9 minute read
Olga IVLYEVA, Mykhailo RAZUVAIEV
The Monopolist Pays Twice: Myth or Reality?
Ukrainian antitrust law stipulates that damages caused by, among other things, abuse of dominance shall be compensated by the infringing party at double the amount. This rule is established by para 2 of Article 55 of the Law of Ukraine On Protection of Economic Competition No. 2210 of 11 January 2001 (the Competition Law).
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This article discusses how the above mechanism actually works in practice and whether it has proven to be an effective protective measure against the abuse of dominance or has a declarative nature only.
regUlatory framework and existing Challenges
Apart from establishing the general rule on compensation of damages caused by abuse of dominance, Ukrainian antitrust regulations do not provide for any specific mechanism for exercising such right by afflicted persons. The relevant right to apply to court with a claim for compensation of damages caused by abuse of dominance is established by the Commercial Code of Ukraine. However, the Commercial Code does not establish any specific mechanism either.
Unlike in the EU, where the practice of filing claims for compensation of damages is quite common, in Ukraine such practice is not yet widespread. The reasons behind this situation may include such factors as a lack of the established procedure for compensation of damages, absence of clear mechanism for calculation of damages, duration and complexity of the overall process, etc.
It appears that the principal challenges for persons suffering from abuse of dominance are (i) difficulty in proving caused damages and their amount, and (ii) the ne-
cessity to establish and prove nexus between the abuse of dominance and caused damages.
the role of the antimonopoly Committee
Article 55 of the Competition Law does not require the claimant to have a decision of the Antimonopoly Committee of Ukraine (the AMCU) in order to get compensated for caused damages. However, in accordance with the available court practice, the fact of abuse of dominance and the infringer’s guilt in each case was confirmed by the relevant AMCU decision. As stated by courts: (i) only the AMCU has the competence to detect and establish the fact of abuse of dominance, and (ii) the right to file a court claim arises from the moment of establishing the fact of abuse of dominance by the AMCU, rather than from the moment when the monopolist committed a violation.
Therefore, in order to effectively proceed with the case on claiming damages for abuse of dominance, it is required to apply to the AMCU and ensure to obtain the relevant AMCU decision. As follows from court practice, only the AMCU decision may serve as admissible evidence of abuse of dominance and the infringer’s guilt.
Olga IVLYEVA
is the head of competition practice at Wolf Theiss Kyiv
Mykhailo RAZUVAIEV
is an associate at Wolf Theiss Kyiv
With regard to persons who can claim compensation under Article 55 of the Competition Law, the relevant list is not established by the law. The law only specifies that these can be any persons who suffered damages as a result of the abuse of dominance.
Therefore, it may in principle be argued that apart from persons who suffered from abuse of dominance directly (i.e. direct customers), the list of persons who can apply to a court for compensation of damages, at double the amount, may also include indirect customers and the infringer’s competitors.
However, available court practice addresses only cases where damages were claimed by direct customers, and neither the AMCU nor courts commented on the possibility of claiming damages by indirect customers or the infringer’s competitors, including how to prove caused damages, their amount and causality in such cases. Therefore, in practice, it would be difficult (or even impossible), at least in the near future, for indirect customers/competitors to receive compensation for damages caused by an abuse of dominance.
CalCUlating the amoUnt of damages
Based on available court practice, the amount of damages subject to compensation at double the amount was generally determined as the difference between (i) the costs actually incurred by the afflicted person as a result of and during the period of abuse of dominance, and (ii) the amount of reasonable expenses that the claimant could have had in the absence of such violation.
Therefore, the amount of damages can be determined as the difference between
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(i) the amount paid for the goods/services at the time of abuse of dominance, and (ii) the value of the same goods/services established after termination of the violation.
notable past Cases
The following can be noted as being among the most important cases in the past.
Nibulon vs. Ukrainian Railways
Nibulon vs. Ukrainian Railways (Ukrzaliznytsia) is the most notable case on compensation of damages as a result of abuse of dominance. The whole process lasted for about six years and the sum of compensation came to UAH 120.28 million (approx. USD 4.3 million) plus about UAH 54.47 million (approx. USD 1.95 million) in total for inflation costs; Ukrzaliznytsia was also penalized by the AMCU for the amount of UAH 100 million (around USD 3.6 million) for a violation of antitrust legislation.
