UAE to regulate competition
The United Arab Emirates will implement its first comprehensive competition law regime on 23 February 2013 aimed at regulating anti-competitive behaviour and introducing merger control. In introducing this new regime, the UAE is following the trend set by a number of other countries in the middle-Eastern and north-African regions that have recently introduced competition regulation.
The new regime contains the usual and expected features included in the majority of competition regimes across the globe and will apply to enterprises present in or affecting competition in the UAE. State-owned and Sovereign enterprises will be exempt from the regime, as well as a number of industries that are already subject to sector regulation including telecommunications, pharmaceuticals, postal services, financial services, oil and gas, electricity, sanitation and waste disposal, water and transportation (land, air and rail). The primary regulator under the regime will be the Minister of Economy.
The regime prohibits abuse of dominance and anti-competitive agreements that restrict or prohibit competition. Both prohibitions will be based on an enterprise’s market share – the specific threshold share, however, is yet to be determined by the UAE Cabinet.
The prohibition against anti-competitive agreements will prohibit price fixing, bid-rigging and market division, including geographic market sharing and customer allocation. Dominant firms will be prohibited from taking advantage of or abusing their dominant position including by engaging in retail price maintenance, refusal to deal or restricting production or supply. Penalties for breaching the prohibitions will be between 500,000 dirhams (AUD130,100) and 5 million dirhams (AUD1.3 million), which will be automatically doubled for repeat offenders.
If a merger is likely to give rise to a dominant market player, the merger must be notified to the Minister of Economy who then must decide whether to approve or block the merger within 90 days (which may be extended by a further 45 days). If a decision is not granted within the prescribed period, the merger is deemed to be approved. Gun-jumping is prohibited, which means that the merging parties cannot take any steps to implement the merger until a decision is granted. Breach of the merger provisions may attract fines of between 2 and 5% of the parties’ annual revenue.
While the regime will come into effect on 23 February 2013, there is a 6 month grace period to allow enterprises to ensure that their business arrangements and practices comply with the regime. Therefore, if you do business in the UAE or have UAE-based operations, we strongly advise commencing a detailed review of your business arrangements as soon as possible and incorporating any necessary changes by the middle of August 2013 in order to avoid the risk of being one of the first test cases under the regime.