Since 1970s, the UAE economy has experienced significant development spurts. The UAE’s stability in terms of economy, politics, and security has drawn capital investments in a variety of industries. The state has been keen on enhancing and growing the institutional and legal environment by changing some existing laws as well as passing new legislation in order to maintain these benefits and ensure the flow of capital. In this regard, the passage of Federal Law Number (4) of 2012 on the regulation of competition stands out as one of the most significant pieces of contemporary economic legislation designed to support the operation of market mechanisms by safeguarding competition and combating anti-competitive behaviour.
Federal Law Number (4) of 2012, the UAE’s new competition law, noted that it was the first of its type to restrict monopoly techniques and anti-competitive activity in the jurisdiction. It was also observed that important matters like threshold and procedural requirements were not addressed by the Competition Law. The Cabinet Decision Number (37) of 2014, has been implemented (the Regulations). There are still a lot of unanswered questions regarding how the Competition Law will function, even if these Regulations offer new clarity on the appropriate exemption or clearance procedures.
The goal of the UAE Competition Law is to prevent anti-competitive behaviour and to create an environment that encourages companies to improve productivity and competitiveness in the best interests of their customers. Anyone doing business in the UAE should take legal advice from the most trusted corporate lawyer to make sure that market practices and related contracts comply with competition law. In addition to the possible steep fines, if a company is discovered to be engaging in anti-competition actions, the ensuing bad press can seriously harm its reputation, brand, and goodwill.
The competition regulator in the jurisdiction is the UAE Competition Regulation Committee, which was created in accordance with the Competition Law and operates under the direction of the Ministry of Economy (MOE). The committee was only recently founded in 2018, and as no official rulings have yet been published, it is unclear how much it would manage competition-related issues in the UAE.
Article 5 of the Principal Legislation forbids agreements between establishments that, among other things are:
Entities with dominating market positions are prohibited from abusing those positions by following the guidelines in Article 6 of the Principal Competition Legislation:
In cases where the merger or acquisition is likely to negatively impact market competition (for example, by acquiring a dominant position) or where the overall share of the establishments will exceed 40% of all transactions in the market, the concerned establishments are required to seek approval from the MOE prior to entering into merger or asset transfer deals. According to the needs of the economy, the MOE will examine such suggestions and request a rise or decrease in the proportions of concentration.
Agreements between companies that have as their object, restricting or obstructing competition are prohibited by the Competition Law, including, but not limited to, price-fixing, market-sharing, and bid-collusion agreements. Thereafter, price-fixing and market-sharing, which are among the most flagrant anti-competitive actions, are never permitted, but other restrictive measures might be permitted if they are weak agreements or contracts made by parties with a combined market share below a specific limit.
Additionally, SME are exempted from the entirety of the Competition Law. Depending on whether the relevant entity operates in the commerce, industry, or services sectors, the SME Decision determines what such term means. SMEs are distinguishable by turnover and personnel count, which gives them assurance that they are excluded, in contrast to the definition of the concerned market.
Weak-impact agreements are exempt from the prohibition on restrictive agreements set forth in Article 5 of the Principal Competition Legislation. That stated, agreements between parties with a combined market share of less than 10% of all transactions in the relevant market are referred to as having a weak influence.
Exclusive distribution contracts covered by Federal Law Number (18) of 1981’s Commercial Agencies Law are exempt from the Competition Law’s application.
As a result, when the relevant sector’s regulator is given the authority to regulate competition for the listed sectors, this exception is applicable under the Competition Law. Additionally, the Competition Law can still be applicable to the listed industries if the regulator for that sector asks the Ministry of Economy in writing to handle the situation and the Ministry grants such a request. The specified sectors are as follows:
Individual undertakings may also submit a request for an exemption from the provisions relating to restrictive agreements and abuse of a dominant position under the Implementing Regulations by notifying the Competition Regulation Committee of the relevant contract or commercial practice and providing the required supporting documentation.
While conducting investigations into alleged violations of the UAE Competition Law & its Regulation, the MOE, including the Competent Authority, has extensive authority. However, if there are reasons and information to believe that there are practices that may violate, restrict, or obstruct competition, the Competent Authority has the authority to launch an inquiry into potential violations of the Competition Law (Automatic Investigation). Furthermore, any interested person may request that the Competent Authority open an inquiry by submitting a complaint to the Authority alleging a violation or breach of the UAE Competition Law (Investigation based on Compliant).
Thus, if the Ministry determines that the circumstances under which a clearance was issued have changed, that undertakings did not adhere to the conditions and requirements on the basis of which the concentration was granted, or that the concentration was granted based on false or misleading information, the Ministry may also revoke a clearance that has already been granted.
Organizations that violate Articles 5 or 6 of the Competition Law by entering into a restrictive agreement or engaging in a dominant practice, may be fined between AED 500,000 and AED 5 million. The UAE Competition Law’s articles, which state that the penalties set forth in this law shall not prejudice the right of the harmed party to have recourse to the Court to claim compensation for the damages arising from violating any provision of this la, make private enforcement available, granting any party or entity who has suffered any damages due to a violation of any provision of the UAE Competition Law to claim for compensation from the Courts in the UAE. There is legal authority to bring such a civil action.
Since the rules are relatively new, the Competition Committee will keep performing its duties, which include receiving complaints, comprehending the reasons for violations, helping defendants to correct their positions, and resolving any disputes without referring or addressing criminal charges through the public prosecution office. Hence, the following key factors will continue to be taken into account by businesses/entities before reaching a settlement in accordance with Competition Law provisions: exposure to statutory sanctions; and publicity surrounding violations of Competition Law and the extra-territoriality implications.
To conclude, big corporations can dominate, obscure, absorb, and severely impact the growth and prospects of small enterprises in the absence of an effective competition law regime in the market. The ability of customers to make choices, keep prices low, and maintain high standards for both the quality and variety of goods and services all contribute to the functioning of the economy. The reputation of a company may be harmed through anti-competitive activities. Finally, businesses must make sure that their contracts and business activities comply with the Competition Law, especially for large providers of products and services.