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Overview of competition law in the UAE

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Published February 2017

The first anti-trust and competition legislation was introduced in the United Arab Emirates (“UAE”) in October, 2012 through the publication of the UAE Federal Law No 4 of 2012 on the Regulation of Competition (the “2012 Law”) and has been in force since 23rd February, 2013. The primary aim of 2012 Law is to promote and protect competition in the UAE.

 The following regulations were subsequently introduced to set out the procedure and application of the 2012 Law:

  1. The Resolution of the Council of Ministers No. 37 of 2014, Concerning the Executive Regulation of the Federal Law No 4 of 2012 on the Regulation of Competition (the “2014 Regulations”); and
  2. The Cabinet Decree No 13 of 2016 on Ratios and Regulatory Controls related to Application of UAE Federal Law No 4 of 2012 for the Regulation of Competition and the Cabinet Resolution No 22 of 2016 concerning the small and medium enterprise organisations (collectively the “2016 Regulations”).

 (The 2012 Law, 2014 Regulations and the 2016 Regulations are hereinafter collectively referred to as the “Competition Law”)

The Competition Committee

The 2012 Law established the Competition Regulation Committee (the “Committee”) which is to be chaired by the undersecretary of the Ministry of Economy (“Ministry”). The Committee’s role is to oversee the work of the competition department (the “Department”) of the Ministry which has the task of the day to day handling of applications, investigations and the implementation of the Competition Law.  

Scope of Application

The 2012 Law applies to all entities undertaking commercial activities in the UAE. The 2012 Law also applies to economic activities conducted outside the UAE which may potentially affect competition within the UAE. However, the 2012 Law stipulates that the following sectors are exempted from provisions of the Competition Law:

  1. Federal Government or any of the UAE governments and organizations or entities owned or controlled by the Federal Government or any of the UAE governments;
  2. small and medium size entities;
  3. regulated sectors that have specific competition rules; and
  4. entities operating in telecoms; financial services; pharmaceutical production and distribution; cultural activities; oil and gas; postal services including express delivery; electricity and water production and distribution; sewage and waste disposal; transportation and railway.

Anti-Competitive Practices

The 2012 Law is similar in many respects to the antitrust legislation of UAE’s regional counterparts and focuses primarily on regulating three (3) areas:

  1. Restrictive Trade Practices: Article 5 of the 2012 Law prohibits “restrictive agreements”, these include agreements which have the objective of restricting competition by manipulating price, affecting free trade of commodities or services or result in collusive practices.
  2. The prevention of the abuse of dominant positions: Article 6 of the 2012 Law provides that an organisation holding a dominant position in a market sector, or in a substantial or influential part thereof, shall be prohibited from undertaking actions which result in such organisation taking undue advantage of its position; and
  3. Mergers: The 2012 Law and the 2014 Regulations require prior approval of the Ministry for transactions which result in a merged entity holding a dominant position in any of the relevant markets in which both the acquirer and the target operate. The 2016 Regulations set out the concentration threshold which if exceeded will require the parties to obtain the approval of the Ministry.

Investigations

It is important to be aware of the wide powers that the Ministry has to, on its own initiative, commence an investigation into possible violations of the Competition Law. In addition, any interested party may file a complaint with the Department alleging breaches of the Competition Law.

Confidentiality

Much like in other jurisdictions, the 2012 Law requires the Ministry to take steps to maintain as confidential, information deemed sensitive by applicants in relation to any application filed with the Department.  To claim confidentiality, parties should indicate the same on information submitted as part of their application and also submit non-confidential summaries of the same. 

Penalties

Both the 2012 Law and the 2014 Regulations, set out the penalties applicable for a breach of the Competition Law. In addition to the penalties, the 2012 Law provides that an offending party may be temporarily closed down by the competent Court for a period between 3 months and 6 months.

Review and appeal of a decision

Where an applicant is dissatisfied with the decision of the Minister, such applicant may request a review of the decision by the Minister himself within fourteen (14) days from the date on which the applicant becomes aware of this decision. The 2014 Regulations set out the specific timelines by which the Minister is required to revert to the applicant.  Decisions issued by the Minister can be appealed before the competent Court.

Conclusion

The Competition Law will result in businesses having to reassess their deal structures in light of the potential extraterritorial reach which the Competition Law may have. The Competition Law is also likely to have significant implications in relation to merger and acquisition transactions involving entities which have a global presence and operate in the UAE in respect of any cross-border transactions which such entities propose to complete and which would impact economic concentration in the UAE. These entities should consider the possibility that an additional approval may be required in the UAE for the completion of these transactions. For parties seeking to invest in the UAE and companies which are already operating in the UAE, it is important to consider the impact of the Competition Law on any transaction or business arrangement which they are contemplating. It would be advisable to engage with the Ministry at an early stage so that any questions may be answered and relevant applications made, prior to the parties entering into a restrictive trade practice, partaking in behaviour that may lead to an abuse of a dominant position or a notifiable concentration.

If you are interested in discussing the content of this article, please contact: Adil Shafi, Partner (ashafi@ach-legal.com) or Zahra Saleem Baig, Associate (zbaig@ach-legal.com) 

Disclaimer:

The legal alert contained above is for informational purposes only and not for the purposes of providing any form of legal advice. You are requested to contact your legal counsel to obtain advice in respect of any particular issue or problem. Use of and access to this legal alert does not create any attorney-client relationship between Anjarwalla Collins & Haidermota, Legal Consultants and the user or browser.