IMF “sends their greetings” to oligarchs

What spoils monopolist’s mood in the new Memorandum between Ukraine and IMF

Demonopolization is one of the vital steps needed to be made on the way to respectable life in Ukraine.

We overpay monopolists and cartels for goods we consume daily and we usually don’t know about it. Small and medium-sized enterprises don’t stand a chance in competition with influential market players and close down, preserving poverty. Ukrainians have to go abroad to get a decent salary that helps to bring up their children because monopolists don’t value human resources and don’t have to compete on a market for it. All of this is the result of the monopolized economy and total impunity of cartels, and this is added to weakness, helplessness and political dependence of the Antimonopoly Committee – the most important economic regulator in the country.

One can get a dozen examples in the world that prove this: strengthening of institutional capacity and independence of an economic regulator can make miracles, increase population’s incomes and good quality, as well as help make prices competitive. I realize that we are a country with a young competitive law, unlike the US with their first antitrust laws passed in the 19th century. However, it is a fact that for the last 20 years there had been no Ukrainian president or parliament that has tried to strengthen the Antimonopoly Committee and declare war to monopolies. An excuse for not having knowledge or experience in this sphere is indefensible since international organizations have already given specific, detailed and official recommendations to Ukrainian authorities on how to tackle this challenge. Nevertheless, Ukraine as a state prefered monopolists rather than Ukrainian citizens. The advice was ignored and the monopolies backed the authority’s impunity.

It can change since we are now witnessing an important historical moment. For the first time in Ukrainian history, the Antimonopoly Committee reform was mentioned in IMF’s Memorandum with Ukraine. I want to believe that in several years we will recall these days as the ones when antimonopoly reform started.

Unlike Ukrainian authorities who create loads of bills on antimonopoly law amendments that only simulate reforms and preserve a status-quo, IMF knows how to do stuff. In the memorandum, one can find a short list of simple steps that create opportunities to oust monopolists from the market and political power.

I realize that Ukraine’s commitments will spoil oligarch’s mood and I will be waiting for an information campaign to discredit these commitments. The alleged messages may include “it is a pressure on the business”, “the state is intervening the free market”, etc. It’s all manipulation. I will explain what commitments to the IMF mean so that we won’t waste a window of opportunity.

Ukraine has committed to adopting legislation to strengthen the AMCU in line with international best practices. The steps need to be made are listed in the sections called “Privatization and reform of state-owned markets and enterprises”.

  1. Financial and operational independence of the Committee

What’s going on now:

The Antimonopoly Committee funding, stuff’s salary level and personnel number are dependent on the decisions made by ministries and parliament’s committees. If the AMC’s decisions don’t favour any of the party, there is a risk of getting a “financial punishment”. Besides, the consistently underpaid AMC isn’t dangerous enough to influential businessmen with monopoly profits. As a result, the AMCU’s personnel salary level is one of the lowest, comparing to other government bodies. The lack of paper material, office supplies and toxic work environment form a reality the AMC has been living in for the latest years. Until AMC is neglected, money from Ukrainian’s wallets to monopolist’s bank accounts will be transferred without hindrance.

How it should be:

In developed countries, the ones who fight with monopolies earn the highest salaries. Expenditures on a regulatory agency are planned years ahead and are secured from political interference. A job in such an agency is s prestige one, agencies can hire professionals and conduct painstaking research. A state provides funding to beat parasitic monopolises. Ukraine has committed to secure this according to the IMF’s memorandum.

  1. Transparent and competitive procedures of the appointment and the dismissal of the AMCU’s chairperson and its commissioners, insulated from political interference

What’s going on now:

The chairman of the AMC is appointed and dismissed by the president with parliament’s consent (as the Law on the Antimonopoly Committee of Ukraine states), or by the parliament based on prime minister’s proposal (as Ukrainian constitution states). The AMC’s commissioners are appointed by the president based on prime minister’s proposal. There are no transparent and competitive procedures that regulate nomination, as well as zero requirements to the candidate’s background or knowledge. As a result, there is a tendency among politicians to get the AMC’s leaders like white rabbits out of hats and present them to the public that will find out about the newly appointed only after the appointment took place. This helps monopolists to integrate “their people” to the AMC, as well as allow weak people  who carry no threat work safely at the AMC. To fire any AMC commissioner who made it to the committee despite backroom deals is relatively easy. As the example of recent dismissals has shown, no grounds are needed for this. The president alone passes a decree on dismissal. 

How it should be:

Any antitrust professional unaffiliated to any influential monopolist should have an opportunity to compete on a fair and transparent competition to earn a right to work for the AMC. The public should have all data about the candidates beforehand and monitor the competition. The politics cannot influence the process of appointment of the agency’s leaders. An AMC commissioner should be ensured that he\she will not be dismissed. Commissioner’s incumbency doesn’t depend on his\her obedience to the President’s office will. This is the second commitment Ukraine has taken in the memorandum with IMF.

  1. Strengthening the powers of the AMC to conduct physical searches, confiscate documents and to obtain information from, as well as share information with other law enforcement agencies and other government bodies

What’s going on now:

To find the evidence of wrongdoing the AMC sends its request to obtain data and information to alleged suspects. But these requests can be ignored, the alleged suspects can stall for time when providing the AMC with the answers, or the AMC may simply be provided with deceitful information. Of course, the committee can punish for such behaviour. But the fines are usually only several hundred hryvnias and the process of its imposing can last for years. The second way the AMC can gather information is on-site inspections, but the alleged suspects can simply not allow the AMC to do its job on-site. The evidence important for the investigation can be destroyed or put in a safe place during a lawyer’s discussions.

How it should be:

In developed countries, the regulatory agency has the power to forcibly enter the premises if it is denied to have access inside, on the basics of a court decision. The agency can also wiretap and use evidence obtained during intelligence operations. The regulatory agency can either perform it on its own or ask another law enforcement agency to perform these actions. This is what Ukraine must do, according to the mentioned memorandum.

  1. The decisions of the AMC must gain the status of enforcement documents, therefore ensuring that there is no need for a court process to enforce decisions

What’s going on now:

If the Antimonopoly Committee passes a decision to impose a fine, for example, the committee can impose it only after two litigations and six court levels. At first, a wrongdoer can appeal a decision to impose a fine in court, and if he fails he can address a court of appeal and then to a court of cassation. If a court upholds the AMC, the committee cannot start the enforcement process immediately because of the State Executive Service. Instead, the AMC should itself apply to a court to impose a fine, and the wrongdoer can again appeal against the court’s decision in a court of appeal and a court of cassation. Eventually, the committee gets a writ of execution and a process to collect money from a wrongdoer starts. It usually lasts for years. The complexity and length of such a procedure allow wrongdoers to rebuild a business model and avoid paying the fine.

How it should be:

The AMC’s decision should gain the status of enforcement documents. The decision must not undergo litigation which is disguised as a procedure of getting a charging order. After an unsuccessful appeal of a wrongdoer, the AMC must start enforced collection of the fine without delay. And this is the fourth and last Ukraine’s commitment in the memorandum.

***

If Ukraine carried out these four promises on its own, there would be no need to ask for IMF’s credit. Instead, Ukrainian presidents and MPs didn’t implement demonopolization and deoligarchization further than pre-election promises. I hope that commitments to the IMF would mean more conscience among politicians. And we will no longer need to borrow money from international organizations in the future. Since the money we overpay because of competition law wrongdoings would be more than enough to live without debts.

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