The United Arab Emirates (UAE) has ushered in a new era of UAE competition law with the implementation of Federal Decree-Law No. 36 of 2023 on the Regulation of Competition. This landmark legislation, effective from December 29, 2023, not only introduces a modernized merger control system but also encompasses various other aspects aimed at enhancing market competitiveness. In this article, we embark on a user-friendly journey through the key features of the revamped UAE competition regime, exploring the legal nuances that businesses need to navigate for compliance and success.
Merger Control Framework – A Paradigm Shift
The cornerstone of the new competition law lies in its revamped merger control framework, signaling a paradigm shift in how economic concentrations are scrutinized. Under the old regime, transactions faced filing requirements only if the combined market share exceeded 40%, leading to minimal filings. The introduction of a turnover-based threshold under the new regime is a game-changer, likely resulting in more transactions meeting the conditions to file.
Businesses contemplating mergers or acquisitions are now required to notify the UAE Ministry of Economy and obtain clearance if their annual sales or market share exceeds thresholds to be determined by the UAE Council of Ministers. The implementation of a 90-day suspension period for transactions pending review adds a layer of diligence, emphasizing the authorities’ commitment to ensuring fair and competitive markets.
Extended Timelines and Decision-Making
Under the revamped law, the timeline for merger reviews has undergone a significant extension. Filings must now be submitted at least 90 days before completion, a departure from the previous 30-day requirement. While this may seem like a substantial increase, the overall timeline for clearing an Economic Concentration remains similar due to the mandatory 90-day period for the Minister of Economy to issue a decision.
This extended review period underscores the authorities’ commitment to conducting thorough evaluations. It also provides an opportunity for the Competition Committee to engage with stakeholders, potentially leading to more informed decision-making. Businesses involved in notifiable transactions should factor in these extended timelines for strategic planning and compliance.
Potentially Steep Fines
The new competition law introduces potentially steep fines for non-compliance, emphasizing the importance of adhering to the filing conditions. Parties failing to notify the Ministry of Economy when required can face fines ranging from 2% to 10% of their total annual revenues achieved from the relevant product or service in the UAE during the prior fiscal year.
To avoid these financial consequences, businesses are urged to carefully assess whether their transactions meet the filing conditions and promptly notify the authorities. The potential for steep fines underscores the UAE’s commitment to promoting a competitive landscape and ensuring compliance with the new competition law.
Additional Changes
Beyond merger control and preventive measures, the new competition law introduces substantial changes, expanding the geographic scope in defining the “relevant market.” Moreover, it imposes prohibitions on certain conduct, such as exploitative practices targeting economically dependent customers and predatory pricing designed to exclude or hinder market entry.
This shift acknowledges the digital landscape’s influence on competition and underscores the legislation’s adaptability to emerging market dynamics. These changes may significantly impact how businesses operate within the UAE, requiring a careful examination of their market practices to align with the updated regulatory framework.
While the Decree-Law provides a comprehensive framework, many details are yet to be fully clarified. Articles 38 direct the Council of Ministers to issue the Implementing Regulation within six months of the Decree-Law’s entry into force. This forthcoming regulation is expected to offer more granular details on various aspects, including thresholds, procedures, and specific requirements for compliance.
Businesses are advised to closely monitor updates regarding the Implementing Regulation, as it will play a crucial role in providing clarity on the practical implications of the law.
Conclusion:
The new competition law brings about fundamental changes, from the merger control framework to extended timelines and potential fines for non-compliance. Businesses operating in the UAE are advised to stay informed, adapt to the evolving regulatory landscape, and work closely with antitrust counsel to navigate the complexities of the new competition regime effectively. As we await the forthcoming Implementing Regulations, it’s crucial for companies to proactively assess the implications of the new law Given the nuanced and evolving nature of the new competition law, businesses are strongly encouraged to consult with experienced Dubai lawyers specializing in competition regulations