Until the issue of the Federal Law No. 4 of 2012 on the Regulation of Competition, the United Arab Emirates (UAE) lacked a composite law on competition, with elements of competition law strewn over various legislations. In 2013, the said law came into force, aiming to curb anti-competitive practices and regulate economic concentrations.

This article provides an overview of the law and regulations surrounding antitrust and competition in the UAE.

1. What are the laws and regulations governing antitrust and competition in the UAE?

As of the date of this article, the laws and regulations governing antitrust and competition in the UAE include the following:

  • Federal Law No. 4 of 2012 on the Regulation of Competition which is the principal legislation on the subject (“Principal Legislation”);
  • Cabinet Decision No. 37/2014 which is the implementing regulation of Federal Law No. 4 of 2012 (“Implementing Regulations”); and
  • Cabinet Decision No. 13/2016 which provides the ratios and controls related to the application of Federal Law No. 4 of 2012.

The above law and regulations are collectively referred to as the “Competition Law”.

2. What does the Competition Law seek to regulate?

The focus of the Competition Law is primarily on the following:

  • curbing monopolistic business practices and boosting competition in the economy;
  • prohibiting restrictive agreements and business practices that lead to an abuse of an entity’s dominant position in the market; and
  • monitoring and restricting economic concentration that may adversely affect competition in the economy.

3. Who is the Competition regulator in the UAE?

The UAE Competition Regulation Committee, established under the Competition Law, and functioning under the supervision of the Ministry of Economy is the relevant competition regulator in the UAE.  The committee has been recently established in 2018, and it remains to be seen to what extent it would regulate competition issues in the UAE as there have not been any formal decisions published yet.

4.What are the key areas the Competition Law seeks to regulate in the UAE?

To regulate competition in the economy, the Competition Law lays down measures in the following key areas:

Areas Particulars Penalty
Restrictive Agreements Article 5 of the Principal Legislation prohibits agreements between establishments, the subject of which, amongst others, is

(i)     influencing or fixing the prices or supply of products or services to the detriment of competing entities;

(ii)    collusion in tender or bids;

(iii)   colluding against buying from or selling to a specific establishment;

(iv)   restricting or oversupplying products or services to a specific market with the intention of creating artificial prices;

(v)    dividing the markets or allocating customers depending on their geographical area, distribution centres or customer type, amongst others; and

(vi)   taking measures to hinder the entry of establishments to the market or excluding them from the market.

 

Fine of a minimum of AED 500,000 and a maximum of AED 5,000,000.

 

Abuse of Dominant Position Article 6 of the Principal Competition Legislation precludes entities enjoying dominant positions in their relevant market from abusing such positions by way of:

 

(i)       resale price maintenance, i.e., imposing the princes or terms for reselling products and services directly or indirectly;

(ii)      predatory pricing, i.e., creating barriers to the entry of new players, or by exposing existing players to losses by way of lowering costs of products or services;

(iii)     discriminating between customers without sufficient reason;

(iv)     trade restraints by way of preventing customers from dealing with competing entities;

(v)      violating established trade practices;

(vi)     price manipulation, i.e., unjustifiably refraining from buying or selling products or services to cause the prevalence of artificial prices;

(vii)    tying, i.e., refusing to supply goods or services on the condition that the buyer also purchases a different product from the supplier or another seller appointed by the supplier; and

(viii)   carry on similar unfair practice with resulting in the prevention or reduction of competing entities in such market.

 

Entities enjoy a “dominant position” in the relevant market if their market share exceeds 40% of the total transactions in such market.

 

Fine of a minimum of AED 500,000 and a maximum of AED 5,000,000.

 

Merger Control or Economic Concentration Prior to entering into merger or asset transfer deals, the concerned establishments are required to seek approval from the Ministry of Economy in cases where the merger/acquisition is likely to adversely affect competition in the market (such as by acquiring a dominant position), or where the overall share of the establishments will exceed 40% of the total transactions in the market.  The Ministry of Economy will review such proposals and demand the increase or decrease of proportions of concentration, as per the demands of the economy.

 

 

Fine of a minimum of two per cent (2%) and a maximum of five per cent (5%) of the overall annual sales of products or service revenues in question as accrued by the violating establishment within the UAE in the last financial year, or a minimum of AED 500,000 and a maximum of AED 5,000,000, if the estimation of the overall annual sales or revenues in question is impossible.

 

5. Who are exempted under the Competition Law?

The Competition Law provides for the following exemptions and exceptions:

  • Government-owned entities

The Competition Law exempts activities or transactions initiated by:

  1. the federal or local government; or
  2. entities established by virtue of a decision or authorization granted by the federal government;
  3. entities wholly owned by the federal government or the local government;
  4. entities whose ownership by the Federal Government or a local government exceeds 50% or more.

 

  • Weak-impact agreements

The prohibition on restrictive agreements laid down by Article 5 of the Principal Competition Legislation will not apply to agreements classified as “weak-impact”. “Weak impact” agreements refer to those between entities that together control a market share of 10% or below of the total transactions in the relevant market.

