Revolutionizing Market Dynamics: Federal Decree-Law No. 36/2023 Transforms UAE’s Competition Landscape

The introduction of Federal Decree-Law No. 36/2023 (“New Competition Law”), which will come into force on 28 December 2023, marks a significant evolution in the United Arab Emirates' (“UAE”) approach to competition law. This new legislation, replacing the Federal Law No. 4/2012, is a comprehensive overhaul designed to address the recent competitive challenges and align the UAE with global competition law standards.

Key Changes

Expanded Scope and Jurisdiction

One of the most striking changes is the broadened scope of the law. The New Competition Law extends its applicability to all establishments, including those based outside the UAE if their activities affect competition within the country. This global reach is particularly relevant in the context of digital markets and multinational corporations, acknowledging the transnational nature of modern business operations.

Strinoftent Prohibitions and Enhanced Consumer Protection

The New Competition Law introduces more rigorous prohibitions against anti-competitive practices. This includes a focused stance against restrictive agreements and abuse of a dominance. Notably, it introduces specific provisions against exploitative practices like economic dependency and predatory pricing. These amendments reflect an understanding of the various ways competition can be undermined in contemporary markets.

Refined Exemptions and Sector-Specific Considerations

The New Competition Law adopts a more selective approach to exemptions. While it continues to recognize exemptions for government entities, it removes certain broad-based exemptions, necessitating a closer examination of sector-specific impacts. Instead, the New Competition Law sets out that a sector-specific exemption will be granted only if another regulatory body is legally empowered to oversee and address anti-competitive behaviors in that particular sector. Former exemptions pertaining to "weak impact" restrictive agreements and those involving small and medium-sized enterprises have been discontinued. Establishments may submit applications to the Ministry for a distinct exemption, comparable to the individual exemption in the EU and other established competition law systems, from restrictions on restrictive agreements, dominance abuse, economic dependency exploitation, and predatory pricing. Detailed procedures for applying for such exemptions will be elaborated in the upcoming Implementing Regulations. The highlighted modifications underscore the significance of a more precise evaluation of competitive practices. This ensures that exemptions are allocated in a way that harmonizes market efficiency with the principles of fair competition.

Comprehensive Merofter Control Reoftime

A significant aspect of the New Competition Law is the overhaul of the merger control regime. The criteria for mandatory notification have been refined, introducing thresholds based on total sales alongside with the market shares. This comprehensive approach aims to prevent the formation of monopolies or oligopolies through mergers or acquisitions, ensuring a diverse and competitive market. Furthermore, the New Competition Law explicitly permits parties to propose actions to mitigate the anti-competitive impacts of their transactions, such as divesting a subsidiary, division, or business line. Additionally, it empowers the Ministry to disclose details of proposed transactions on its website and to solicit feedback from stakeholders. With these changes, UAE Competition law aligns more closely with the globally recognized standards in terms of its merger control regime.

Under the previous legislation, if the Minister did not respond to a notified transaction, it was interpreted as an approval. However, the New Competition Law reverses this understanding; now, no response from the Minister indicates rejection of a transaction. This updated law includes a provision for the Minister of Economy to solicit opinions from relevant parties about a specific transaction. Additionally, it grants the opportunity for any party with an interest to provide information to the Ministry about a proposed economic concentration, including the right to raise objections.

Establishment of a Robust Reoftulatory Framework

The introduction of the Competition Regulation Committee is a pivotal development. This body is tasked with shaping competition policy, drafting supplemental legislation, and ensuring the effective implementation of the New Competition Law. Its role in overseeing and guiding competition matters signals a shift towards a more institutionalized approach to competition regulation.

Enhanced Penalties and Enforcement Mechanisms

The law prescribes strict penalties for non-compliance, including fines of up to 10% of the annual turnover for engaging in anti-competitive behaviors. This is complemented by refined procedures for legal proceedings and appeals, ensuring that enforcement is both effective and fair. Also the empowerment of specific government employees with law enforcement capacities underlines the UAE's commitment to rigorous enforcement of competition law.

Transitional Provisions and Future Compliance

The transitional provisions and the expected issuance of detailed Implementing Regulations highlight the law's forward-looking nature. Businesses will need to closely monitor these developments to understand the full implications of the law and to ensure compliance. The New Competition Law demands a proactive approach to legal and business strategy, emphasizing the need for ongoing vigilance in a changing regulatory landscape.

Conclusion

The New Competition Law represents a fundamental shift in the UAE’s competition law framework, bringing it in line with international standards. Its comprehensive provisions reflect a deep understanding of the complexities of modern markets and the need for a robust legal framework to govern them. As this law comes into force, it challenges businesses to adapt and align with its rigorous standards, ultimately contributing to a more competitive, fair, and efficient market in the UAE.