1 antimonopoly committee of ukraine guidelines on setting fines imposed for violations of the law on...
DESCRIPTION
3 Direct determination of the basic fine The possibility of determining the basic amount of the fine as: Amount of improper advantage (profit), gained from violation increased by restraining indexTRANSCRIPT
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Antimonopoly Committee of Ukraine
Guidelineson setting fines imposed for violations of the law on protection of
economic competition
GENERAL APPROACHES
First Deputy Chairman of the Committee M. Nizhnik
Kyiv, 09 September 2015
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General procedure of setting fines imposed for violations of the law on protection of economic
competition
1. Determination of the basic amount of fine.2. Taking into account aggravating and mitigating circumstances.3. Final determination of the amount of fine with regard to:
the maximum possible value under Article 52 of the Law of Ukraine "On Protection of Economic Competition" and Article 21 of the Law of Ukraine "On Protection of Economic Competition";
Impact of the fine on the competitiveness of the economic entity or the ability to meet consumer demand (possibility of decrease);
Securing the purposes of application of fines in exceptional cases (possibility of increase).
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Direct determination of the basic fine
The possibility of determining the basic amount of the fine as:
Amount of improper advantage (profit), gained from violation
increased by restraining index
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Advantages and disadvantages of direct determination of the basic fine
Advantages :
Provides maximum effect
from removal of illegally
obtained monopoly and
cartel rent
Disadvantages :
The difficulty and in some cases -
the impossibility of determining
the amount of an improper
advantage; discretion of the
AMCU on the choice of fine
calculation method
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The circumstances to be taken into consideration when determining the basic amount of the fine
IN ORDER TOIN ORDER TO
Economic Economic scope of scope of violationviolation
Gravity of Gravity of violationviolation
Deterrent Deterrent effecteffect
Remove illegally obtained rent and cause negative Remove illegally obtained rent and cause negative consequences for the offender for the purpose of consequences for the offender for the purpose of
preventionprevention
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Economic scope of the violation
If the violation is caused by If the violation is caused by sellerseller
Income (proceeds) from sales Income (proceeds) from sales of products (goods and of products (goods and
services) effected upon the services) effected upon the violationviolation
If the violation is caused If the violation is caused by buyerby buyer
Conventional (hypothetical) cost of Conventional (hypothetical) cost of purchase of goods (works, services) purchase of goods (works, services)
occurred upon violation that would be occurred upon violation that would be incurred without any violation and the incurred without any violation and the
purchase would be carried out for specific purchase would be carried out for specific purposespurposes
FEATURESFEATURES
In case, when violation In case, when violation negatively affects competition in negatively affects competition in
the adjacent marketthe adjacent market
In case of violation at auctionIn case of violation at auction ((bid rigging)bid rigging)
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To calculate the basic amount of the fine the income / expenses
shall be taken into account:
in the designated territory, or if such sale / purchase affect or
may affect economic competition in Ukraine;
During the effective time of the violation (if the features are not
provided by explanations).
Spatial and temporal dimension of the economic scope of violation
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The gravity of violation shall be taken into account as a percentage
of violation related income (expenses), which, according to
empirical studies, is normal amount of overpricing (underpricing):
in the case of anticompetitive concerted actions of economic entities
- 15-30 percent;
in the case of abuse of monopoly (dominant) position - 10-15
percent;
in the case of concentrations that lead to monopolization or
significant restriction of competition in the market – 3-7 percent.
Consideration of the gravity of violation
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Ensuring deterrent effect
Ensuring deterrent effect shall be done by increasing the percentage
characterizing the gravity of violation, by surcharge rate inversely
proportional to the probability of detecting violations of a certain type.
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The suggested final value of percent of income / expense level related to the violation based on the gravity of violations considering deterrent effect
45 percent
30 percent
15 percent
5 percent
Horizontal anticompetitive concerted actions betwee
competitors (cartels)
Other types of anticompetitive concerted actions
The abuse of dominant position and non-enforcement
Restrictive practices and breach of the control of concentrations
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The base fine in fixed amount
Fixed basic amount of fines (in the income tax exemption
(personal exemption) is proposed to be set after a formal
breach of moderate severity, namely:
declination to committing violations of the legislation on
economic competition protection;
breach of presenting information;
obstruction of the Committee activities.
