This new statute, which supersedes the former Federal Law No. 4 of 2012, is designed to eradicate various limitations and practices deemed detrimental to a fair and competitive marketplace.
Taking the step to updating its Competition Law enables the UAE to foster a dynamic, competitive, and fair marketplace, which is essential for its long-term economic aspirations and stability in the context of a global economy addressing:
- Economic Diversification and Growth: The UAE has been actively diversifying its economy beyond oil. A modern competition law is crucial to ensure fair competition, attract foreign investment, and stimulate innovation across various sectors, contributing to sustainable economic growth.
- Global Market Integration: As a significant player in the global market, the UAE needs a competition law that aligns with international standards. This alignment helps facilitate trade and investment partnerships and enhances the country’s reputation as a business-friendly environment.
- Consumer Protection: An updated competition law better protects consumers from monopolistic practices and unfair competition, ensuring they have access to a wide range of products and services at competitive prices.
- Encouraging SMEs and Entrepreneurship: Small and medium-sized enterprises (SMEs) and entrepreneurs are vital for the UAE’s economic vitality. A robust competition law creates a level playing field, encouraging new entrants and fostering innovation.
- Adapting to Technological Advancements: With rapid technological changes, especially in digital markets, the UAE needs a competition law that can address new challenges like digital monopolies, data control, and e-commerce practices.
- Enhancing Efficiency and Productivity: Effective competition laws promote efficiency and productivity among businesses by encouraging them to innovate, improve quality, and reduce costs to stay competitive.
- Regulatory Clarity and Predictability: An up-to-date law provides clarity and predictability to businesses operating in the UAE, helping them understand their legal obligations and plan their activities accordingly.
- Mitigating Anti-Competitive Practices: A modern competition framework is better equipped to detect, prevent, and penalize anti-competitive behaviors, such as price fixing, market division, and abuse of dominant positions.
Key Elements of the New Competition Law:
- Broadened Jurisdiction and Application Scope: The law extends to all entities involved in economic activities within the UAE or abroad, impacting the UAE market. Notably, it defines ‘economic activity’ more broadly, covering all goods and services across production and distribution stages. All industries are now subject to the law, with prior exemptions removed, although entities owned by Federal or Emirate governments may be exempted under specific governmental decisions.
- Enhanced Provisions Against Anti-Competitive Practices: While maintaining similar provisions regarding agreements, the law eliminates exemptions for agreements with low market share thresholds and adopts an effects-based approach to assess restrictive agreements, such as horizontal cooperation.
The law also introduces a new concept of collective dominance, increasing liability for entities in partnerships, and establishes ‘objective justification’ as a defense in refusal-to-deal scenarios.
Additionally, it introduces regulations against selling at significantly low prices to eliminate competition and defines new rules concerning economic dependency.
- Revised Merger Control Regulations:
– The revised law maintains mandatory merger control filings, but introduces an ‘annual turnover’ threshold and retains market share criteria. Ministerial silence now equates to transaction refusal, and stakeholders can input on mergers.
– Economic concentration is defined as ownership/control shifts affecting market dynamics.
– Notification thresholds for mergers/acquisitions are based on turnover or market share, as determined by the UAE Council of Ministers.
– Filings are required 90 days before transaction completion, with a 90-day decision window for the Minister of Economy, extendable by 45 days.
- Increased Penalties: The updated law significantly escalates penalties for anti-competitive practices, with fines up to 10% of annual turnover. It imposes fines for not reporting transactions and administrative penalties for hindering investigations. Non-compliance may result in fines between 2% and 10% of annual UAE revenues from relevant products/services or fixed fines from AED 500,000 to AED 5,000,000.
- Upon ruling of conviction, the court may order the closure of the establishment for a period of not less than (3) three months and not more than (6) six months. It may also order that the text of its ruling be published one or more times in at least two local daily newspapers at the expense of the violator.
Regulatory Framework
The New Competition Law in the UAE establishes a revised framework for market regulation without forming a new regulatory body. Oversight of this updated legislation will be managed by the existing Competition Regulatory Committee within the UAE Ministry of Economy. This new legislative approach, set to become effective on December 28, 2023, will be further detailed through executive regulations anticipated to be released within six months following this enactment date.
Should you have any questions or may need a legal opinion or advice, please feel free to reach out to our Managing Partner, Mr. Ashraf El Motei, at [email protected].
