The United Arab Emirates (UAE) encompasses a wide range of commercial entities, experiencing rapid growth due to numerous favorable factors. These elements are attracting foreign entrepreneurs and investors to the flourishing business atmosphere of the UAE. In an effort to promote and protect healthy competition within its economic market, the UAE government introduced the competition law in 2012.
The Competition Law in the UAE targets to control the competition and anti-monopoly practices by enhancing the efficiency and consumer interest amongst organizations by regulating fair and competitive practices in the jurisdiction. Federal law no. 4 of 2012 on the Regulation of Competition aims at harboring fair and correct mechanisms in consonance with the principle of economic freedom. Exclusion and prohibition of restrictive agreements are adhered to ensure the healthy competition. Any activity or behavior leading to a dominant position in any business sectors are prohibited. Any organization being in a position to control its relevant business sector will fall under the purview the Competition Law.
The law applies to all economic activities that are carried out by organizations in the UAE. It shall also extend to the abuse of Intellectual Property Rights inside and outside UAE’s jurisdiction. It simply prohibits the organizations holding a dominant position from the imposition of prices in the market and prohibits from deliberately playing on prices to alter the market trends to their own advantage either directly or indirectly.
Amidst healthy competition, people strive to come up with better and innovative ideas to stay afloat in the market; there is a scope of continuous progress among the competitors to keep pushing each other to come up with better products and economic strategies to remain in the same old dormant state of business. However, it is necessary that such competition is in line with healthy competition practices As much as competition is encouraged, it should also be duly create an atmosphere to regulate the unfair competition in the economy.
To regulate competition in the economy of UAE, the Competition Law oversees the following aspects;
a) Restrictive Agreements: Agreements signed between establishments to abuse, restrict, or prevent competition, in particular those agreements that aim to fix purchase or sale prices of goods or services by causing increase, reduction, or fixing of prices, thereby adversely affecting competition, as well as collusion in bids or proposals in tenders, and other supply offers.
b) Abuse of Dominant Position: A dominant position is the situation that enables the organization, individually or in association with other organizations, to control or influence the market, carrying out any acts or actions that lead to the abuse of this position in order to prejudice, restrict, or prevent competition.
c) Merger Control or Economic Concentration: Any act that results in a whole or partial transfer (merger or acquisition) of rights, shares, stocks, or obligations of an organization to another organization which would enable an organization or a group of organizations to have direct or indirect control over an organization or a group of other organizations.
The Competition Law provides exemptions for the following:
The UAE Cabinet has issued implementing regulations relating to the Competition Law (Cabinet Decision No. 37 of 2014 (the Regulations)), which came into force on 27 October 2014. The Regulations are to clarifying the applicable exemption / clearance procedures. The Regulations outline the procedures pertaining to exemptions from rules prohibiting restrictive agreements, abuse of dominant position, merger approvals, and investigation of complaints related to violations of the Competition Law.
In broad terms, applications for exemptions and Merger Approvals should be made to the competition department of the UAE Ministry of Economy (the Department). Certain specified documents must be provided along with the application. The Department will examine the application and submit a recommendation to the UAE Minister of Economy (the Minister). The Minister shall then either approve the application (with or without conditions) or reject it. In terms of time frames, the Minister must issue his decision within 90 days of notifying the relevant parties of receipt of the application, although this period may be extended by a further 45 days.
Complaints & Investigations
It is important to be aware of the wide powers that the Ministry has to, on its own initiative, commence an investigation into possible violations of the Competition Law. In addition, any interested party may file a complaint with the Department alleging breaches of the Competition Law.
Both the 2012 Law and the 2014 Regulations, set out the penalties applicable for a breach of the Competition Law. In addition to the penalties, the 2012 Law provides that an offending party may be temporarily closed down by the competent Court for a period between 3 months and 6 months.
The law provides severe penalties for recurrence of violations, and aggrieved parties have the option to claim compensation for damages. Article 26 stipulates that the criminal suits can be initiated upon a written request by the Minister or his authorized deputy, and reconciliation processes may precede criminal proceedings.
In conclusion, the United Arab Emirates (UAE) has seen remarkable economic growth and attracted foreign entrepreneurs and investors due to its favorable business environment. To promote fair competition and protect consumer interests, the UAE introduced the Competition Law in 2012. This law aims to regulate anti-monopoly practices, promote economic freedom, and ensure fair market competition.
The Competition Law covers various aspects, including restrictive agreements, abuse of dominant position, and merger control. The Ministry of Economy plays a crucial role in enforcing the Competition Law, with wide-ranging powers to investigate violations and impose penalties. Recurrence of violations can lead to severe penalties and criminal proceedings. Additionally, aggrieved parties have the right to seek compensation for damages.
For businesses operating in the UAE, understanding the Competition Law and its regulations is essential to ensure compliance and avoid legal repercussions.
Al Safar and Partners Advocates and Legal Consultants offer expert opinions and assistance in navigating these regulations and understanding their impact on business operations.
Connect with us at +97144221944 ext. 375. Reach out via email reception@alsafarpartners.com to discover how our services can elevate your understanding. Visit www.alsafarpartners.com to position yourself at the forefront of legal opportunities in the corporate landscape of the UAE.
Written By: Dr. Samina Aquil – Case Manager at Al Safar and Partners Law Firm