The United Arab Emirates (“UAE”) has introduced Federal Decree-Law No. 36/2023 on the Regulation of Competition. Effective from December 29, 2023 (“New Law”), this legislative overhaul supersedes the previous Federal Law No. 4/2012, signalling a new era in regulatory dynamics. This article aims to delve into the new law’s intricacies, offering insights from the Regulation of Competition and additional sources, examining its objectives, scope, exemptions, prohibitions, enforcement mechanisms, and the underlying legal framework.
I. Objectives and Scope: The Decree-Law is strategically committed to safeguarding and actively enhancing competition within the UAE. In alignment with the nation’s dedication to economic development, consumer protection, and sustainable business practices, the law takes a visionary approach to regulating market dynamics. Its jurisdiction extends beyond the state’s borders, encompassing economic activities conducted abroad that impact competition within the UAE and showcasing a comprehensive and globally conscious regulatory stance.
II. Expanded Scope and New Prohibitions: The New Law introduces a significantly expanded scope, covering any establishment conducting business in the UAE and any economic activity outside the UAE affecting competition within. The definition of an establishment has been expressly broadened to include branches, while the relevant market now explicitly includes the digital economy. Two new prohibitions on exploiting economic dependency and predatory pricing further fortify the regulatory landscape, augmenting existing restrictions on restrictive agreements, abuse of dominance, and economic concentrations (merger control).
III. Narrowed Exemptions: A notable evolution in the regulatory landscape is witnessed by narrowing exemptions under the new law. Eliminating exempt sectors, including telecoms, financial services, utilities, and transport, marks a departure from the previous regime. Instead, a sectoral exemption is contingent upon another regulator having specific authority by law to regulate anti-competitive practices in the relevant sector. Government-owned entities, while still eligible for exemption, now require specific identification by Cabinet decision at the federal level or by local government at the emirate level. This shift necessitates a recalibration of compliance strategies, given the removal of previous exemptions for “weak impact” restrictive agreements and for small and medium-sized enterprises.
IV. Abuse of Dependency, Offering Extremely Low Prices: The Decree-Law is vigilant against any attempts to exploit economic dependencies. Articles 7 and 8 specifically prohibit establishments from exploiting customers’ economic dependency and offering prices significantly below production costs to eliminate competitors from the market. These provisions are pivotal in maintaining equilibrium and fairness in the marketplace.
V. Exemptions and Decision-Making Process: Recognizing that certain agreements or practices may be essential for economic development, performance improvement, or consumer benefits, Article 9 provides exemptions under specific conditions. The decision-making process for exemptions is outlined in Article 10. It includes a timeframe for decision-making and criteria for evaluation and grants the Minister authority to approve, reject, or conditionally approve agreements.
VI. Economic Concentration, Regulatory Committee, and Penalties: Article 12 introduces a provision regarding economic concentration, requiring establishments to submit applications for operations that could impact competition. The establishment of the Competition Regulatory Committee (Articles 16 to 22) and the definition of penalties for violating the Decree-Law (Articles 23 to 29) are crucial components. These penalties vary based on the nature and severity of violations, encompassing fines, closure of establishments, and the publication of rulings.
VII. Revised Merger Control Process: While maintaining the requirement for prior approval from the Ministry of Economy for proposed economic concentrations impacting competition, the New Law introduces substantive changes. The notification period has been extended from at least 30 days to a minimum of 90 days before concluding the relevant contract. Noteworthy is the explicit grant of authority to parties to propose measures preventing anti-competitive consequences, with the Ministry empowered to publish information about proposed transactions on its website and invite comments from interested parties.
VIII. Enhanced Administration and Enforcement: The establishment of a Competition Regulation Committee imparts depth to the administration of competition policy. Entrusted with proposing general policy on competition, drafting legislation, and submitting recommendations to the Ministry, this committee signifies heightened regulatory sophistication. The New Law emphasizes coordination between the Ministry, sector regulators, and other UAE governmental authorities, creating a unified front against anti-competitive practices. For localized anti-competitive conduct or economic concentration confined to a single emirate, applications for exemptions and approvals will now be considered at the local government level, adding a layer of regional specificity to regulatory proceedings. Importantly, the New Law penalizes breaches, including fines and temporary business closure.
IX. Legal Proceedings, Appeals, Fees, and Prescription of Complaints: Articles 31 to 34 provide a detailed framework for legal proceedings and appeals, emphasizing that competition cases will be heard summarily. The law endows specific employees with law enforcement capacity to establish violations, providing a structured approach to enforcement. The Cabinet has designated the authority to issue a decision prescribing fees for implementing the provisions of the Decree Law under Article 36. Moreover, a five-year statute of limitations for complaints related to anti-competitive practices is established under Article 37, ensuring a balance between legal recourse and regulatory finality.
X. The Implementing Regulation and Abrogation: The legislative journey culminates in the directives outlined in Articles 38 and 39. Article 38 directs the Council of Ministers to issue the Implementing Regulation within six months of the Decree-Law’s entry into force, providing a timeline for further regulatory elucidation. Article 39 marks a definitive departure from the past by revoking Federal Law No. 4/2012 and any conflicting provisions. It emphasizes the continuity of regulations, decisions, and laws issued based on the previous law until replaced by new ones aligned with the Decree-Law.
In conclusion, Federal Decree-Law No. 36/2023 on the Regulation of Competition is a robust, far-reaching legal framework meticulously crafted to encourage fair competition, deter monopolistic practices, and nurture a competitive market environment for economic development and consumer welfare. The comprehensive provisions and regulatory mechanisms underscore the government’s commitment to fostering a level playing field, promoting innovation, and ultimately contributing to the nation’s economic prosperity. As the Decree-Law takes effect, it is poised to shape a fair, dynamic, and resilient business landscape in the United Arab Emirates, ushering in an era of heightened regulatory sophistication and global competitiveness.
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