On March 20, 2012 the Draft Law on amending certain legislative acts of Ukraine regarding distribution of competences of state authorities in the sphere of natural monopolies and telecommunications was passed in first reading. The Draft Law No. 9750 was registered on January 25, 2012.
In jurisdictions with developed antimonopoly legislation the powers to regulate activities of natural monopolies (in particular regarding the control over pricing) are divided between antimonopoly authorities and sector regulators. In Ukraine, however, there is still no full-fledged sector regulators system for natural monopoly entities (the so-called "national commissions for natural monopoly regulation"), except for NCRC and NERC, therefore the activities of natural monopolies are still controlled at most by AMCU and other оcentral executive authorities, which is untypical for AMCU as an antimonopoly regulator thus distracting AMCU's resources from performing its normal functions of control over businesses' compliance with the legislation on economic competition protection on liberal markets.
In this respect, one of the most important steps towards the solution of this problem is the Law of Ukraine No. 4344-VI "On Amendments to Certain Legislative Acts of Ukraine regarding the distribution of powers of state authorities in the sphere of natural monopoly entities and the telecommunications industry" adopted by the Parliament on March 20, 2012.
The essence of the Law No. 4344-VI comes to the fact that NCRC as an industry regulator shall regulate the activities of natural monopolies on telecommunications markets. Thus, NCRC, not AMCU, must determine what businesses shall be deemed natural monopoly entities, which would contribute to more effective execution of regulatory powers by NCRC. The same applies to other sector regulators (i.e. central executive bodies, which perform the functions of national commissions until the latter are established).
In accordance with the Laws of Ukraine "On Antimonopoly Committee of Ukraine", "On Natural Monopolies", "On Telecommunications", as amended by the Law No. 4344-VI, registers of natural monopoly entities shall be formed and kept by sector regulators on each of the markets under their control, whereas AMCU retains the right just to keep a generic register of natural monopolies prepared on the basis of the data from sector regulators' registers. Also, the Law No. 4344-VI expands the scope of the Law of Ukraine "On Natural Monopolies". Thus, the provisions of the said Law shall now apply unequivocally to participants of related markets that are in the state of natural monopolies (i.e. regardless of the presence of natural monopolies on related markets), which implies number of regulatory obligations for such participants. In particular, they are subject to the legislation on public procurement procedures.
However, the Law No. 4344-VI does not cancel AMCU's control over natural monopoly markets in terms of legislation on economic competition protection – prohibitions on anticompetitive concerted practices, abuse of dominant position and discriminatory practices as well as prohibitions of unfair competition. An important innovation of the Law № 4344-VI, in particular for telecommunications markets, is the expanded scope of the term "telecommunications operator with significant market advantage", which can now be applied to all telecommunications markets, not just to the traffic admission market, as it was before. Moreover, the concept "entity enjoying monopoly (dominant) position" (AMCU determines an entity's dominant position on the market subject to structural features and is presumed upon such entity's achieving a 35% market share) has been substituted by the concept "entity enjoying essential market advantage" (an entity's essential market advantage shall be determined by sector regulators based on the entity's financial performance and is presumed if the entity's proceeds in the previous year exceed 25% of the aggregate proceeds of all other operators and providers in the market) throughout the text of the Law "On Telecommunications". As it seems, the described novelty is due to the fact that AMCU is the competent authority to determine an entity's dominant (monopoly) position, whereas market entities' financial performance may be analyzed by sector regulators themselves.
To sum up, it should be noted that the Law No. 4344-VI is generally an important step to improve the functioning of the sector regulators system, particularly in terms of distribution of powers between the national commissions and the AMCU regarding the determination of a natural monopoly's legal status. However, a more important matter is still the establishment of an effective sector regulator system in the form of appropriate national commissions (similar to NCRC). This is an indispensible condition for the more mature next stage of the regulation of natural monopoly markets – their liberalization and deregulation.
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