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Entering the Ukrainian Market: Managing Compliance Pitfalls for OTT Providers

Entering the Ukrainian Market: Managing Compliance Pitfalls for OTT Providers

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More and more companies in the TMT sector are looking at Ukraine as a potential market, in the process putting aside the negative image formed during the first decades after the country declared its independence in 1991.

Technology companies are less sensitive about certain deficiencies in the regulatory framework than companies in sectors focused on the exploitation of fixed assets (agriculture, mining and metals, etc.) and, thus are more flexible when it comes to entering a new market. 

As approximately 26 million Ukrainians are active Internet users, the Ukrainian market is of particular interest for over-the-top media (OTT) providers who distribute various copyrightable content such as films, TV shows, and music directly to end-customers via the Internet.

Regulated Activity Test. At the first stage, an OTT provider considering Ukraine should determine whether the services it intends to provide constitute a regulated activity and would thus subject the company to the jurisdiction of the country’s broadcasting regulator. Due to “catch-all” wording of legislation adopted back in the 2000s, the provision of OTT services may potentially qualify as an activity of program service providers which is subject to licensing.

Content Standards. Since most OTT providers have their internal ratings guide, it is important to make sure that this document is compliant with the requirements of Ukrainian law. However, if the OTT provider is not qualified as a broadcasting company or film distributor, it has complete discretion to determine specific parameters of age rating pictograms and content descriptors/warnings. In addition, the OTT provider is not obliged to implement age gating technology to enforce those age ratings. Each OTT provider should also comply with requirements specific to the subject matter of the distributed content. Generally, the production and distribution of content which propagates war, fascism, or disrespect to national and religious sacred objects is prohibited.

Considering the recent trend of using storylines from USSR history in films and TV shows, it is important to note that the production, distribution, and public use of communist symbols such as the USSR flag or other symbols of the Communist party is generally prohibited in Ukraine and violations of this prohibition may subject the provider to criminal liability.

Monetizing Matters. Before adjusting its global monetizing structure to the rules of a new jurisdiction, companies usually look into regulations affecting, among other things, auto-renewal practices, information to be displayed during the purchase process, and limitations on automatic follow-up attempts to bill customers following failed initial attempts (i.e., billing retry periods). Under Ukrainian law auto-renewal may qualify either as a violation of a customer’s right to freely choose goods and services or as an aggressive business practice. As a result, the OTT provider may be subject to a fine and the contract may be deemed void.

The list of information which must be displayed during the purchase process includes only the subject matter of the contract, its price, and the contract’s term (which may be either limited or unlimited). 

In addition, a subscription confirmation email is mandatory and should include (1) the procedure for cancelling the subscription, (2) the name and address of the service provider, (3) the service provider’s procedure for accepting complaints, (4) warranty details or information about additional support services; and (5) the procedure for terminating a contract executed for an unlimited time.

Ukrainian law does not set any limits on billing retry periods, which may be set by the rules of payment systems or payment service providers.

Net Neutrality. Ukrainian law does not recognize the concept of “net neutrality.” However, in practice, OTT providers may come across intentional lowering of speed of Internet connections by Internet providers who also provide their own OTT services.

Privacy. Under Ukrainian law, processing a customer’s personal data – including its collection and transfer to other parties – requires the consent of the customer. In addition, the processing of sensitive data such as customers’ geo-location, data relating to racial or ethnic origin, membership in political parties and trade unions requires notification to the Ukrainian Parliament Commissioner for Human Rights.

Conclusion. The main challenge for technology companies in terms of compliance with the regulatory framework in the TMT sector is that it was not designed to regulate issues that arise during the use of modern IT products. The framework in Ukraine, unfortunately, is no exception..

By Anton Polikarpov, Head of IP, and Dmytro Symbiryov, Associate, Avellum

This Article was originally published in Issue 6.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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AVELLUM is a leading Ukrainian full service law firm with a key focus on Finance, Corporate, Dispute Resolution, Tax, and Antitrust.

Our aim is to be the firm of choice for large businesses and financial institutions in respect of their most important and challenging transactions.

We build lasting relationships with our clients and make them feel secure in new uncertain economic and legal realities.

We incorporate the most advanced Western legal techniques and practices into our work. By adding our first-hand knowledge, broad industry experience, and unparalleled level of service we deliver the best results to our clients in their business endeavours. Our partners are taking an active role in every transaction and ensure smooth teamwork.

AVELLUM is recognised as one of the leading law firms in Ukraine by various international and Ukrainian legal editions (Chambers, The Legal500, IFLR1000, The Ukrainian Law Firms, and others).

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