An open letter from the business community regarding the tobacco market

23/ 07/ 2020

The European Business Association is concerned about the current situation which affects international tobacco manufacturers. According to business, it was the result of structural changes in the market of tobacco products in 2011-2012. Such changes took place with the consent of the Antimonopoly Committee of Ukraine, which at one time granted the relevant permits for concentration in the tobacco market. Thus, in 2019, the AMCU decided on the violation of the legislation on protection of economic competition (№697-r of October 10, 2019), as a result of which four tobacco producers were fined 3.1 billion UAH for anti-competitive concerted actions. The EBA member companies are currently appealing this decision in court. Concerns have been raised about the possible violation of the rights and legitimate interests of international investors in Ukraine. Thus, according to the EBA members – tobacco product manufacturers, on June 30 this year, the AMCU filed procedural documents to recover the fine and secure the claim by seizing property and bank accounts of the parties to the process. According to business representatives, such actions, at the time of appealing the decision in the court of the first instance, are inconsistent with the provisions of the Law of Ukraine On Protection of Economic Competition 102210-III of January 11, 2001, because the implementation of the AMCU decision, including the obligation to pay the fine, must be suspended for the period the commercial court considers claims of companies for declaring such a decision invalid. It should be noted that under the provisions of Article 255 of the Association Agreement between Ukraine, on the one side, and the EU, the European Atomic Energy Community, and their Member States, on another, Ukraine has recognized the importance of applying its competition law transparently and respecting principles of procedural justice and the right to defense. Thus, it can be concluded that to date, the respective entities do not have a legal obligation to pay the fines in question. Moreover, these steps can be seen as pressure on international investors, which will have a negative effect on the tobacco market as a whole, cause a reduction of state budget revenues, and create the conditions for an unprecedented increase in smuggling cases. It should be noted that during their work in Ukraine, representatives of the tobacco industry have invested more than 2 billion US dollars in the state economy, and, according to the results of 2019, paid 55 billion UAH taxes to the state budget. Accordingly, the seizure may pause the work of 4 international companies, which are among the ten largest taxpayers in Ukraine. Therefore, the European Business Association calls on public authorities to treat international investors in Ukraine fairly and impartially. We also ask for a proper legal process, in accordance with the principles of independence, objectivity, and impartiality when considering appeals against AMCU decisions in courts. Also, it is important to refrain from premature measures that may be unwarranted. Thus, we hope that the voice of transparent business will be heard.

Such changes took place with the consent of the Antimonopoly Committee of Ukraine, which at one time granted the relevant permits for concentration in the tobacco market. Thus, in 2019, the AMCU decided on the violation of the legislation on protection of economic competition (№697-r of October 10, 2019), as a result of which four tobacco producers were fined 3.1 billion UAH for anti-competitive concerted actions.

The EBA member companies are currently appealing this decision in court. Concerns have been raised about the possible violation of the rights and legitimate interests of international investors in Ukraine.

Thus, according to the EBA members – tobacco product manufacturers, on June 30 this year, the AMCU filed procedural documents to recover the fine and secure the claim by seizing property and bank accounts of the parties to the process.

According to business representatives, such actions, at the time of appealing the decision in the court of the first instance, are inconsistent with the provisions of the Law of Ukraine “On Protection of Economic Competition” 102210-III of January 11, 2001, because the implementation of the AMCU decision, including the obligation to pay the fine, must be suspended for the period the commercial court considers claims of companies for declaring such a decision invalid. It should be noted that under the provisions of Article 255 of the Association Agreement between Ukraine, on the one side, and the EU, the European Atomic Energy Community, and their Member States, on another, Ukraine has recognized the importance of applying its competition law transparently and respecting principles of procedural justice and the right to defense. Thus, it can be concluded that to date, the respective entities do not have a legal obligation to pay the fines in question.

Moreover, these steps can be seen as pressure on international investors, which will have a negative effect on the tobacco market as a whole, cause a reduction of state budget revenues, and create the conditions for an unprecedented increase in smuggling cases.

It should be noted that during their work in Ukraine, representatives of the tobacco industry have invested more than 2 billion US dollars in the state economy, and, according to the results of 2019, paid 55 billion UAH taxes to the state budget. Accordingly, the seizure may pause the work of 4 international companies, which are among the ten largest taxpayers in Ukraine.

Therefore, the European Business Association calls on public authorities to treat international investors in Ukraine fairly and impartially. We also ask for a proper legal process, in accordance with the principles of independence, objectivity, and impartiality when considering appeals against AMCU decisions in courts. Also, it is important to refrain from premature measures that may be unwarranted. Thus, we hope that the voice of transparent business will be heard.