Practices that are caught by the law
Thus, the business community is advised to take a proactive approach both in ensuring that their advertising campaigns contain accurate information as to the features of their goods and/or services as well as that their product labels do not conceal certain facts that can mislead the general public. The AMC has shown itself to be more than willing to conduct full-blown investigations, with technically all industries capable of being put under the microscope. Those that are subject to particular scrutiny include pharmaceuticals, financial services as well as the food and beverage industry. Indeed, the pharmaceutical sector is being tightly monitored, with many companies having to answer to burdensome questionnaires and informational requests.
Although their marketing campaigns seem to fully comply with advertising rules, companies face a serious risk of infringing the Ukrainian unfair competition laws. The AMC is particularly wary of statements such as “the best”, “the most”, “the oldest”, “the most effective”, “no GMO” etc. Unless backed by supporting evidence, they would almost certainly be contrary to applicable laws. The regulators take the view that all information concerning the true origin of products, method of production, source, quality, suitability for use, standards, specifications, must be clearly indicated on packages and product labels. The idea is to prevent practices which may lure customers into purchasing certain goods or services that they potentially otherwise would not. The AMC has even been successful in uncovering instances where multinationals have formulated their discount policies and other essential conditions in a very opaque manner, or even completely omitted them, so as to attract new customers. In an increasingly competitive environment, it is often the case that competitors implicate one another before the regulators.
The AMC’s modus operandi
All such practices are caught by the law and violators risk facing financial sanctions of up to 5% of their gross worldwide income (sales). The AMC’s territorial branches can also impose fines, which hare capped at UAH 68,000 (approx. EUR 6,800). However, there is a procedural trick permitting territorial branches to impose a fine equally imposable by the AMC (up to 5% of the gross worldwide income (sales)), in which case the decision-making powers would be transferred to a body known as the Administrative Collegium (the “Ad Hoc Committee”). In such case, the AMC would delegate its decision-making powers to the Ad Hoc Committee which would hold a hearing at the territorial branch of the AMC and would have all the necessary powers to impose a maximum fine.
In fact, due to the lack of manpower and resources, the AMC’s recent practice has been to delegate many of its investigations to its territorial branches, with the decisions being further made by the Ad Hoc Committee, thereby allowing for the maximum fine to be imposed. Indeed, all indicators suggest that the amount of fines has been consistently and progressively increasing over the last several years. In fact, the AMC’s modus operandi is rather unpredictable so the actual fine imposed would very much depend on individual efforts to reduce it. Based on our experience, full cooperation with the AMC usually results in a lower fine. More importantly, in addition to the fine, violators face a serious risk of having to recall the infringing product from stores as well as seize the production thereof, a scenario which is much more damaging than a mere administrative fine.
Recent violations
Recent fines include Hr 1.6 million imposed on Pochtovy Magazin for inducing the general public to complete online questionnaires in return for gifts and prizes. Once the questionnaires were completed, Pochtovy Magazin actually used the collected personal information to target those surveyed as potential customers, refusing to provide the promised rewards. Another example includes a fine of UAH 1 million imposed on Boehringer Ingelheim RCV GmbH & Co KG for misleading the public as to the true effects of its drug “Lazolvan”. The company claimed that “Lazolvan” has the ability to cure a particular illness when, in fact, the drug could do no more than reduce its symptoms.
Conclusively, it is perfectly plain that the AMC has adopted a view that all practices contradicting the rules of fair competition must be seized and the violators brought to justice. It is thus imperative that businesses, particularly those in the pharmaceuticals, financial services and the food and beverage industry, conduct proper due diligence of their advertising campaigns in order to ensure that nothing is being misrepresented to their actual and potential customers.
Dmitry Tarany is a lawyer with Sayenko Kharenko law firm in Kyiv.
