Overview of the new Competition Legal Regime in the UAE
Unveiling the UAE’s New Competition Law No. 36 of 2023
The United Arab Emirates (UAE) stands poised at the threshold of a significant milestone in its economic landscape with the introduction of a groundbreaking new competition Federal Law No. 36 of 2023 (the “New Law”). Designed to overhaul market dynamics and fortify fair trade practices, this legislative framework represents a pivotal step toward nurturing healthy competition, safeguarding consumer interests, and propelling innovation within the nation’s burgeoning economy.
Amidst an evolving global marketplace, the UAE has recognized the imperative need to bolster its regulatory framework to promote a level playing field for businesses while ensuring the protection of consumers’ rights. The new competition law aims to achieve these objectives by curbing monopolistic behaviour, prohibiting anti-competitive agreements, and scrutinizing unfair trade practices.
The New Law abrogates and supersedes the previous competition law, Federal Law No. 4 of 2012 concerning the Regulation of Competition.
Addressing Monopolistic Practices
One of the key focal points of the new legislation revolves around addressing monopolies and preventing the abuse of dominant market positions. Through stringent regulations, the New Law aims to dismantle barriers to entry and competition, fostering an environment where multiple entities can thrive and innovate, thereby amplifying consumer choice and driving economic growth.
Merger control regime
The executive regulations shall set the rules for the merger application and the procedure. The New Law provides the set of conditions for completion of a merger operation similar to the repealed law provisions. The new law introduces some major shifts, such as incorporating annual turnover alongside market share for merger control thresholds.
The New Law provides for possibility to invite concerned parties to submit their opinion and perspectives on the submitted transaction file. Further, the possibility for concerned parties to submit and disclose any data or information related to the transaction in accordance with the executive regulations and the possibility for every concerned party to submit an objection before the relevant authority against the filed transaction.
The New Law specifies as well the context of suspension of the deadlines for examining and investigation the merger operation.
The accomplishment of economic concentration operations in which the total share of party enterprises exceeds the rate of total transactions in the market set by the Council of Ministers shall depend upon the submission of an application by these enterprises to the Ministry at least 90 days from their completion, unlike the previous 30 days provided under the repealed law.
Under the existing executive regulations (enacted after the repeal of the previous law but before the New Law), an economic concentration—encompassing actions such as total or partial transfer of ownership, mergers, or acquisitions—is considered to have occurred if an undertaking’s total transactions in the relevant market exceed 40%. For activities or transactions meeting this threshold, submitting a notification is mandatory. However, if this threshold is not met, voluntary notification is not required.
According to the New Law, these executive regulations remain effective until they are superseded by new regulations. The wording in the relevant article of the New Law suggests the possibility that these regulations are being reviewed and may be subject to amendment. Nonetheless, as of now, there have been no official announcements indicating an imminent replacement of these regulations.
Exemptions under the new law
Under the New Law recently enacted, significant changes have been introduced, including the repeal of certain exemptions that existed under the previous law. The repealed exemptions, previously known as the “Exempted Activities & Enterprises,” encompassed a range of sectors and governmental actions.
Previously, the repealed UAE competition law exempted specific sectors from its scope, including telecommunications, financial services, cultural activities, the gas and petrol sector, pharmaceuticals, postal services, electricity and water distribution, environmental services, and various transportation sectors. Additionally, activities conducted by or under the authorization of UAE federal or local governments, including those by entities at least 50% owned by these governments, were also exempt.
Under the new provisions of the New Law, specific exclusions have been delineated from the application of its competition regulations. These exclusions are critical in defining the scope and reach of the New Law.
Firstly, any agreement, practice, or conduct pertaining to goods or services already governed by another law, which outlines rules and procedures for addressing anti-competitive practices, exemptions, and economic concentrations, will be excluded. This is contingent on the responsibility for these matters being designated to a Sectoral Regulatory Agency, which develops competition rules specific to that sector. However, if such an Agency formally requests the Ministry to assume responsibility for these matters, either entirely or partially, and the Ministry consents, this exclusion may not apply.
Secondly, the Decree-Law excludes undertakings that are owned by the Federal Government. The identification of these undertakings is subject to a Cabinet resolution based on the proposal of the Minister and following coordination with the Relevant Authority.
Lastly, undertakings owned by the government of an emirate and operating within that emirate are also excluded. The determination of such undertakings is subject to a resolution by the local government.
These exclusions represent a strategic approach to balance sector-specific regulatory frameworks with the overarching objectives of the UAE’s competition law.
Combatting Anti-Competitive Agreements and restrictive agreements
The legislation also takes a firm stance against anti-competitive agreements among businesses, such as price-fixing, bid-rigging, and market allocation schemes. By outlawing such collusive practices, the New Law intends to foster an environment where fair competition thrives, stimulating innovation and efficiency in the market.
Empowering Regulatory Authorities and means of objection
Empowered regulatory bodies have been designated to enforce the provisions of the competition law. These authorities are vested with the responsibility to investigate, monitor, and take necessary actions against entities found to be infringing upon the New Law. This empowerment signifies the commitment of the UAE government to actively ensure compliance and foster a competitive marketplace.
It is provided under the New Law that any concerned party is allowed to submit and file for an objection against issued decision within 15 days from the date of issuance of the decision. In the event the objection is rejected, the concerned party has the right to file an appeal that must be examined within 30 days of the appeal being filed
Furthermore, it is provided under the New Law that the concerned party may after exhausting all other means of objection and appeal, file for an appeal before the competent court within 30 days of notifying the concerned party about the appeal’s rejection.
This stands as a change in the timeline and limitation period for filing appeals compared to the provisions of article 27 old competition law repealed.
Penalties and fines
A person who violates the provisions of Article 12 of the New Law will pay a fine of at least 2%, but not exceeding 10%, of annual gross sales or revenue from services subject of the violation which is gained by the violating enterprise within the State during the most recent financial year. The maximum percentage increased from 5% to 10% under the New Law.
As the UAE takes proactive steps towards implementing this comprehensive competition law, stakeholders across industries eagerly anticipate the transformative effects it will impart on UAE’s economic landscape.
In conclusion, the UAE’s new competition law stands as a testament to its commitment to fostering an equitable and competitive marketplace. By addressing monopolistic practices, prohibiting anti-competitive agreements, and safeguarding fair trade practices, this legislation lays the groundwork for a thriving economy built on innovation, efficiency, and fairness. As the New Law takes effect, its impact is poised to resonate across the UAE’s economic spectrum.