to be allowed by
the AMCU on an individual basis. Specialization
concerted actions are covered
by two sets <strong>of</strong> standard requirements in
Standard
Requirements for <strong>Concerted</strong> <strong>Actions</strong>
<strong>of</strong> Undertakings for General <strong>Exemption</strong>
from Prior Obtainment <strong>of</strong> AMCU Clearance
(General Standard Requirements).
It is applicable to all concerted actions
irrespective <strong>of</strong> their nature. <strong>The</strong> second
regulation was recently adopted on
11 December 2008 to establish a special
legal regime for specialization agree-
Standard Requirements for <strong>Concerted</strong>
<strong>Actions</strong> <strong>of</strong> Undertakings regarding
Specialization <strong>of</strong> Production (Special Standard
Requirements). <strong>The</strong> latter act is used
according to the principle <strong>of</strong> complementarity
(when concerted actions on specialization
are not exempt under the General
Standard Requirements). That is why it is
essential to focus on the general legal re-
and identify in what way those agree-
special regulation.
<strong>The</strong> General Standard
Requirements
<strong>The</strong> General Standard Requirements
provide for legal conditions under which
an undertaking does not have to apply
for AMCU clearance. Such legal conditions
are presented in the table.
(See table 1).
Thus, as long as the aggregate market
share <strong>of</strong> the group <strong>of</strong> undertakings involved
does not exceed 5% any concerted
action is secure (except for the establishment
<strong>of</strong> an undertaking). In the event <strong>of</strong>
the establishment <strong>of</strong> an undertaking, the
participants should check whether their
assets/turnover thresholds for the pre-
lion
and 1 million, respectively.
A more complicated analysis is
needed in the event that the aggregate
market share <strong>of</strong> the group <strong>of</strong> undertakings
involved exceeds 5%, but does not
exceed 15% (for horizontal and mixed
concerted actions) and 20% (for vertical
and conglomerate concerted actions). In
Standard Requirements, the participants
should not only check their assets/turnover
thresholds, but also take care <strong>of</strong> other
group <strong>of</strong> determinants is related to the
status <strong>of</strong> the undertakings: 1) no undertaking
involved should have a monopoly
position in any market concerned; 2)
no undertaking involved should have
exclusive or privileged rights or powers
from state bodies, bodies <strong>of</strong> local
self-government, administrative bodies,
subjects <strong>of</strong> natural monopolies or other

monopoly entities. <strong>The</strong> second group <strong>of</strong>
determinants is related to the potential
consequences <strong>of</strong> concerted actions. Such
certed
actions; 2) limitation on sales or
purchase volumes; or 3) the allocation <strong>of</strong>
markets, sellers, buyers or consumers.
framework: if the market share is below
15% / 20%, the undertakings concerned,
being non-dominant ones, should effect
the concerted actions in a way to avoid
harmful consequences for the market.
However, as long as there are no guidelines
on assessment <strong>of</strong> probable harmful
effect by the AMCU, the parties may not
be sure that their self-assessment is in line
with the understanding <strong>of</strong> the AMCU on
the application <strong>of</strong> the relevant rules. Virtually
any concerted action may evoke
from the General Standard Requirements
in the event that the aggregate market
share <strong>of</strong> the undertakings involved exceeds
5%. As a practical matter, this means that
the parties to the concerted actions should
apply for the opinion <strong>of</strong> the AMCU to be
on the safe side while conducting such actions.
An application for clearance is not
Table 1. <strong>The</strong> General Standard Conditions for <strong>Exemption</strong>
from Prior AMCU Clearance*
No.
1.
