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ANTITRUST 07/12/2017

LEGAL HOTLINE . 07 December 2017

The Antimonopoly Committee of Ukraine (AMCU) recommends Foxtrot to be more explicit in its advertisements

German car manufacturer concerns may be fined 50 Billion Euro

Information provided on product labels must be true; otherwise the producer will be fined

Contacts

Max Lebedev

Partner, Head of corporate practice, Attorney at law

Oleksandr Melnyk

Attorney at law, Associate

THE ANTIMONOPOLY COMMITTEE OF UKRAINE (AMCU) RECOMMENDS FOXTROT TO BE MORE EXPLICIT IN ITS ADVERTISEMENTS

According to the AMCU, the advertisement “A Fair 24 Month Loan at 0%* is Easy to Pay off!” published on FOXTROT’s website and in its printed materials contains inaccurate information about the interest rate per annum and has influenced or may influence the intentions of consumers to purchase goods at FOXTROT and, therefore, misleads them.

The AMCU has justified such an opinion by the fact that in view of the statement provided in the first part of the advertisement, that is “0%”, a consumer has the reason to associate this rate with any loan payments, whereas according in the detailed information on the loan terms referred to by the asterisk, the interest rate per annum makes 0.01%.

Thus, in the AMCU’s opinion, despite the fact that the advertisement contained comprehensive information about lending, the discrepancy between the first part of the advertisement and the details misleads consumers.

When considering this case, the AMCU paid attention, in particular, to the fact that during the period of distributing the advertisement (i.e., February – August 2016) the company’s increase in income only for two months of 2016 was larger than its monthly increase in income for the same period in 2015.

Based on the results of the consideration of the case, the AMCU recommended the company to eliminate the discovered violations within 10 days. In case FOXTROT fails to comply with the AMCU’s demand to eliminate violations, the company faces the threat of a fine in the amount of up to 5% of income (proceeds) for the last reporting year.

GERMAN CAR MANUFACTURER CONCERNS MAY BE FINED 50 BILLION EURO

The European Commission suspects BMW, Volkswagen, Audi, Porsche, and Mercedes of anticompetitive concerted actions, which consist in coordination of issues related, in particular, to supplier selection, diesel emissions control, fuel tanks size, and overall trends in the development of automotive technologies.

The maximum amount of potential fine for concerted actions of German car manufacturers may reach the record level of EUR 50 billion. In order to calculate the amount of a fine, the companies’ financial indicators are used, namely, their aggregate amounts of goods turnover in 2016.

Under the Ukrainian legislation, anticompetitive concerted actions result in a fine of up to 10% of the violator’s income (proceeds) for the last reporting year, which precedes the year when the fine is imposed. Also, in the event of availability of the illegally obtained income exceeding 10% of annual income (proceeds), the fine is imposed in the amount that does not exceed the threefold amount of illegally obtained income. Herewith, the amount of illegally obtained income can be calculated through assessment.

Recently, the issue of antitrust compliance (the system for preventing violations of competition law) has become more topical in view of the European Commission’s law enforcement practice in the field of protection of economic competition – fines for violations of the law are getting higher and inspections are becoming more thorough.

INFORMATION PROVIDED ON PRODUCT LABELS MUST BE TRUE; OTHERWISE THE PRODUCER WILL BE FINED

Based on the application submitted by the Ukrainian producer of alcoholic beverages, the AMCU provided a clarification regarding the compliance with the law of “ROYAL HIGHLAND KILT WISKEY” and “Classic Scottish Traditions” designations on the alcoholic beverage named “Whiskey-flavoured Liqueur”.

When drafting the clarification, the AMCU analysed the label design, the process of producing the applicant’s beverage, as well as the requirements of the rules developed by the Scotch Whiskey Association and came to the conclusion that placing such designations on the applicant’s label would constitute a violation of the legislation on the protection of economic competition and qualify as the dissemination of information on beverage labels that is false because of the way of its presentation, which may mislead consumers as to the composition of this beverage.

The AMCU emphasised that the consumer properties of whiskey differ from the consumer properties of other alcoholic beverages. In particular, its long-term aging in barrels is the obligatory condition for the process of producing whiskey; at the same time, the technological process of producing the applicant’s beverage did not involve such a production stage.

Herewith, the label of the beverage includes the “Classic Scottish Traditions” designation, which is translated into Ukrainian as «Класичні шотландські традиції». Next to this designation, there is an image of a Scotsman in the national dress and the “WHISKEY” designation, which, in the AMCU’s opinion, may be associated with Scotch whiskey for an average consumer.

Thus, product producers should treat the issue of developing product labels with high responsibly and use only those designations that do not mislead consumers; otherwise, they will face the threat of a fine in the amount of up to 5% of income (proceeds) for the previous year.

HOW CAN GOLAW HELP?

  • Receiving permits for the concentration and concerted actions
  • Representation of interests in cases on the protection against unfair competition
  • Audit of compliance with the competition law
  • Assessment of compliance with the law when advertising goods, using designations, packages, etc.
  • Structuring of purchase and commercial operations
  • Development and implementation of strategies for minimising the risks of violating the antitrust legislation

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