Presentations and publications
Recent Amendments to the Competition Legislation
On 17 May 2015 a new Law “On Introduction of Amendments and Changes Into Certain Legislative Acts of the Republic of Kazakhstan on Issues as to Natural Monopolies and Regulated Markets”, dated 5 May 2015 (the “Amending Law”), came into effect. This Law has amended certain laws, including Law “On Competition” No. 112-IV, dated 25 December 2008 (the “Competition Law”).
The summary below highlights the most significant amendments to the Competition Law.
Changes as to Competition Clearance
Important amendments have been introduced to the Competition Law in relation to merger control requirements. Such amendments are the following:
(i) The Amending Law has doubled the percentage of the voting shares (interest) in an undertaking, the acquisition of which is deemed to be “economic concentration” under the Competition Law.
Under the amended version of the Competition Law, acquisition by a person (or group of persons) of voting shares (interest) in an undertaking if, as a result of such acquisition, the acquirer will obtain the right to control more than fifty per cent (50%) of such shares (interest), provided that prior to the acquisition the acquirer did not control, or controlled, fifty per cent (50%) or less of the voting shares (interest) in the undertaking, is deemed to be “economic concentration” and can be completed only with consent from the competition authority .
Under the previous version of the Competition Law, acquisition of more than twenty-five per cent (25%) of the voting shares (interest) in the undertaking was considered to be economic concentration.
(ii) The Competition Law now clarifies that the above provisions do not apply to the founders of a legal entity, that it is being created, even if one the founders has more than fifty per cent (50%) of the voting shares (interest) in such a legal entity. This means that the establishment of a legal entity does not require consent for economic concentration from the competition authority.
Previously the competition authority took a view that the creation of a legal entity, as a result of which certain founders would own more than twenty-five per cent (25%) of shares (interest) in a created entity, as economic concentration, although the previous version of the Competition Law did not expressly provided for such.
(iii) The timeframe for consideration of an application for consent for economic concentration has been considerably decreased, i.e. from fifty (50) calendar days to thirty (30) calendar days. Meanwhile, the Amending Law retained the right of the competition authority to suspend the review of the application and did not limit the number of such suspensions.
(iv) Transactions, the execution of which are directly provided in the laws, President’s Decrees and/or Government’s Resolutions of Kazakhstan, are now exempted from obtaining consent for economic concentration.
Introduction of Cartel
The Amending Law has introduced to the Competition Law a new term “cartel”, which means anticompetitive horizontal agreements or agreed actions among undertakings, which are competitors or potential competitors on the same market.
Cartel may include such actions as price fixing, reducing or ceasing industry output, fixing market shares, allocating customers, sharing the market on the basis of territorial principle and/or refusing to enter into contracts with particular suppliers.
Cartels are prohibited by the Competition Law and constitute the violation of the antimonopoly legislation.
Introduction of the Prevention of Antimonopoly Violations
To prevent the breach of the antimonopoly legislation, a competition authority now has the right to issue a written warning, addressed to an official of an undertaking and/or state authority, on inadmissibility of actions, which may lead to the breach of the antimonopoly legislation.
Such a warning may be issued on the basis of a public announcement made by an official of the undertaking and/or state authority as to proposed actions on the relevant market, if such actions may lead to the violation of the antimonopoly legislation, whilst there are no grounds for an investigation.
Conclusion
We consider the above amendments to the Competition Law as positive, because they are intended to further develop the antimonopoly legislation of Kazakhstan and reduce administrative barriers for undertakings. In particular, the amendments as to competition clearance will definitely reduce the number of regulatory approvals required to closing of transactions between undertakings.
For more detailed information on any above issues, please contact Elena Lee at: +7 727 2584890 or Elena.Lee@mwp.kz.
The summary below highlights the most significant amendments to the Competition Law.
Changes as to Competition Clearance
Important amendments have been introduced to the Competition Law in relation to merger control requirements. Such amendments are the following:
(i) The Amending Law has doubled the percentage of the voting shares (interest) in an undertaking, the acquisition of which is deemed to be “economic concentration” under the Competition Law.
Under the amended version of the Competition Law, acquisition by a person (or group of persons) of voting shares (interest) in an undertaking if, as a result of such acquisition, the acquirer will obtain the right to control more than fifty per cent (50%) of such shares (interest), provided that prior to the acquisition the acquirer did not control, or controlled, fifty per cent (50%) or less of the voting shares (interest) in the undertaking, is deemed to be “economic concentration” and can be completed only with consent from the competition authority .
Under the previous version of the Competition Law, acquisition of more than twenty-five per cent (25%) of the voting shares (interest) in the undertaking was considered to be economic concentration.
(ii) The Competition Law now clarifies that the above provisions do not apply to the founders of a legal entity, that it is being created, even if one the founders has more than fifty per cent (50%) of the voting shares (interest) in such a legal entity. This means that the establishment of a legal entity does not require consent for economic concentration from the competition authority.
Previously the competition authority took a view that the creation of a legal entity, as a result of which certain founders would own more than twenty-five per cent (25%) of shares (interest) in a created entity, as economic concentration, although the previous version of the Competition Law did not expressly provided for such.
(iii) The timeframe for consideration of an application for consent for economic concentration has been considerably decreased, i.e. from fifty (50) calendar days to thirty (30) calendar days. Meanwhile, the Amending Law retained the right of the competition authority to suspend the review of the application and did not limit the number of such suspensions.
(iv) Transactions, the execution of which are directly provided in the laws, President’s Decrees and/or Government’s Resolutions of Kazakhstan, are now exempted from obtaining consent for economic concentration.
Introduction of Cartel
The Amending Law has introduced to the Competition Law a new term “cartel”, which means anticompetitive horizontal agreements or agreed actions among undertakings, which are competitors or potential competitors on the same market.
Cartel may include such actions as price fixing, reducing or ceasing industry output, fixing market shares, allocating customers, sharing the market on the basis of territorial principle and/or refusing to enter into contracts with particular suppliers.
Cartels are prohibited by the Competition Law and constitute the violation of the antimonopoly legislation.
Introduction of the Prevention of Antimonopoly Violations
To prevent the breach of the antimonopoly legislation, a competition authority now has the right to issue a written warning, addressed to an official of an undertaking and/or state authority, on inadmissibility of actions, which may lead to the breach of the antimonopoly legislation.
Such a warning may be issued on the basis of a public announcement made by an official of the undertaking and/or state authority as to proposed actions on the relevant market, if such actions may lead to the violation of the antimonopoly legislation, whilst there are no grounds for an investigation.
Conclusion
We consider the above amendments to the Competition Law as positive, because they are intended to further develop the antimonopoly legislation of Kazakhstan and reduce administrative barriers for undertakings. In particular, the amendments as to competition clearance will definitely reduce the number of regulatory approvals required to closing of transactions between undertakings.
For more detailed information on any above issues, please contact Elena Lee at: +7 727 2584890 or Elena.Lee@mwp.kz.