On October 10, 2019, the Antimonopoly Committee of Ukraine (AMCU) fined the four largest tobacco companies in Ukraine – Philip Morris, JTI, Imperial Tobacco, British American Tobacco and their distributors – a total of UAH 6.5 billion. The companies were charged with conspiracy to set and maintain inflated prices for tobacco products.
This decision became a precedent for Ukraine and was seen as a significant step in the fight against monopoly in the tobacco market. However, as of May 15, 2024, none of these fines have been paid. Tobacco companies appealed the AMCU’s decision in courts. The court proceedings are still ongoing, and the final decision has not yet been made.
Serhiy Mytkalyk, executive director of the Anti-Corruption Headquarters, spoke about the tobacco monopoly and the AMCU’s “underfines” for cigarette manufacturers in an interview with investigative journalist Yevhen Plinsky.
“The Russian company Megapolis enters Ukraine and takes over the Ukrainian cigarette distribution market, and all Ukrainian cigarette manufacturers start working exclusively through Megapolis, which means it is definitely a monopoly. Moreover, there is a decision of the AMCU that proves that this is a monopoly and that there is a conspiracy between the monopolist Megapolis (the former name, now Tedis Ukraine), together with tobacco producers Philip Morris, JTI, Imperial Tobacco, British American Tobacco on anticompetitive concerted actions in the market that as a result monopolize the tobacco market and do not allow other business entities to properly sell their products.
Accordingly, billions of hryvnias in fines have been imposed, for example, in 2019 a fine of UAH 6.5 billion was imposed, and supposedly this is good for the state budget, but in the end the company paid only UAH 300-400 million, and they took the rest of the money back from the state through the courts.
Such actions indicate the “efficiency” of the Antimonopoly Committee’s activities. When the Antimonopoly Committee says that in recent years it has imposed a fine of UAH 20 billion on companies, but in fact the state received UAH 2 billion, because the rest was returned in the courts.”
“The AMCU sees a conspiracy, makes a decision, and the players go to court to cancel this decision, within a certain period of time, because there were several decisions on different instances of this fine and that’s it. It turns out that there is a monopoly, it is recognized, but there is no punishment,” says Yevgeniy Plinsky.
Dmytro Kupyra, Executive Director of the NGO “Life”, in turn, noted that in addition to determining the offense and imposing certain sanctions or fines, the AMCU may or may not fight with the decision’s challenger when appealing its decision in court.
“In court, there is another principle, the principle of competition, and here it is already the case whether the AMCU satisfies the informal interests of the business entity that is suing or not. After all, the AMCU can fight in court for its fine imposed on the company, prove the facts of the violation and why such sanctions should be imposed, or it can say that yes, we imposed a fine, but the opponent may be right in some way and lose any court. That is, the AMCU can then truly defend its decision, or it can give in depending on whether there was an agreement with the opponent or not.”
As a reminder, these monopolists and tobacco giants Philip Morris International and Japan Tobacco International were added to the list of international sponsors of war by the National Agency for the Prevention of Corruption in August 2023. These companies continue to do business in Russia and support the economy of the aggressor country by paying significant taxes to its budget.
In the first six months of the war alone, by the fall of 2022, tobacco companies paid more than $7 billion to the budget of the Russian Federation. Based on the fact that the budget of the Russian army is 65-66 billion dollars, that is, more than 10% of the defense budget of the aggressor country was made up of money from tobacco companies such as Philip Morris International, JTI and others, said investigative journalist Yevhen Plinsky.