Vertical Block Exemption Regulation enters into force in Ukraine

On 5 December 2017, the Vertical Block Exemption Regulation (the "Regulation") of the Antimonopoly Committee of Ukraine (the "AMC") entered into force. The Regulation is adopted in accordance with Ukraine's obligations under the Ukraine-European Union Association Agreement and is based on the Regulation of the European Commission No. 330/2010. The Regulation provides (i) a block exemption (a so-called "safe harbour") for certain categories of vertical agreements where the absence of anti-competitive effects may be presumed and (ii) a list of hardcore and other restrictions not covered by the block exemption.

Unlike in the EU, where companies are required to undertake a self-assessment of their vertical agreements with the help of regulatory guidelines, in Ukraine, there is a notification system for vertical restraints falling outside the scope of the block exemption. Such vertical restraints can be implemented only after obtaining individual exemptions from the AMC, if the parties prove that the economic benefits arising from the agreement outweigh any anti-competitive effects.

If there is any doubt as to whether an agreement contains any provisions which may qualify as anti-competitive vertical restraints, the parties may also apply to the AMC for guidance (a so-called "comfort letter") on qualification of actions and their compliance with the Ukrainian competition law.

According to the Regulation:

1. Block exemption applies to vertical agreements:

1.1. where the market share of each of the seller and the buyer does not exceed 30% in the relevant market(s);

1.2. which relate to the assignment to the buyer or use by the buyer of intellectual property rights if such provisions are directly related to the use, sale or resale of goods or services, provided that market share threshold specified in item 1.1 above is not exceeded;

1.3. between an association of retailers and either its (a) members or (b) suppliers, if no individual member of the association, together with its connected undertakings, has a total annual turnover in Ukraine of more than EUR 25 million, provided that market share threshold specified in item 1.1 above is not exceeded; and

1.4. where the subcontractor undertakes to produce certain products exclusively for the contractor which provides the required technology or equipment to produce the products (subject to exceptions).

The vertical agreements mentioned above may be implemented without the approval of the AMC, as the absence of anti-competitive effects is presumed.

2. Block exemption does not apply to:

2.1. vertical agreements containing the following hardcore restrictions:

  • resale price restrictions (except for establishing maximum and/or recommended prices);
  • restrictions by territory/customers (except for restrictions on active sales into exclusive territories of other distributors; sales by wholesale distributors to end customers; sales to unauthorised distributors within selective distribution systems; and sales of components for finished goods to customers who intend to manufacture goods similar to those of the supplier(s));
  • restrictions on active or passive sales to end customers by authorised retailers;
  • restrictions on cross-supplies between authorised distributors; and
  • restrictions on sales of spare parts to end customers or to repairers.

2.2. other types of vertical restraints, being:

  • non-compete obligations for a period of more than 5 years (subject to exceptions);
  • a buyer's obligation not to manufacture, purchase, sell or resell goods after termination of the agreement (subject to exceptions); and
  • a distributor's obligation in a selective distribution system not to sell the goods of certain suppliers' competitors.

If you would like to receive further information in connection with the above, please contact Anastasia Usova or Nataliya Kovalyova.