  • Small and medium establishments (SME)

SMEs are excluded from the Competition Law. Cabinet Resolution No. 22 of 2016 sets out the definition of an SME under UAE law. The resolution lays down financial thresholds for micro, small and medium enterprises, based on whether they form part of the trading, manufacturing or service sector. The financial thresholds (sector-wise) are as follows:

Particulars Trading Sector Manufacturing Sector Service Sector
Micro Enterprise

 

 

≤ 5 employees; or

 

≤ AED 3 million annual revenues

 

 

≤ 9 employees; or

 

≤ AED 3 million annual revenues

 

 

≤ 5 employees; or

 

≤ AED 2 million annual revenues

Small Enterprise

 

 

6-50 employees;

 

≤ AED 50 million annual revenues

 

 

10-100 employees; or

 

≤ AED 50 million annual revenues

 

6-50 employees; or

 

≤ AED 20 million annual revenues

Medium Enterprise

 

 

51-200 employees; or

 

≤ AED 250 million annual revenues

 

 

101-250 employees; or

 

≤ AED 250 million annual revenues

 

 

51-200 employees; or

 

≤ AED 200 million annual revenues

 

  • Exclusive distribution agreements

Exclusive distribution agreements that fall within the ambit of the Commercial Agencies Law (Federal Law No. 18 of 1981) have been exempt from the application of the Competition Law.

  • Sector-based exemptions

Certain sectors, as set out below, appear to be exempt from the application of the Competition Law, although the law is unclear on this aspect.  As such, under the Competition Law, such exception applies when the competence to regulate competition for the specified sectors is granted to the relevant sector’s regulator.  In addition, the Competition Law may still apply to the specified sectors if the sector’s regulator requests the Ministry of Economy in writing to take charge of the matter and the Ministry approves such request.  The following are the specified sectors:

  1. Telecommunication;
  2. Financial sector;
  3. Cultural activities
  4. Oil and Gas
  5. Production and Distribution of pharmaceutical products;
  6. Postal service including express mail service;
  7. Production, distribution, and transportation of electricity and water;
  8. Treatment of sewerage, garbage disposal, hygiene and the like, in addition to supporting environmental services thereof;
  9. Land, maritime, air transport, railway transport and related services
  • Individual exemptions

As per the Implementing Regulations, individual undertakings may also make an application seeking exemptions from the provisions regarding restrictive agreements and abuse of dominant position, by notifying the Competition Regulation Committee of the agreement or business practice in question, along with the prescribed supporting documents.

The committee may decide to exempt such applicant entity from the application of the relevant provision of the Competition Law, in the event the applicant can demonstrate that such agreement/business practice is in the interest of the economy and the end-customers.

Based on the recommendation of the committee, the Minister of Economy is required to issue his decision on the exception within 90 days of notifying the applicants concerned of the receipt of the complete application. Such period may be extended for 45 additional days. If no decision is issued within this period, the application is deemed approved.

6. What are the procedural requirements in connection with a merger control filing?

The entities concerned must apply to the Minister of Economy (the “Minister”) at least 30 days from the date of concluding the draft agreement regarding the merger, acquisition, or asset transfer (the “Economic Concentration”).  Such application must be accompanied by certain prescribed documents including the draft agreement concerning the Economic Concentration, the financial statements of each of the entities for the last two fiscal years, and a report on the positive effects of the transaction on the relevant market as well as solutions to limit the adverse effects of the transaction.

7. What are timelines for a decision after the merger control filing with the Minister of Economy?

The Minister is required to issue a decision on the merger control filing within 90 days from the date of receipt of the complete application.  This period may be extended for 45 additional days.  If no decision is issued within this period, the application is deemed approved.

The Competition Regulation Committee will take into account various factors including the competition level in the relevant market, how easy it is for new entities to enter the relevant  market, the potential impact on the prices of relevant commodities, the extent of the barriers to entry in the relevant market, the contribution in the promotion of investment or expert or the local entities’ ability to compete internationally, and the  potential impacts on innovation and consumer interests.

8. What is the procedure for filing a complaint with the Ministry of Economy regarding any violations of the Competition Law?

Any relevant person may file a complaint with the Competition Regulation Committee regarding any violation of the Competition Law with the details of the defaulting party, sections of the law which were violated, and the facts of the matter. Upon acceptance of the complaint, the committee is required to notify the defaulting parties and other interested parties within 10 days.  All parties are to be given an opportunity to defend themselves. The committee is then required to submit the report to the Minister within 10 days of the date of its completion.  Subsequently, the Minister is required to notify all parties of the decision within 30 days of the submission of the committee’s report.

9. Are there any appeal provisions in connection with any decision rendered by the Minister of Economy under the Competition Law?

An appeal may be filed within 14 days of the Minister’s decision along with justifications thereof and supporting documents. The Competition Regulation Committee is required to study the petition and submit its recommendations to the Minister within 10 days of the referral of the petition to the committee. Finally, the Minister is required to decide upon the petition within 30 days of the date of submission of the recommendations by the committee.  If no decision is issued with this period, the appeal is deemed rejected.

10. What are the decisions taken by the Ministry of Economy or the Competition Regulation Committee until now?

The Competition Law is still in its early stages and the Ministry of Economy or the Competition Regulation Committee have not published any decisions yet.  In the absence of any decisions or formal guidance, it is unclear about how various provisions of the law would be implemented. In view of the recent constitution of the Competition Regulation Committee, we are keeping a look out for any updates on this space.

 

If you would like further information or have any questions regarding this law, please contact priyasha.corrie@fichtelegal.com or call +971 4 435 7577

10-Point Guide to Antitrust and Competition Law in the UAE was last modified: October 1st, 2018 by Priyasha Corrie