In accordance with the case materials, during the period of 2011 — 2014 Ukrzaliznytsia requested Nibulon, without any due legal basis, to qualify its domestic shipments as those made for export. This resulted in applying higher fees to Nibulon. As a result of such actions, Nibulon suffered damages amounting to UAH 60.14 million (about USD 2.15 million).
In June 2013, the AMCU issued its decision and qualified the actions of Ukrzaliznytsia as abuse of dominance, and imposed a fine of UAH 100 million (around USD 3.6 million) for a violation of the antitrust law.
The court then established that, as a result of the infringement, Ukrzaliznytsia
caused damages to Nibulon in the amount of UAH 60.14 million, which is the difference between the tariff for domestic shipments and the tariff for export that was, in fact, applied to Nibulon.
UIA vs. AMIC
Another notable case is Ukraine International Airlines (UIA) vs. AMIC Aviation.
In September 2015, the AMCU found Amic guilty of abusing its monopoly position at Kharkiv and Odesa airports as a result of (i) establishing increased prices for the refueling of aircraft and (ii) providing discounts without objectively justified reasons. The AMCU imposed a fine of UAH 18.7 million in total (about USD 670,000) for a violation of the antitrust law.
The court of first instance then fully satisfied UIA’s claim and ordered Amic to compensate UIA the amount of about UAH 21.6 million (approx. USD 774, 200) at double damages. However, in April 2019, at the appeal stage, the parties reached an amicable settlement agreement whereby Amic agreed to pay UIA USD 300,000.
The above case is the first and, so far, the only available case where the court approved an amicable settlement agreement in a case on compensation of damages as a result of abuse of dominance.
pending and potential Cases
At the end of 2020, three Ukrainian freight forwarders (C.M.T. Ltd., Inter Trans Logistics LLC and Unimar Ligistic LLC) applied to a court and claimed about UAH 6.9 million (roughly USD 247,000) in total as compensation of double damages caused by Eurotermynal LLC.
The basis for such claims was the abuse of dominance by Eurotermynal LLC when servicing trucks at Odesa port in 2016 — 2017. The infringement was confirmed by the relevant decision of the AMCU, and the antitrust authority imposed a fine of UAH 5.37 million (approx. USD 192,000) for a violation of the antitrust law.
Other potential cases relate to gas supplies for household consumers. The AMCU recently commenced investigations against several gas supply companies in Western Ukraine (Lvivgas zbut, Volyngas zbut, Zakarpatgas zbut, Ivano-Frankivskgas zbut and Rivnegas Zbut). Each company is suspected of abuse of dominance and overpricing when supplying gas to consumers.
Although at this stage it is too early to draw any conclusions in respect of
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the above cases, they will certainly contribute to the existing practice related to compensation of damages resulting from abuse of dominance. Therefore, all these cases should be further monitored in order to see what practical conclusions can be drawn.
eU praCtiCe
In the EU, issues related to compensation of damages caused by antitrust law infringements are regulated by Directive 2014/104/EU (the Directive). The document aims to simplify the procedure for review of relevant court cases. The Directive provides, among other things, that damages subject to compensation may include the actual losses, loss of profit, and interest payments; the document also specifies that damages can be claimed: — not only by direct consumers but also by indirect consumers; — regardless of whether or not the fact of infringement was established by the antitrust authority; and — from any infringer (in case of joint violation by several persons).
What is also important is that the Directive allows the courts to estimate the
amount of damages caused by the infringement if it is practically impossible or excessively difficult for a claimant to calculate them on the basis of available evidence.
Apart from this, back in 2019, the EU Commission introduced Guidelines for courts on how to estimate the share of overcharge which was passed on to indirect consumers (so-called “Passing-On Guidelines”). The Guidelines have a recommendatory nature and provide for approaches and examples of calculation of the amount of damages that could be helpful for courts and claimants.
ConClUsions
Taking into consideration the increased number of court cases in this area during the last few years and the outcome of the cases, it appears that the mechanism for compensation of damages resulting from the abuse of dominance is on a path of active transformation from a theoretical declared measure to an effective protective solution available for use in real business life.
In order to speed up the transformation process and simplify the existing mechanism for compensation of damages, the rules of the game should be changed and the factors that currently inhibit the process should at least be reduced. The implementation of EU practice, where the availability of the Directive and Passing-On Guidelines enables the overall process to be significantly simplified, would most definitely increase the number of relevant cases in courts and transform the existing mechanism into an effective protective measure against monopolists which abuse their market powers.
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