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The Competition Law In The UAE

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Staff Writer, TLR

Published on July 14, 2023, 17:40:59

200

Law, competition

Competition law and antitrust law date back to the Roman Empire, when various business practices, markets, guilds and governments came under greater scrutiny. But it was not until the twentieth century that competition law prevailed on international markets. Over the centuries, the United States (antitrust) and the European Union (competition) have adopted a larger and more comprehensive system of regulated competition laws. Competition law in the United Arab Emirates (UAE) aims to promote competition and antitrust proceedings and, at the same time, to protect them in order to increase efficiency and protect consumer interests. It should be noted that the UAE Competition Law introduces two new important concepts into the regulation of competition in the United Arab Emirates in the form of a dominant position and economic concentration, as described in the law's objectives.

The UAE Competition Law: An Overview

The first antitrust and competition law was introduced in October 2012 in the UAE with the publication of Federal Law 4 / 2012 (" Regulation of Competition") , which has been in force since 23 February 2013. The 2012 Act established the Committee on Competition Regulation, a committee chaired by the Undersecretary of the Ministry of Economy. Federal Law No. 4 of 2012 is the UAE’s competition law that provides fair market mechanisms in accordance with the principles of economic freedom. Sustainable development should be achieved by promoting a healthy and productive environment and organisation by regulating fair and competitive practices in all legal systems.

Competition law and rules provide for a comprehensive system of merger controls, prohibitions on anti-competitive agreements, and abuses of dominant positions. The exclusion and prohibition of restrictive agreements must be respected in order to prevent monopolies. The responsibility for enforcement lies with the Competition Department of the Ministry of Economy assisted by the Competition Regulation Committee. The Ministry of Economy’s task is to supervise the work of the Competition Department, a department within the Ministry responsible for the day-to-day processing of applications, investigations and the implementation of competition law. The Committee is the main competition authority in the UAE.[1]

The Competition Act applies to mergers and notifications up to a threshold that entered into force in August 2016. Certain loopholes remain, which should be closed by further cabinet decisions. At this stage, there are no guidelines on how the law should be interpreted and applied in the future. [2]

Delving Deeper: Key Provisions under the Competition Law

The law regulates restrictive agreements such as price fixing, collusion, supply market sharing and production suppression agreements. In the years since its entry into force, competition law has been followed by several implementing decisions.

The first rung in the Law elucidates the purpose of the law as maintaining a competitive environment, bringing efficiency and competitiveness, and keeping the market governed by the market mechanism itself, abiding by the principles of economic freedom. Article 3, delves into what would be governed under this law:

"The provisions hereof shall govern all establishments with regard to their economic activities in the UAE, exploitation of the intellectual property rights inside and outside the UAE, as well as the economic activities conducted outside the UAE while affecting competition in the UAE."

Article 4 lists out the establishments the law does not apply to, which include the ones mentioned in the appendix, government activities and SMEs. The subsequent Chapter elucidates on anti-competitive practices, which include restrictive agreements and abuse of a dominant position. Undertakings seeking an exclusion from restrictive agreements or practices relevant to their dominant position under Articles 5 and 6 of the Competition Act must notify the competent authorities in advance. In order to implement this Regulation, an individual company submitting an application for exemption from the provisions of a restrictive agreement or abuse of a dominant market position must (1) notify the relevant agreement or business practice to the Competition Regulatory Committee and (2) provide the required evidence. The Competition Regulation Committee, as explained above, has been explained in the 6th Chapter of the Law.

The Competition Act provides that mergers, acquisitions and other consolidations involving two or more companies, such as the creation of a company with a market share above a certain threshold which distorts competition in the market, must be approved in advance by the Ministry. The law provides that the authorisation is necessary when a dominant position is created, but it states that mergers and controls are not applicable in such circumstances.[3]

Under Article 16 of Competition Law, sanctions against companies engaged in restrictive agreements or abuse of dominant position can range from 500,000 to 5 million AED. The subsequent provisions elaborate on more specific penalties. The Ministry of Economy and the Competition Department receive complaints about infringements of competition law and examine claims by companies based outside the country. Furthermore, the Law allows the courts to close down establishments for not less than three months and not more than six months, under Article 22.

Bottom-Line

Competition law has led to companies having to reassess their transaction structures in the light of the potential extraterritorial scope of the law. It remains to be seen how this will be implemented in practice, in particular to what extent it will follow EU precedents in this regard. The regulations have provided new clarity on applicable exemptions and authorisation procedures, but there are still significant gaps in the explanation of how competition law works.

[1] https://www.stalawfirm.com/en/blogs/view/competition-law-in-uae.html

[2] https://www.lexology.com/library/detail.aspx?g=eb84eb9c-7cb8-47bd-ac6f-80acb46dce86

[3] https://afridi-angell.com/the-uae-competition-law-clarified/

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