Protecting economic competition plays a crucial role in economic development and creating a favorable environment for entrepreneurship and investment. Almost three years ago, the government of Ukraine initiated a reform of the legislation on the protection of economic competition and the work of the Antimonopoly Committee of Ukraine (AMCU). Today, only the President’s signature is needed to implement the first stage of the reform – strengthening the powers of the AMCU. However, the question remains whether we are ready for such a surge of the AMCU or if this could become an additional source of pressure on businesses and an opportunity for abuse of power.
In early August, under the terms of the Association Agreement with the EU (Article 256) and the Memorandums with the IMF (2020 and 2021), Parliament adopted a law on improving the activities of the Antimonopoly Committee (Bill No. 5431) aimed at enhancing the AMCU’s institutional capacity. Earlier this year, we analyzed the key provisions of this bill. We pointed out several main issues that, unfortunately, were not addressed in the version signed by the Chairman of the Verkhovna Rada.
- Political dependence of the AMCU. According to the Constitution, the head of the AMCU is appointed and dismissed by the Verkhovna Rada upon the Prime Minister’s submission. Under the current Law on the AMCU, the President appoints and dismisses the AMCU head with the consent of Parliament, appoints deputy heads and authorized representatives upon the Prime Minister’s submission, and dismisses them independently. Such a procedure creates the AMCU’s dependency on the President, while this body should be independent of politicians. Draft law 5431 does not address this contradiction, even though during its second reading, MPs proposed harmonizing the appointment procedure of the head with the Constitution and introducing a competitive selection process for the position of the AMCU head. These amendments were not taken into account. Thus, the AMCU’s dependence on the President remains. By the way, according to the 2023 IMF Memorandum, Ukraine has committed to submit a new draft law to Parliament by the end of December, which will ensure the institutional independence of the AMCU, improve procedures for appointing key officials, and strengthen its executive powers.
Several bills (Nos. 2730, 2151, 3779, 4122) aimed at ensuring the political independence of the AMCU are currently under consideration in Parliament, as we previously detailed. According to the logic of the reform, ensuring the AMCU’s independence should precede the expansion of its powers.
- Expansion of AMCU powers. The legislative project grants the AMCU functions like law enforcement and judicial bodies. Specifically, after filing a petition with the Commercial Court and obtaining a favorable decision (permission), the AMCU gains the right to “conduct inspections of economic entities, associations, government bodies, access to premises, other properties, and places of information storage, conducting searches, sealing (sequestering), imposing property arrest, and confiscating property, etc.” A positive clarification in the draft law is that the types, scope, and timelines of sealing, property arrest, and property confiscation are determined by the decision of the Commercial Court in each specific case. The project also stipulates that AMCU decisions will be legally enforceable executive documents (as prescribed in IMF programs). However, the bill does not specify procedures for lifting property arrests, returning confiscated property, imposing fines, or holding representatives of the AMCU accountable.
- AMCU’s authority in access to and obtaining Information. According to EU norms (Directive 2019/1 and Directive No. 1/2003, which outline the competencies of competition authorities), in a request for information, the Competition Authority must specify the legal basis and purpose of the request, identify the information being requested, set a deadline for providing the information, and also establish the types of penalties for providing inaccurate or misleading information. Such justification by the AMCU is not provided for in the draft law, which practically allows the AMCU to obtain any information related to the operation of a business entity and obligates the business entity to provide it.
- AMCU’s authority in selective case review. Another issue that remains concerning the adopted bill 5431 is granting the AMCU the right not to review applications alleging violations of competition legislation if the person who applied fails to prove that actions or inaction with signs of competition law violations directly and negatively affected or affect their rights and/or activities. Essentially, the duty to protect competition is suggested to be shifted from the AMCU to market entities. Additionally, the right of third parties (such as public organizations) to submit applications to the AMCU regarding violations of competition legislation is abolished.
Conclusions
Adopting Bill 5431 is an essential part of the AMCU reform. The powers the draft law grants will enhance the AMCU’s institutional capacity to fulfill its functions. However, for the reform of competition protection legislation to be consistent and not create additional risks through the expansion of AMCU powers, a law on the institutional (political) independence of the AMCU must be adopted before it takes effect. Only after aligning the appointment and dismissal procedures of the AMCU head with the Constitution and introducing open competitions for the position of the head and state representatives of the AMCU with public participation should the expansion of AMCU powers be implemented.
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