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In brief

On 28 September 2023, the United Arab Emirates (UAE) issued Federal Law No. 36 of 2023 (“New Competition Law“), which repealed and replaced Federal Law No. 4 of 2012. The New Competition Law signals a new era of enforcement by the UAE Ministry of Economy by providing a functional competition regime through, inter alia: extending a wider scope of application to almost all economic activities; expanding its mandate by prohibiting new conducts and introducing a new dominance test; and finally introducing administrative penalties and stricter financial penalties. The New Competition Law will officially enter into force on 28 December 2023, with the executive regulation to be published within six months thereafter.


In more detail 

The New Competition Law introduces numerous new provisions including on the jurisdiction and scope of application, anti-competitive conducts, administrative and financial penalties and other details. Set out below are the main features:

Jurisdiction and scope of application

The New Competition Law applies to all entities engaging in economic activities that take place in the UAE, in addition to practices taking place overseas that have effects on the UAE market. Further, the New Competition Law introduces a new and wide definition for economic activity, including all activities related to goods and services at different levels of production and distribution.

It is important to highlight that the previous sectorial exemptions under the old law have been removed under the New Competition Law, the scope of which now applies to all industries across the board.

It is also worth noting that entities owned by the Federal or Emirate-level governments may be exempted from the application of the New Competition Law in case the relevant government issues a specific decision of exemption for the entity. In other words, all Federal and Emirate-level government-owned companies are subject to the New Competition Law unless specifically exempted by a Federal or Emirate-level government decision.  

Anti-competitive conducts

Despite not introducing major amendments to the agreement section, the New Competition Law removes the exemption given to low market share threshold agreements. It also introduces a new effects prohibition approach in the agreement section. This development expands the jurisdiction of the authority to review agreements that do not necessarily violate the New Competition Law by object but can have a restrictive effect, e.g. horizontal cooperation agreements.

Under the abuse of dominant position, the New Competition Law presents a new dominance test with the introduction of the concept of collective dominance, which entails that entities are now liable for their partnerships with other entities. This new concept of collective dominance seems to be a catch all prohibition on controlling or limiting production processes, markets or technological developments, as it is broadly worded. Further, the New Competition Law introduces the concept of objective justification as a defense to refusal to deal.

Besides predatory pricing, the New Competition Law introduces Article 8, which prohibits selling at very low prices in comparison to the costs of production, transportation and marketing. If the object of this low pricing is to foreclose a competitor or a new entry, this is different from the predation test as it does not require prices to be below cost. However, it might be meant to address the concern of profit sacrifice.

Finally, the New Competition Law includes a new prohibition on conduct abusing economic dependency. It will remain to be seen, how the implementing regulations are going to define “economic dependency” and whether they will be guided by the existing international regimes adopting this concept such as in France and Tunisia.

Merger control

Generally, the merger control filing is still mandatory and suspensory. However, the New Competition Law includes a new threshold test of the “annual turnover” of the entities, in addition to the test of market shares under the old law. The New Competition Law gives the parties the right to propose remedies to address the anti-competitive effects upon submission of the filing. Turnover thresholds will be determined by virtue of a Minister Council Decision.

Unlike the old law where non-response by the Minister is considered acceptance, under the New Competition Law, silence is a sign of refusal of the transaction. The New Competition Law introduces a mechanism whereby the Minister of Economy may invite interested parties to express their views on the transaction. It also allows any interested party to submit any information to the Ministry regarding an economic concentration process presented to the Ministry with the right to object.

Penalties

The New Competition Law includes stricter financial penalties by increasing the maximum threshold to 10% of the annual turnover for anti-competitive practices. Failure to notify a notifiable transaction is punishable by the same penalty.

Further, the New Competition Law introduces administrative penalties that may be imposed on entities violating any provisions of the new law, in addition to a penalty of AED 500,000 for obstructing the Competition Committee’s work during an investigation.

Comments

While the old law was not effectively enforced and provided for an extensive list of exemptions, the New Competition Law seems to cast a wider net and encourages the Ministry of Economy to take more action. There are still several points that need to be clarified with the new law which the executive regulation is anticipated to address. We will keep you updated on further developments as and when the executive regulation is issued.

To speak with us in relation to the New Competition Law, or any commercial matters or issues more generally, please contact one of the Baker McKenzie team members above.

Author

Hani has been practicing since 2007 with a focus on M&A, joint ventures, corporate reorganizations and post-acquisition integration as well as corporate structuring, foreign direct investment and market entry in the Middle East with a particular focus on the UAE and Qatar. His experience also covers general commercial contracts such as agency and distribution and advice on corporate governance, compliance and competition matters.
Hani focuses on the healthcare, technology and the retail sectors but he also gained substantive experience advising both companies and government agencies in the defense sector and had significant exposure assisting governmental authorities with developing their internal structures and drafting legislations.
Hani is also the lead Pro Bono partner in the UAE and the Middle East.
Hani holds an MBA degree and a Masters in Management alongside his law degree. He is fully trilingual and practices in English, French and Arabic, all three at a professional level.
Prior to joining Baker McKenzie’s UAE offices in April 2012, Hani worked as a corporate associate at an international law firm in both Dubai and Doha between 2008 and 2012 and prior to that worked at an FMCG company and a private equity group in Kuwait.

Author

Laya Aoun-Hani is a Counsel and senior member of the EMEA Baker McKenzie International Commercial & Trade Practice Group. With over 17 years of experience in the Middle East, Laya regularly advises multinational clients from different industries on commercial transactions, multijurisdictional distribution and agency arrangements and restructurings, commercial disputes settlements, competition law, trade compliance, export controls, trade sanctions and customs matters. She is the Middle East lead for the Baker McKenzie Consumer Goods and Retail Industry Group and has also extensive experience in the Healthcare sector.
Laya trained at one of the largest law firms in Lebanon and one of the largest international law firms in London before she joined Baker McKenzie in Dubai in 2013. She was a lecturer and coordinator of a Business Law course for five years at the Faculty of Business at Antonine University in Lebanon and she currently delivers training courses to lawyers in the private practice at the Dubai Legal Affairs Department.

Author

David Monnier is a Senior Legal Consultant in Baker McKenzie, Riyadh office.

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