Aggregate
market
share
A&B**
< 5%
2. A&B EUR 12 mln – worldwide
for A&B in total; and
2) > EUR 1 mln – worldwide
for each A and B; and
3) > EUR 1 mln – in
Ukraine for either A or B
at least one threshold is
not met:
1) > EUR 12 mln – worldwide
for A&B in total; or
2) > EUR 1 mln – worldwide
for each A and B; or
3) > EUR 1 mln – in
Ukraine for either A or B
all thresholds are met:
1) > EUR 12 mln – worldwide
for A&B in total; and
2) > EUR 1 mln – worldwide
for each A and B; and
3) > EUR 1 mln – in
Ukraine for either A or B
thresholds are not
relevant
establishment <strong>of</strong> an undertaking
no condition is present:
1) monopoly position;
2) exclusive or privileged rights
from state, local self-government
or subjects <strong>of</strong> natural monopoly;
4) may lead to the limitation <strong>of</strong>
sales or purchase;
5) may lead to the allocation <strong>of</strong>
markets, sellers, buyers or consumers
other conditions are not relevant
any condition is present:
1) monopoly position;
2) exclusive or privileged rights
or powers from state, local selfgovernment
or subjects <strong>of</strong> natural
monopoly;
4) may lead to the limitation <strong>of</strong>
sales or purchase;
5) may lead to the allocation <strong>of</strong>
markets, sellers, buyers or consumers
Prior
AMCU
clearance
not
required
required
not
required
required
required
A&B >
6.
––––––– ––––––– required
15/20%
** A and B – groups <strong>of</strong> undertakings the participants <strong>of</strong> the concerted actions belong to.
*** 15% for horizontal and mixed concerted actions, 20% for vertical and conglomerate concerted
actions.
required if the undertakings have an aggregate
market share <strong>of</strong> 5% or less in any
market concerned. It is presumed that no
harmful consequences may arise (except
for the situation <strong>of</strong> an establishment <strong>of</strong> an
undertaking) for the market.
<strong>The</strong> Special Standard
Requirements
General Description
<strong>The</strong> Special Standard Requirements
were only adopted quite recently. That
is why the practice <strong>of</strong> their application
still has to be developed. <strong>The</strong> main
ments
is the abolishing <strong>of</strong> the quantitative
thresholds <strong>of</strong> EUR 12 million and
tion
<strong>of</strong> the market share threshold to 25%
for specialization agreements, though
with certain limitations. <strong>The</strong> Special
Standard Requirements do not apply if
any participant in concerted actions occupies
a monopoly (dominant) position
in any market concerned, which is in
line with the prohibition in the General
Standard Requirements (if the aggregate
market share exceeds 5%).
<strong>The</strong> regulation resembles Commission
Regulation (EC) No.2658/2000 <strong>of</strong>
29 November 2000 on the application <strong>of</strong>
Article 81(3) <strong>of</strong> the Treaty to categories
<strong>of</strong> specialization agreements (hereinafter
That legal act also dispenses with quantitative
thresholds and sets the presumption
that participating undertakings do
not need individual clearance if their
combined market share does not exceed
20% <strong>of</strong> the relevant market.
At the same time, certain provisions
<strong>of</strong> the Special Standard Requirements do
not make it possible for the specializa-
special legal regime, leaving them for the
less favorable general regime <strong>of</strong> exemption
from prior AMCU clearance.
maximum time limit for specialization
Standard Requirements. All agreements
exceeding that duration should be assessed
using the General Standard Requirements.
However, such a long-term
agreement does not appear to be a viable
option, because there is a high probability
that the AMCU will consider it as bring-

ing about (or capable <strong>of</strong> bringing about)
harmful consequences due to the long
duration. That is why, in fact, the setting
tion
agreements does not devoid such
the General Standard Requirements. In
the European Specialization Regulation,
the absence <strong>of</strong> any term is countervailed
by the its inapplicability to agreements
prices, the limitation <strong>of</strong> output or sales or
the allocation <strong>of</strong> markets or customers.
<strong>The</strong> second point is that according
specialization, they may only be horizontal
(between competitors or potential
competitors). On the contrary, the European
Specialization Regulation states in
its Preamble that unilateral specialization
agreements may take place between
non-competitors, being, at the same time,
a form <strong>of</strong> vertical cooperation. Thus, in
Ukraine vertical unilateral specialization
agreements are covered by the general
20%) in the absence <strong>of</strong> any special legal
act on block exemption <strong>of</strong> vertical concerted
actions. On the contrary, in the European
legal regime the aforementioned
exemption regulation on vertical agreements
and concerted practice.
Market share threshold
<strong>The</strong> special market share threshold
<strong>of</strong> 25% is additionally limited by certain
conditions. <strong>The</strong>se limitations are designed
to avoid collusion between market
players if the market is concentrated
around several large producers <strong>of</strong> goods.
