Editor’s Note: This article has been updated to include documents provided by Ukrspyrt.
Ukraine’s Anti-Monopoly Committee will fine the country’s state-owned monopoly producer of potable ethanol alcohol Hr 33 million ($1.2 million) for abusing its position as a monopolist.
The monopoly, known as Ukrspyrt, set up discriminatory conditions for selling its production to third parties and established different prices on rectified ethanol alcohol for different buyers. These prices were neither connected to the volumes of alcohol being purchased, nor to other legitimate pricing criteria. As a result, they were discriminatory, Anti-Monopoly Committee Chair Yuriy Terentyev wrote in a Dec. 20 post on Facebook.
Ukrspyrt also created conditions for granting discounts to specific buyers that were neither systematic, nor transparent. And it decreased and set prices at different levels in different time periods, Terentyev added.
The committee determined that these actions could lead to a decrease in market competition and harm the interests of purchasers, making them a violation of the Ukrainian law “On defending economic competition.”
On Dec. 20, a representative of Ukrspyrt’s press office told the Kyiv Post he could not yet comment on the Anti-Monopoly Committee’s decision. However, the next day the company sent the Kyiv Post excerpts from its official correspondence with the committee.
In the correspondence, Ukrspyrt presented its approach to production, sales, and pricing as an honest response to difficult economic conditions — including the loss of markets in the Donbas and Crimea, which have been occupied by Russia since 2014.
The letters showed that, on Nov. 1, 2017, Ukrspyrt had requested an explanation of the law and recommendations for following it from Terentyev and the Anti-Monopoly Committee.
“With the aim of preventing violations of the existing legislation on competition and increasing the predictability of its implementation, economic actors have the option of receiving from the Anti-Monopoly Committee of Ukraine an (official) conclusion in the form of explanations with recommendations as to the (actors’) adherence to the legislation on defending economic competition,” Ukrspyrt wrote in that letter.
In a Dec. 7, 2017 letter, the company also sent its pricing algorithm to the committee and requested that it evaluate the document for violations.
After not receiving the information it sought, Ukrspyrt again requested an official explanation on Jan. 11, 2018 “due to Ukrspyrt’s need to take the document into account in its economic and production activities.”
On April 19, 2018, the company received a response from the Anti-Monopoly Committee that it had not provided enough information and, as a result, the committee could not issue an explanation with recommendations for following the law.
Ukrspyrt is widely viewed as a quagmire of embezzlement and inefficiency, and representatives of the alcohol industry have accused the monopoly of producing illegal alcohol. Roughly half of Ukraine’s alcohol is believed to be counterfeit.
The company has been slated for privatization for many years, but has seen little movement in this direction. In March, Ukrspyrt’s acting director, Yury Luchechko told the Kyiv Post that he was working to bring efficiency to the state company and prepare it for privatization. Back in October 2015, his predecessor Roman Ivaniuk told the Kyiv Post that he was aiming for similar goals.
Within two months of being fined, Ukrspyrt must eliminate the causes of the legal violation and establish a transparent mechanism for setting prices on ethanol alcohol. For the next year, it must also report each month to the Anti-Monopoly Committee on its implementation of the these requirements, the committee wrote in a statement on its website.
