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The AMCU says there was producers' conspiracy to prevent new potential participants from entering the tobacco distribution market.
The Anti-Monopoly Committee of Ukraine (AMCU) has announced its decision to impose fines worth UAH 6.5 billion (about US$265 million) on affiliated companies of Philip Morris, JTI, Imperial Tobacco and British American Tobacco, as well as on TEDIS Ukraine.
The AMCU says there was producers' conspiracy to prevent new potential participants from entering the tobacco distribution market.
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However, Ruslan Ovcharenko, the lawyer and Doctor in Public Administration, says the Anti-Monopoly Committee has itself to blame for the monopolization of the wholesale market for tobacco products.
"The Anti-Monopoly Committee officially states that 'a single and common distributor in the market for the initial sale of cigarettes' emerged in 2013. Meanwhile, in 2010 and 2011, distribution companies merged with TEDIS not only with the knowledge, but also with official consent of Ukraine's Anti-Monopoly Committee," the expert said.
Moreover, the AMCU could not prove that it was profitable for manufacturers to sell the entire volume of cigarettes to one distributor, according to Ovcharenko.
"This is contrary to logic and common sense. The presence of 10-12 wholesale companies could be beneficial for manufacturers since it would cut the price of cigarette delivery services. There was not and could not be any agreement between manufacturers and TEDIS," the expert added.
At the same time, there was also a positive in such an association of wholesale chains, including for small-scale businesses.
"A lot of competition at the wholesale level would hit retail chains. It was through retail, including small-scale businesses, that wholesale chains would offset their costs," the lawyer said.
According to Ovcharenko, the presence of one large wholesale player makes it possible to more effectively manage distribution of cigarettes in the market and prevent their smuggling into the European Union countries.
The expert predicts that such a huge fine will lead to a new investment scandal. Foreign investors will defend their rights not only in Ukrainian courts, but also in international ones, which will not contribute to improving Ukraine's investment climate.
"The AMCU decision will affect four enterprises from the TOP 10 major taxpayers in Ukraine. This is a blow not only to future investments, as such cases always affect the country's investment rating, but it is also a blow to local communities, which depend on manufacturers' tax revenue. For example, cigarette manufacturers in [the towns of] Kremenchuk and Pryluky, are the main taxpayers and employers," Ovcharenko summed up.