With the Association Agreement with the EU, Ukraine has committed itself to bringing its competition legislation and its application closer to European standards.
Therefore, back in March 2019, European experts developed a comparative legal analysis of the Law “On the Protection of Economic Competition of Ukraine,” in which they listed all the inconsistencies and made recommendations for changes, dividing their implementation into two stages. This was a signal to Ukraine that healthy competition is a prerequisite for economic growth based on innovation, a transparent market for attracting investment, but things only moved forward in the summer of 2023, when the Verkhovna Rada, in pursuance of the first stage of the reform, adopted a bill that strengthened the importance of the AMCU.
The growing role of the Antimonopoly Committee and bringing Ukrainian antimonopoly legislation to EU standards will certainly stimulate the development of competition. Transformations in the field of antimonopoly policy will lead to demonopolization of many industries and their rapid development. This will also accelerate European integration and the flow of investment into our country.
One of the areas that requires close attention from antimonopoly authorities is the prevention of the artificial creation of monopolies. Today, as a result of a full-scale Russian invasion, Ukraine must block and nationalize the assets of people and companies associated with the aggressor country. This is, of course, the right way to cleanse ourselves from the legacy of the period of geopolitical uncertainty and the notorious “multi-vector”.
However, the nationalization of assets now creates challenges that the state must think about as quickly as possible and develop tools that will help avoid the trap of monopolization caused by patriotic, but short-sighted actions. Unfortunately, there are already enough examples of this.
For example, the manufacturer of building materials Aerok from Obukhov, Kyiv region, which had a Russian owner, was given over to its direct competitor, the Kharkov Construction Materials company.
Right now they are trying to forcibly merge the water producer Morshynska (IDS Ukraine company) with its closest competitor Carpathian Mineral Waters LLC. At the same time, ARMA wants to give the management of IDS Ukraine, which has a market share of about 40%, to a company with a share of up to 10%, which creates a great threat to the emergence of a monopoly producer of drinking water.
Another monopoly remains despite many years of recommendations from European partners to demonopolize the gas delivery market. Regional gas companies, which were previously controlled by the fugitive oligarch Dmitry Firtash, were transferred to the manager in the person of the State Joint Stock Company Chernomorneftegaz, which created an even greater monopoly on the market. And EU energy market standards do not allow concentration of gas production, delivery and sale in one hand.
So the nationalization of Firtash’s regional gas companies was a unique opportunity to take the first steps in demonopolizing the gas market in Ukraine, but a network of 26 regional gas companies, again concentrated in one hand, does not at all correspond to European competition practices. In the end, the promised 226 million hryvnia in royalties per year for the management of regional gas companies is not the price for which Ukraine should run the risk of slowing down the European integration process.
We often hear that Ukraine is implementing European competition rules, but sometimes these words miss the essence of the phenomenon. European rules consider a company with a market share of more than 39.7% to be a monopoly, and companies with market shares of more than 20% receive special attention from antitrust authorities. Is Ukraine really moving along the European path when the market in recent years has been under threat of the creation of artificial monopolies with market shares of 50% or more?
There is hope that the state, represented by the updated AMCU, will pay attention to all these nuances and the application of European competition practices in Ukraine will finally acquire practical content.
Competition stimulates the development of smaller producers and other market participants, in particular international companies. Potential investors in the Ukrainian economy expect positive signals that the state will not carry out non-market administrative redistribution of the market at the hands of officials under the guise of a policy of nationalizing the assets of a hostile country.
Ukraine and its leaders must understand the importance of compliance of our practices with EU standards, so as not to lay mines under the future European integration of Ukraine. And future privatization of confiscated assets, which may be of great investment value, will be carried out transparently, taking into account the risks of monopolization. At this time, companies seized from the enemy will become the No. 1 channel for the state to generate income and attract investment for post-war reconstruction.