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For the purpose to enable the consideration of aggravating
circumstances the basic amount of a fine shall not exceed two-
thirds of the maximum possible amount of the fine, regarding the
application of provisions Article 52 of the Law of Ukraine "On
Protection of Economic Competition" and the Article 21 of the Law
of Ukraine "On Protection Against Unfair Competition“.
Increase of the basic amount of fine
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Aggravating circumstances
In the case of evidence, including the following aggravating
circumstances:
repeated (relapse);
initiate actions (inaction);
obstructing the case investigation.
The list of circumstances is harmonized with EU Guidelines on the
method of setting fines.
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Mitigating circumstances
Proposed non-exhaustive list of mitigating circumstances, for example: voluntary termination defendant actions (inaction); compensation for harm caused by the infringement or eliminate the effects
of abuse in other ways appropriate to the decision of the Committee; eliminate on its own initiative the conditions that contributed to the
commission of violations; committing violations due to negligence; the actual non-compliance of conditions by the member of the concerted
actions and the availability (existence) of evidence that the entity actually competed on the market;
cooperation with the Committee during case proceedings committing violations due to the influence of the executive authority (power) voluntary appeal before start of proceedings case on violation concerning
obtaining permission for merger; Existence of compliance program (?)
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The problematic issue of quantitative measure (indices) that takes into account aggravating and
mitigating circumstances in the calculation of fines
Pro argument :
increased level of legal certainty.
Argument against:• opportunity to determine in advance
(anticipatory) the amount of the fine creates the risk that it will be embedded in monopoly rents (cartel) rent and transferred to consumer;
• limited flexibility and comprehensively assess the circumstances of the case;
• in most jurisdictions set or the total possible amount of increase due to aggravating circumstances, or increase in size for certain aggravating circumstances (usually relapse).
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Proposals for quantitative mechanisms taking into account mitigating and aggravating circumstances
when calculating fines
quantitative consideration of the mechanisms provides only
for certain mitigating and aggravating circumstances;
It is determined or "floating" ("from to") or marginal
("before") aggravating factors impact on mitigating
circumstances of the amount of fine.
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CASE
Case on violation of the law on protection as abuse of monopoly
(dominant) position the market for use of the linen in trains.
Actually fined : 50 million UAH
The amount of revenue (proceeds) associated with violation:
12,781 million UAH
The basic amount of the fine: 12,781 * 0,15 = 1,917 million UAH
Mitigating circumstances: 10 % (as mitigation)
Final calculation of the amount of fine : 1, 725 million UAH
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CASE
Case on violation of the law on protection economic Competition as
implementation of concentration without the prior Committee
authorization the household appliance market.
Actually fined : 105 thousand UAH
The amount of revenue (proceeds) in the market where the infringement
occurred: 577,103 million UAH
The basic amount of the fine: 577 103 868,2 * 0,05 = 28,855 million UAH
Final calculation of the amount of fine : 28, 855 million UAH
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CASE
Case on violation of the law on protection economic Competition as
anticompetitive concerted actions on the retail market.
Actually fined : 203 million UAH
The amount of buyer costs associated with violation: 50 902 million UAH
The basic amount of the fine : 50 902 766 680 * 0,45 = 22 906 million UAH
Aggravating circumstances: 10 % (coordination of committing abuse)
Final calculation of the amount of fine : 25 196 million UAH
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CASE
Case on violation of the law on protection economic Competition as anticompetitive concerted actions on the market of untreated wood, that was realized at specialized auctions.
Actually fined: 419 million UAH
The amount buyers costs associated with violation: 620,26 million UAH
the actual amount of buyers costs : 506,36 million UAH
The basic amount of the fine: 620,26 million UAH*0,45 = 279,12 million UAH
Aggravating circumstances: 17 %
Final calculation of the amount of fine : 326,57 million UAH