Published October 2017
The UAE Competition law framework establishes a comprehensive regime to legislate merger control, imposes prohibitions on anticompetitive agreements and abuse of dominant positions. The key implication of Federal Law No. 4 of 2012 – on the Regulation of Competition (“Competition Law”) is the requirement that certain merger transactions involving entities in the UAE will now be subject to the prior approval of the Ministry of Economy (“Ministry”).
Although the Competition Law came into force in February 2013, delay in operationalising the competition regulator has meant that parties have until recently, remained unclear as to the process for making the applications or the forms to be employed for the purpose of individual exemption applications and merger control notifications.
The substantive and procedural provisions for the implementation of the Competition Law are set out in 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”). In addition, the Federal Cabinet of the United Arab Emirates has issued Cabinet Resolution 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 (the “Threshold Resolution”). The Threshold Regulations set out the thresholds for market share of (i) the de minimis exception (applicable to restrictive agreements and the prevention of the abuse of dominant positions); and (ii) merger control rules, as well as the criteria for identifying small and medium undertakings which are exempted from the Competition Law.
The Competition Law and the 2014 Regulations require prior notification of “concentrations” in writing at least 30 days prior to the completion of a transaction which results in a merged entity holding a market share exceeding 40% and which may affect competition, in particular by creating a dominant position in any of the relevant markets in which both the acquirer and the target operate. The 2014 Regulations defines a ‘concentration’ as any act resulting in a total or partial transfer (merger or acquisition) of property, usufruct rights, rights, stocks, shares or obligations from an establishment to another, empowering the establishment or a group of establishments to directly or indirectly control another establishment or another group of establishments.
The regime suspends mergers that constitute economic concentrations subject to the notification requirement until either: (a) a ministerial resolution is issued clearing the transaction; or (b) the expiration of 90 days from the date of submission of the notification (this 90-day period may be extended by an additional 45 days, for example, if the Ministry has requested further information).
The Ministry currently stands ready to accept merger control filings as contemplated under the Competition Law. As part of making the filings, applicants must in addition to a form, submit, amongst other documents, the Articles of Association, financial statements and register of shareholders of the relevant companies and an economic report, analysing the positive impact of the concentration. The applicant must submit three (3) copies of the form in Arabic and an English translation of the same may also be filed. . Three (3) copies of the accompanying documents must also be submitted and if these are not in Arabic, a translation of these documents must also be filed.
With regard to confidentiality, applicants may identify possible confidential information contained in the material filed, and unlike in the case of restrictive trade practices or applications with regard to the prevention of the abuse of a dominant position, must also submit a non-confidential summary of it. Further documents and information can be requested during the proceedings by the Ministry. Similarly, with notifications for exemption, the Ministry can request interested third parties to submit their comments in this regard within fifteen (15) days from the request. In order to gather additional information and insight on the possible impact of the notified concentration on the market, the Ministry can also hold interviews with the relevant undertakings and interested third parties.
In assessing the effects of a proposed transaction, the department will take into account certain criteria listed in the 2014 Regulations and will issue a final decision in respect of the concentration within ninety (90) days from notification. As mentioned above, this deadline may be extended by an additional forty-five (45) days. If the Minister does not issue a decision within the specified timeline, the proposed transaction is deemed to be authorised.
It should be noted that as with successful applications with regard to restrictive trade practices or dominant positions, the Ministry may either: (i) approve the concentration if it does not adversely affect competition and its procompetitive effects outweigh the anti-competitive ones; (ii) approve the concentration but impose conditions on its implementation; or (iii) prohibit the concentration.
The Ministry may also withdraw a clearance already granted if it is determined by the Ministry that the circumstances under which it was issued have changed; or that undertakings did not comply with the conditions and requirements on the basis of which the concentration was granted; or that the concentration was granted based on incorrect or misleading information.
The key take away points from the Threshold Resolution are as follows:
Authors:
Adil Shafi, Partner (ashafi@ach-legal.com)
Zahra Saleem Baig, Associate
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