In that situation, concerted actions on
specialization are highly likely to lead to
further collusion between participants
and restriction <strong>of</strong> competition.
Specialization concerted actions are
not automatically allowed, unless the
aggregate market share <strong>of</strong> the groups <strong>of</strong>
participants and at least two (four) other
largest market players is less than or
equal to 50% (70%) in any market concerned.
It means that the remaining 50%
(30%) <strong>of</strong> the market concerned is to be
controlled by other competing undertakings
(that are not the largest ones).
<strong>The</strong> Special Standard Requirements
also provide for an exception when the
remaining market share may be less
than 50% (30%). In that case, the least
market share belonging to the concerted
actions participants or belonging to the
two (four) other largest market players
should be less than or equal to 10%. <strong>The</strong>
implied opinion contained in this provision
is that the competitive situation in
the market is not going to change sig-
It is interesting to note that the European
Specialization Regulation does
not contain such a sophisticated test to
limit the allowed market share threshold.
However, the test’s effectiveness is yet to
be seen on the ground in Ukraine.
Obligations on specialization
<strong>The</strong> Special Standard Requirements
were drafted in a way different to its
European analogue regarding the obligations
<strong>of</strong> the parties. <strong>The</strong> main focus <strong>of</strong>
the European Specialization Regulation
is on agreements, while corresponding
obligations are listed throughout its text
chasing
and marketing arrangements.
<strong>The</strong> main focus <strong>of</strong> the Special Standard
Requirements is on the concerted
actions (obligations) themselves. That
is why there is no list <strong>of</strong> specialization
agreements in Ukrainian regulation, but
tion
concerted actions and the corresponding
obligations are enlisted in a
separate chapter.
To structure the obligations on specia-
on the European legal act may be used:
1) obligations inherent to concerted
actions (without those obligations the actions
lose their rationale):
1-1) to cease production <strong>of</strong> certain
identical or similar products or to refrain
from producing those products (unilateral
specialization agreements);
1-2) on a reciprocal basis to cease or
refrain from producing certain, but different
products (reciprocal specialization
agreements);
1-3) to produce certain products only
jointly (joint production agreements);
2) purchasing and marketing arrangements
(those obligations eliminate
the threat <strong>of</strong> concerted actions with third
parties, including the level <strong>of</strong> distribution
<strong>of</strong> the products):
2-1) not to take concerted actions on
specialization with other undertakings
regarding identical or similar products in
the same market;
2-2) not to supply a competing undertaking
other than a party to the agreement
(exclusive supply obligation);
2-3) not to purchase from a competing
undertaking other than a party to the
agreement (exclusive purchase obligation);
2-4) to pursue distribution activities
jointly or by means <strong>of</strong> a jointly appointed
distributor;
3) ancillary obligations (those obliga-
mary
obligations):
3-1) to supply a party to the agreement
with the products that satisfy the
minimum conditions on quality;
3-2) to maintain minimum reserves <strong>of</strong>
products, as well as spare parts there<strong>of</strong>;
3-3) to provide for accompanying
services for the customer and guarantee
services for products.
Forbidden restrictions
<strong>The</strong> Special Standard Requirements
have the same list <strong>of</strong> forbidden restrictions
<strong>of</strong> competition as their European
analogue and the General Standard Re-
limitation <strong>of</strong> production, distribution or
purchase volumes; 3) the allocation <strong>of</strong>
markets, sellers, buyers or consumers.
with respect to prohibited activities that
may not only be directed to limitation <strong>of</strong>
distribution or purchase volumes, but
also to limitation <strong>of</strong> production volumes.
Another improvement relates to market
location
according to the principle <strong>of</strong> territoriality,
assortment <strong>of</strong> goods, volumes
<strong>of</strong> distribution or purchase.
and limitation <strong>of</strong> volumes do not apply
to the jointly appointed distributor, if
that does not or cannot result in limiting
production or distribution <strong>of</strong> products
to other customers. That provision
is intended to secure the participants in
the concerted actions from competition
on the part <strong>of</strong> their jointly appointed
distributor. At the same time, if such
a person is the only market player that
distributes the goods, initially there
can be no competition with the partici-
or limitation <strong>of</strong> distribution cannot secure
the participants from non-existant
competition and is deemed to be anticompetitive.