THE UAE OVERHAULS COMPETITION LAWS: A COMPREHENSIVE OVERVIEW OF THE NEW REGIME
02 January 2024
Ajmal Khan Nadakkal
The United Arab Emirates (UAE) has implemented a new competition law on December 29, 2023, signaling a significant shift in its regulatory framework. This comprehensive overview delves into the key aspects of the revamped competition regime, with a particular focus on the introduction of a modernized merger control system.
Dubai: New competition law has been made effective highlighting a new merger control regime, led by the parties’ turnovers and that can allow suspensions of transactions up to ninety days until the review is completed. At its core, the Decree-Law aims to create an environment that not only safeguards but enhances competition. This legislation targets the effectiveness and competitiveness of establishments, consumer interests, and sustainable development within the state. The law's reach is broad, encompassing all establishments and their economic activities, both within and outside the state, even those involving the exploitation of intellectual property rights. Furthermore, economic activities conducted abroad that impact competition within the state are also brought under its purview.
1. Legislative Changes: Federal Decree-Law No. 36 of 2023
On September 28, 2023, the UAE introduced Federal Decree-Law No. 36 of 2023 on the Regulation of Competition, replacing the prior legislation from 2012 reflecting the nation's responsiveness to the evolving dynamics of competition in the contemporary business landscape. The revamped legal framework seeks to address and mitigate monopolistic practices while fostering a competitive environment conducive to economic growth.
2. Merger Control Framework: Triggering Factors and Notification Thresholds
An essential aspect of the new competition law is the revamped merger control framework. The legislation defines "Economic Concentration" and introduces notification thresholds based on turnover or market share. The new regime, led by parties' turnovers, can allow suspensions of transactions for up to ninety days until the review is completed.
3. Merger Review Process: Extended Timelines and Decision-Making
The timeline for merger reviews has undergone a significant extension under the new law. Filings must now be submitted at least 90 days before completion, with potential extensions based on additional information requests. This section outlines the revised merger review process and the decision-making parameters, emphasizing the potential impact on transaction timelines.
4. Prevention of Exploitation, Offering Unusually Low Prices
The Decree-Law is watchful against any efforts to take advantage of economic dependencies. Specifically, Articles 7 and 8 forbid businesses from exploiting customers' economic dependency and offering prices well below production costs to eliminate competitors. These provisions play a crucial role in maintaining balance and fairness in the market.
5. Exemptions and Regulatory Compliance
The new competition law introduces changes in exemptions under Article 9 and 10, including entities owned by the UAE government and those regulated by other laws. The removal of the exemption for small and medium-sized enterprises is highlighted, and the potential implications for regulatory compliance are discussed.
6. Enforcement Mechanisms: Potentially Steep Fines
Non-compliance with the new competition law carries the risk of substantial fines. This section details the fines imposed on parties failing to meet filing conditions, emphasizing the financial consequences for entities involved in economic concentrations.
7. Additional Changes: Expanded Geographic Scope and Prohibitions
Beyond merger control, the new competition law introduces substantial changes, such as an expanded geographic scope in defining the "relevant market" and new prohibitions on certain conduct. This section explores these additional changes and their potential implications for businesses operating in the UAE.
8. Legal Proceedings
Articles 31 to 34 elaborate on legal proceedings and appeals, emphasizing that competition cases will be heard summarily. Under Article 35 the law also authorizes specific employees with law enforcement capacity to identify violations. Under Article 36 the Cabinet is entrusted with the authority to issue a decision prescribing fees for implementing the Decree-Law's provisions. A five-year statute of limitations for complaints related to anti-competitive practices is established under Article 37.
9. The Implementing Regulation
The legislative process is not concluded without considering Articles 38, which directs the Council of Ministers to issue the Implementing Regulation within six months of the Decree-Law’s entry into force.
There are several implications of the new competition law for businesses operating in the UAE as it has generated new regulatory requirements for any contemplated merger of these entities especially the ones generating revenues. Some matters remain unclear under the new legislation, however once the new Implementation regulations are issued, a deeper highlight is expected. The new competition law has significant implications for businesses operating in the UAE, introducing new regulatory requirements, especially for entities generating substantial revenues. While some aspects remain unclear, the forthcoming implementation regulations are expected to provide a deeper understanding of the law's practical implications. Businesses are advised to stay informed and adapt to the evolving regulatory landscape to ensure compliance and navigate the new competition regime effectively.
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