On 9 August 2016, AMCU approved the 4th version of its Recommendations on Calculation of Penalties for Violations of the Competition Legislation (the Recommendations). As a matter of background, the 1st edition of the Recommendations was adopted back in September 2015 with a goal to regulate approaches used by AMCU to calculate penalties. The new version introduces the following changes:

  • From now on, the basic penalty for anti-competitive concerted actions during public tenders will be calculated according to general rules. The preceding version of the Recommendations defined the basic penalty as the highest price of the proposal of the members of anti-competitive concerted actions.
  • In determining the duration of violation being taken into account for the calculation of the basic penalty, AMCU will not regard the period of limitation for bringing to liability violation of the competition legislation. In other words, while earlier the duration of violation as regarded by AMCU to determine the basic penalty was limited to the period of limitation established for such violation (three or five years depending on the violation), from now on AMCU will regard the entire duration of the violation; this may result in larger amounts of penalties.
  • Basic penalties (which, depending on the violation,  constituted  45%, 30%, 5% or 1% of sales revenues or buyer's purchase expenses, or were calculated in non-taxable minimum incomes (NTMI)) are now replaced with initial penalties (15%, 10%, 5% or 1% respectively) subject to the following adjustment coefficients: (i) effect or potential effect of the violation on competition in related markets, (ii) social significance of goods and (iii) profitability of the business activity related to violation. Each coefficient ranges from 0.05 to 2. The basic penalty is calculated by multiplying the amount of sales revenue related to the violation on the initial penalty and the average of the adjustment coefficients. Worth noting that if basic penalty prior to application of the adjustment coefficients amounts to 4,000 times the NTMI or less, each of the adjustment coefficients shall be 1. The referred formula applies only to gross, significant and medium degree violations. The approach to calculating penalties for moderate violations remains unchanged (depending upon the violation, 6-20,000 times the NTMI, 1% of sales revenue or the amount specified in the annex to the Recommendations).
  • For the purpose of calculating the basic penalty, the violator now has the possibility to provide a justified calculation of the amount of an illegal benefit and/or losses of the person whose rights were injured by violation of the competition legislation.

In our view, the revised Recommendations are a positive step towards bringing AMCU's practice into compliance with the European standards of penalty calculation for violations of the competition legislation.

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