This past week, Ukraine’s Antimonopoly Committee marked its tenth anniversary. In market economy countries this government institution plays a key role in ensuring adequate competition. Meanwhile, some of the financial and political groups that control the various sectors of Ukraine’s economy are still out of reach of the Antimonopoly Committee. Yet, the committee has gained sway of late. Among its recent widely publicized steps was a warning issued to the big players in the mining and metallurgy sector, among them such heavyweights as SKM, Privat, and Intertype. The specifics of competition are discussed in the interview with Antimonopoly Chairman Oleksiy KOSTUSIEV below.
“In what way does the work of Ukraine’s Antimonopoly Committee differ from that of similar institutions in the EU or elsewhere?”
“In the West, many investigations and lawsuits drag on for years. Meanwhile, we manage to solve many problems by issuing recommendations. Unfortunately, the state of our economy gives us plenty of reasons to interfere, and there is no time for lengthy investigations. We are told that the market situation needs to be stabilized immediately. If a case is opened, it takes half a year to find evidence and collect all documents, which is a tremendous amount of work. Moreover, our inspectors are never welcome guests. It is difficult to obtain documents. When we punish and penalize, this touches off lawsuits, which can drag for years in our country. Thus, to get results quickly we have found a solution, namely to issue recommendations, which makes it possible to achieve tangible results in a matter of months or even weeks.”
“There have been complaints of late to the effect that the Antimonopoly Committee attempts to extend its powers. Would you comment on this?”
“Amendments, which we have initiated, are designed to enable us to do a better job of what we have been charged with. The parliament is currently considering a bill on admissibility of evidence in courts. Specifically, it would make it possible to use economic analyses to prove collusion. The current law reads, ‘...based on direct evidence.’ This has been written by a wishful thinker. When individuals collude and hike prices artificially, they do not record it in any documents, nor do they sign anything, but simply collude. In many cases we are certain that collusion has taken place. When prices for the same kind of goods from different suppliers are raised simultaneously and by the same percentage, and there are no economic preconditions for such an increase, what else could that indicate if not collusion?”
“The Antimonopoly Committee also seeks control over the distribution of government aid.”
“The fact is, in countries where such aid is administered, it should be regulated by law, since such aid deforms the competitive environment. This applies to both companies and territories. We are not demanding that such aid be stopped. If it is needed, then it should be administered, but according to certain rules that should be set forth in relevant laws. Before this is done, the Antimonopoly Committee should publicize its findings as to how this will affect a specific competitive environment in the given market. We find this absolutely civilized, although initially this was not well received by all ministries and departments. One of their arguments was: ‘It would be way too much if the Antimonopoly Committee also became involved in the budgeting process.’ But then we managed to convince our colleagues in the government. Moreover, the bill has been supported by the parliamentary Committee for Economic Policy. Now it is to be submitted for consideration and put to the vote.”
“Which of Ukraine’s markets are the most vulnerable to monopoly abuse?”
“Among the most tempting are markets of foodstuffs and consumer goods, since such markets offer the shortest payback periods. One can cash in on such markets instantly, whereas in metallurgy or elsewhere this chain is longer. The Antimonopoly Committee is constantly monitoring the most essential social markets — those of the foodstuffs, primarily bread, flour, and grain markets. Among those constantly under our scrutiny are public utility companies, for there is no individual in Ukraine independent of them. They are followed by communications and transport companies, primarily rail companies. Also there is the market of petroleum products, primarily trade in gasoline. These markets are under particular scrutiny.”
“Speaking of foodstuffs, is the grain market within the scope of your attention today?”
“We are watching it very closely and doing everything we can to eliminate all the problems as far as we are concerned. But there are factors outside our control. Even the Bible reads that in the year when the crop is high part of the grain should be placed in the care of the pharaoh and preserved for a lean year. If we have sold everything and not set anything aside, why should the Antimonopoly Committee shoulder the blame? A situation whereby traders could collude and cause the market to crash is not possible. We work with major traders, while there are too many small traders and they cannot possibly collude.”
“Should your recent statements about a conflict in the mining and metallurgy sector be viewed as a fire alarm?”
“There were many hard feelings among the mining and metallurgy sector representatives. Yet this case specifically illustrated the potential of recommendations as compared to court-ordered investigations. Our colleagues in other countries were very surprised to see that our recommendations produced results so quickly. After all, it is telling when such industry heavyweights heed recommendations. The first to accept our requirements were companies of the TAS group. Then prices were stabilized by companies of the SKM group. The Privat group, with which we had disagreements, also heeded our recommendations, and both Kryvorizhstal plants and the Illich Plant received letters in which new prices were made known to them.”
“What about Intertype? How did this corporation respond to your interference with its business?”
“Because our recommendations were not fulfilled in time, we filed three lawsuits. We are now collecting evidence, and the court rulings will be harsh, uncompromising, and principled. But I hope that the companies of this group will nonetheless fulfill our recommendations. There are two possible options: either they fulfill our recommendations or the cases are completed and we will make our own decisions. What those might be I cannot tell, but they are easy to guess, judging by practical experience. Meanwhile, dozens and not only three lawsuits could have been filed.”
“How do Intertype representatives explain their stance?”
“They contend that some companies want to buy their produce at domestic prices, use it to manufacture their own products, and then export them at world prices. Meanwhile, they are ready to reduce prices for products to be sold in the domestic market and used in Ukraine even today. I consider it a fair stance. Yet, work is ongoing, and I think that our recommendations will be fulfilled. The psychological aspect is the main thing in this story. For example, one of the companies, a manufacturer of brake shoes, rejected our recommendations. But on learning that such industry sharks as SKM or Privat accepted them, the director and chief engineer of the wayward company came to us, and we set everything straight. The main consideration is an equal approach to everybody.”
