Are all natural monopolies in Ukraine equally “natural”?
Authors: Strizhkova A. 
Published: September 2020

Problem setting. In Ukraine competition policy aims to support healthy competition and limit abuses of monopoly position. However, there are special markets that society requires to meet its needs, but doing business in these areas is very resource-intensive, requires a difficult activity, and therefore objectively engage in such economic activities is too difficult and / or unfavorable to the vast majority of business entities. Then objectively “natural” monopolies are formed, and at the same time only one / several business entities claim to operate in such a market. Accordingly, these monopolies require special legal regulation by the state. Moreover, without proper government intervention, such socially useful activities would not be carried out on the market at all, or would be carried out according to other standards (level of quality, availability, safety, etc.). State regulation of Ukraine in this area is rightly criticized by Ukrainian researchers. Accordingly, an interesting question arises: is the state regulation of different markets, which are in a state of natural monopolies, based on the same principles and approaches?

Target of research. The purpose of the article is to analyze the nature, features of the criteria for defining markets as natural monopolies and the objectivity of the classification of markets for certain services in seaports to natural monopolies in Ukraine.

Analysis of recent researches and publications. Some issues of the analysis of the state antimonopoly (competition) policy were considered by O.O. Bakalinskaya, V.M. Grudnitsky, V.I. Polyukhovych, Y.I. Yasko, features of problems of a natural monopoly in the market of pilot services were covered by E.M. Klyueva, M. Gardus et al. Article’s main body. Unlike traditional natural monopolies (for example, markets for oil and oil products, natural gas, pipeline, air, rail transport, electricity) in Ukraine, the status of natural monopolies have some services in seaports, approved by the Cabinet of Ministers of Ukraine from June 3, 2013 № 405 by granting exclusive rights to the State Enterprise “Administration of Seaports of Ukraine”. But this list was compiled without proper feasibility studies and arguments. However, some of these services in ports (pilotage, icebreaking) do not meet the criteria of natural monopolies.

Bylaws that contradict special laws have created a vicious circle where it is impossible to become a pilot without pilots, and a specialist can only be considered a pilot if he is recognized as such by a pilot after fulfilling a number of requirements.

But such a situation contradicts the special legal norms of the Laws of Ukraine, in particular, the Merchant Shipping Code of Ukraine and “On Seaports of Ukraine”. In accordance with Art. 19 of this Law of Ukraine, the provision of pilotage is not a service provided only by state enterprises. After the entry into force of the Code of Merchant Shipping of Ukraine on June 13, 2013, pilotage services were removed from the exclusive competence of state-owned enterprises. The novelties were approved by the Law of Ukraine of May 17, 2012 № 4709-VI. But in the bylaws there are some provisions that directly contradict the laws of Ukraine, for example, paragraph 4.1.2. Order of the Ministry of Transport and Communications of Ukraine of August 1, 2007 № 655 “On approval of the Rules of navigation and pilotage of vessels in the north-western part of the Black Sea, Bug-Dnieper-Estuary and Kherson sea canals”.

It is interesting to note that most of the bylaws that currently contradict these laws and in fact create barriers to access to the market for pilotage services were not only not adapted to the new requirements of the laws, but were adopted after the adoption and shortly before the entry into force of this already approved by the Supreme Council of Ukraine of the Code of Merchant Shipping of Ukraine: Order of the Ministry of Infrastructure of Ukraine № 292 of May 8, 2013 and Resolution of the Cabinet of Ministers of Ukraine № 405 of June 3, 2013. Of course, after the entry into force of laws, the rules of law must be given in bylaws in strict accordance with the laws of Ukraine. However, this has not been done so far, although changes to them and to the order of the Ministry of Transport № 655 of August 1, 2007, were made in 2015, 2016 and 2018. On the contrary, despite the fact that the pilot market does not fall directly under the criteria of a natural monopoly, neither the Ministry of Infrastructure of Ukraine nor the Cabinet of Ministers of Ukraine has provided public reasoned explanations or feasibility studies, whether in this state there is demand in this market. more effective in the absence of competition, and such a justification is essential to clearly establish the main criterion of a natural monopoly – the state of the commodity market. Because of this, the Antimonopoly Committee of Ukraine in its Report of 2017 pointed out that it is possible to state the controversy of including the market in which pilotage services are provided in the market, which is in a state of natural monopoly.

The analysis of judicial practice in resolving disputes related to the provision of specialized services in ports (icebreaking works) shows the possibility of providing specialized services by a business entity that is not a monopolist and the lack of responsibility for providing such services to a company that is not a natural monopolist.

Conclusions and prospects for the development. So, in Ukraine the current legal regulation of the status of natural monopolies among certain services in seaports is ambiguous, reminiscent of the artificial intervention of the regulator in relations, rather than the natural formation of such monopolies, as such criteria do not fully meet the statutory criteria of natural monopolies. the acts actually formed natural monopolies. Moreover, these bylaws must be brought into strict compliance with the Merchant Shipping Code of Ukraine, abolishing the exclusive rights to carry out at least pilotage and icebreaking operations of the State Enterprise “Administration of Seaports of Ukraine”. Licensing of these activities is possible in order to allow private entities to enter these markets and to ensure proper state control.