07 July 2022

Ostchem enterprises won a court case against AMCU

On July 5, 2022, the enterprises of the Ostchem nitrogen holding, which is a member of Dmitry Firtash’s Group DF, won a court against the Antimonopoly Committee of Ukraine in case No. 910/15541/19 on the coercive division of Ostchem holding and a fine of UAH 107 million. The Economic Court of Cassation as a part of the Supreme Court upheld in full the claims of three Ostchem holding enterprises, i.e. PrJSC “Severodonetsk Azot Association”, PJSC “Azot” (Cherkasy) and PJSC “Rivneazot”, and invalidated the decision of the Antimonopoly Committee of September 5, 2019, No. 598-r “On violation of the competition laws, imposition of fine and coercive division”.    


This was the third and final decision in tedious court proceedings that lasted almost 3 years. The court declared as unjustified all charges of abuse of monopoly position in the market of nitrogen mineral fertilizers, and the conclusions of the Antimonopoly Committee of Ukraine on the monopoly position of the Group as ungrounded. The court overturned the decision of the Antimonopoly Committee of Ukraine on the coercive division of OSTHEM nitrogen holding.


Note. On September 5, 2019, the Antimonopoly Committee of Ukraine decided to forcibly divest Dmytro Firtash’s Ostchem Group of the producers of nitrogen mineral fertilizers and to impose a maximum fine of UAH 107 million.


On July 29, 2020, Ostchem lawyers successfully appealed the decision of the Antimonopoly Committee on the abuse of monopoly position and coercive division in the Commercial Court of Kyiv. 


Oleg Arestarkhov, Director, Corporate Communications Department, Group DF, International Group DF:

This just decision of the court is important for entire Ukraine, as it allows keeping the largest national producer of nitrogen fertilizers and, most importantly, the country’s food independence. Our representatives spent almost three years proving in the courts of all three instances that we were not monopolists and that the claim to divide the holding was non-point. We are convinced that the activities of the competition authorities should strengthen Ukrainian industries and enterprises and enhance their competitiveness in global markets. The AMCU did the opposite, i.e. it tried to break the largest holding. In AMCU vs. Ostchem case, officials did not take into account one significant point: at present, most of the world’s giants in the global chemical industry are striving to consolidate their chemical assets and many governments support fertilizer producers since this is a matter of the national food security. In 2018-2022, there has been a trend toward aggregation and consolidation in the global chemical industry. Through M&A deals, fertilizer producers become bigger, stronger, and more efficient, they are able to scale up and address existing challenges. In Ukraine, the previous temporary composition of AMCU went against this trend, trying to artificially divide our business. At present, Ostchem holding enjoys the advantage and strength in bringing together the strongest Ukrainian fertilizer producers under one umbrella. The synergies of our factories, in terms of the common logistics, repair service, IT systems, marketing, finance, sales, and other units make us stronger and allow us to reduce costs. Only when enterprises are in one fist, in one holding, can we reduce costs and build sales networks. Only in a holding can we, for example, buy gas wholesale cheaper and compete with the giants like BASF or SF Industries. The more competitive Ukrainian enterprises, the stronger the entire economy. This is the main lesson that we ask the current composition of the AMCU to take into account. This is important for the restoration of the destroyed economy to assist and not to harm. This applies to all industries, not just chemistry.


Igor Golchenko, Vice-President of the Union of Chemists of Ukraine*:

*UCU is a party to the court case

The unprecedented and groundless decision of the previous composition of the Antimonopoly Committee of Ukraine to divide Ostchem and impose a large fine look like a political put-up job along with the active work of the lobbyists from the Russian Federation. The purpose of the latter is to destroy the Ukrainian chemical industry. They continue doing it even now, though now they do it using rockets and bombs. The case was initiated hastily, without sufficient evidence and good reason. The court once again made it clear that our industry expertise is true: 1. The market share calculations, on which the AMCU based its accusations, turned out to be wrong both in terms of the essence and calculation methodology. When calculating the market share held by Ostchem, AMCU ignored imports to Ukraine from the Russian Federation on a huge scale, bypassing import duties. The list of products (commodity market boundaries) was drawn up selectively, which was explained only by the lack of statistical data for some of them. 2. The market share held by Ostchem was calculated by AMCU based on the physical weight of mineral fertilizers sold in Ukraine, ignoring the percentage of active substance in each of the products. According to this logic, it turned out that, for example, ammonium nitrate and urea were equalized in tonnage, although in terms of the active substance, the difference in weight is almost 30%. The court did not accept the calculation methodology artificially created by the Antimonopoly Committee of Ukraine and agreed with the arguments of chemical industry experts, i.e. – the market share indicator should be calculated based on the contents of nitrogen (active substance) in the finished product. This methodology is a common practice used by the EU antitrust authorities and in all statistical reports. 3. The AMCU ignored the extraterritoriality factor of the market. The openness of Ukraine’s fertilizer market exceeds 40%, and we have more than 40% of imports. Our market is considered open, so the share of each market participant should be calculated taking into account the factors of import and production in Eastern Europe. We have also stated on several occasions that the decision to divide the Group is actually a death warrant for the nitrogen chemistry of Ukraine. The decision to divide the Group was made without a single expert analysis of the technological feasibility and expediency of such a division of the enterprises. It seems that the fate of the industry and the national interests were simply ignored when Antimonopoly Committee of Ukraine was making this decision. As a result, all charges against Ostchem fell to pieces in court, and the AMCU decision was reversed.