Ukraine antitrust body fines tobacco firms UAH 6.5 bln

Ukraine’s Antimonopoly Committee ruled on Oct. 10 to
impose a fine of UAH 6.5 bln against the Tedis cigarette wholesaler and other
top tobacco companies at a total amount of UAH 6.5 bln (USD 260 mln) for
collusion on the Ukrainian tobacco market, the committee reported the same day.
The tobacco companies are blamed in reducing the number of tobacco distribution
contracts on the market from “several dozens” to a single contract with Tedis
over 2011-2012. As a result, Tedis’s share of the tobacco wholesale market
swelled to 99.4% in 2013 and created strict entry barriers for new wholesalers.

Wholesaler Tedis was penalized UAH 3.4 bln. Fines for
the local subsidiaries of global tobacco companies are as follows: Philip
Morris International (PM US) – UAH 1.17 bln, Japan Tobacco (2914 JT) – UAH 0.92
bln, Imperial Brands (IMB LN) – UAH 0.46 bln, and British American Tobacco
(BATS LN) – UAH 0.53 bln.

All the penalized companies assured the media they will
appeal the decision. Commenting on it to Interfax-Ukraine, Imperial Tobacco
said the committee authorized Tedis’s campaign to control top tobacco
distributors in Ukraine in 2008-2010. Such permits were considered by the
industry as “clear messages” of full correspondence of the concentration of the
wholesale tobacco market with local antitrust regulation, the statement said.

In its press release, the committee recalled that it
imposed a UAH 430 mln penalty on Tedis in 2016, and after a series of company
appeals, the courts upheld the penalty in 2018.

Alexander Paraschiy: It might take some time for the committee to secure a decisive victory
over the tobacco companies, but the development looks positive for Ukraine and
its potential budget proceeds. Such a ruling – though it seems to contradict
previous “messages” of the committee made under prior governments (as Imperial
Tobacco commented) – is unlikely to have any negative impact on the investment
climate in Ukraine. That’s considering 1) it “shows” the rules of the game have
changed under new governments and 2) tobacco producers have long had a
contentious image globally.