Editor’s Note: This story was written based upon an interview conducted on June 26. Just a week later on July 3, Ukraine’s parliament fired Yuriy Terentyev as leader of the Anti-Monopoly Committee. In a message to the Kyiv Post, he noted that his resignation was passed with “the minimal possible number of votes” from the Verkhovna Rada.
We are publishing the story unchanged, as it offers a look into how Terentyev views his work and his contribution to Ukraine’s anti-monopoly efforts after five years on the job.
On July 7, Olga Pishchanska was appointed acting head of the Anti-Monopoly Committee. For more on that, please read our story: “Zelensky appoints new acting Anti-Monopoly Committee head after Terentyev fired”
Yuriy Terentyev, 43, chairman of Ukraine’s Anti-Monopoly Committee (AMCU), is proud of his professional achievements.
“We changed the AMCU from a rather passive institution which was not making decisions — to a competent center that works with critical economic sectors and big players on the market,” he told the Kyiv Post on June 26.
In 2019, Terentyev and his agency managed to impose $322 million worth of fines overall, with the largest sum coming from cigarette manufacturers and tobacco distributors – $240 million.
His agency is dedicated to fighting monopolies in Ukraine in an attempt to create a level playing field in the country. If the monopoly rules are violated, the body fines the monopolists, bringing millions of dollars into state coffers.
In October 2019, for example, the AMCU opened a case against DTEK for abusing its position on the market. As Ukraine’s largest electric power company, DTEK controls up to 90% of Ukraine’s coal output and up to 80% of its thermal power production. It belongs to oligarch Rinat Akhmetov.
The AMCU may fine the energy company for up to 10% of its 2019 revenue if the alleged violation is confirmed.
“This high profile case is underway, and we should see results in the upcoming months”, Terentyev said.
Terentyev used to work as general counsel at steelmaker ArcelorMittal Kryvyi Rih and in a variety of management positions at retailer Metro Cash & Carry. Now he advocates for a comprehensive approach to big market players and calls those who criticize the effectiveness of the AMCU “irrelevant.”
“The AMCU is not the parliament,” Terentyev said. “It is an institution that requires profound legal and technical understanding of the matter. We have managed to create an effective team capable of working on big cases.”
Big cases
In 2019, the state budget received more than Hr 150 million ($5.5 million) in payments of fines imposed by the AMCU. Overall, the economic impact of the agency’s decisions amounted to Hr 4.3 billion.
In a very unusual situation for Ukraine, the state agency brings back 20 times its funding, Terentyev says.
“We are the only agency which brings in so much money compared to our funding” from the budget, he says.
While it seems relatively easy for the AMCU to impose a fine, it is difficult to force businesses to pay it, Terentyev says. He wants business to understand why they were fined and courts to give transparent and fair decisions based on hard evidence.
“Businesses should understand what the decision is about, and then effectively challenge our decision in courts, based on the hard evidence we provide”, he says.
Terentyev is trying to avoid situations where the cost of the paid penalty is transferred to consumers because customers should not pay the price of business misconduct. And businesses should also understand that being competitive benefits them.
While fines serve as a metaphoric whip, for the AMCU to be taken seriously, Terentyev believes businesses should change their behavior themselves and be willing to cooperate.
“If we want businesses to change their behavior, we need to punish violators for purposes believed to be illegal,” he says, “but we also need to formulate what we believe is the proper code of conduct.”
Terentyev also raised the Stockholm arbitration court case between Ukraine’s state gas monopoly Naftogaz and Russian energy company Gazprom, which took place in January 2016 and led to an agreement signed in December 2019 between the two energy giants over a $7.4 billion fine initiated against Gazprom by the AMCU.
Terentyev says that, before 2015, the agency avoided targeting big players because of a lack of competence and ambition to bring change in these economic sectors. As a result, the growth of small repeated infringements was slowing down the agency.
Today, the number of fines is decreasing, while their volume and economic effect constantly grow. There were as many as 3,000 AMCU fines a year as of 2015. In 2019, they have dropped to 20 to 30.
“We see fewer decisions, but their effects are better,” Terentyev says.
Reforming structure
The AMCU has 640 employees, 45% of whom work in the central office in Kyiv. The rest work in its regional offices all over Ukraine.
The agency began reforming its territorial offices in November 2019, decreasing them from 18 regional branches to 6 interregional entities.
Businesses used to contact regional branches to report on infringements and the central office was used as a “back office,” only gathering this information.
Now, the central office is a key enforcement agent and gives the orders, Terentyev says, “and regional offices are here to represent us in the regions.”
“We need to go after big players and we can only go after big players from the central office.” That includes when big players monopolize a part of the market to the extent that they can dictate prices.
The agency needs competitive employees and investigators. To recruit these people and prevent corruption within the agency, AMCU needs a strong central office.
“It is a bit naive to believe that we have people with proper motivation and paid enough to take proper transparent decisions in every regional office,” Terentyev says.
The AMCU is divided into three main departments: one is dedicated to energy and utilities, another to foods and industrial goods and the third is for services. A separate investigative department has been created, along with a smaller one that oversees mergers and acquisitions and public procurement.
The AMCU collaborates with international partners such as the Organization for Economic Co-operation and Development, the United Nations, the International Competition Network, the World Bank, the U.S. Agency for International Development and the European Union’s Twinning program.
Public procurements
Public procurement complaints over a lack of transparency in contracts unfairly given to shady contractors jumped from roughly 900 in 2014 to 11,000 in 2019. Terentyev expects at least 15,000 this year.
This increase in cases is due to ProZorro, an official online procurement system that became mandatory for all procurement in the country in 2016. It offers free access to all public purchasing data, which means the agency can detect more cases.
According to procurement legislation, the economy minister should act as the main authority on public procurement violations, but many problems related to transparency in tenders at a local level could be reduced just by designing a healthy procurement system, Terentyev says.
He believes local government institutions do not respect open and transparent tenders. “We sometimes take hundreds of thousands of cases and most of the cases are linked to local authorities,” Terentyev says.
The state should take responsibility and deal with the actions of the local authorities. But it takes at least seven years to implement an efficient anti-monopoly agency, Terentyev says, citing the examples of Israel and Mexico.
“It takes time to bring up cases, to train people and to establish proper levers,” he says. “There are no miracles.”
