Competition Regulation in the United Arab Emirates

Competition legislation in the United Arab Emirates has been traditionally contained in a series of consumer protection conventions. Nonetheless, these regulations fell short of creating a substantial regulatory structure to embolden and safeguard competition within the state. The Federal Law aims to protect and enhance competition within the state. The Competition Law is an important piece of legislation and it will have an impression on the commercial dealings in the UAE, both for the local and international companies. This paper identifies the relevance of domestic competition law in different transactions and practices in the United Arab Emirates (the UAE) in light of the new federal law.

Certain commercial transactions such as tender rigging and cartels, which until now have circumvented competition law sanctions, will be liable to probable criminal punishments. According to the new regulations, all forms of business combinations, such as mergers and meeting certain requirements, will be subject to obligatory notification and suspension before approval.

 

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The Competition Law in the UAE standardizes market behavior with precise emphasis on regulating obstructive agreements and market power abuse as well as merger practices. The Competition Law abounds to all bodies conducting business in the UAE and other units outside the UAE whose activities may influence the competition in the country. However, the Law specifically excludes some sectors and activities. The Competition Law states that any work, practice, or agreement related to a particular service or product agreement, practice, or work related to a specific product or service, which is regulated by another regulatory body, is exempt from the law unless the Ministry agrees to review the matter, following a request from any other regulatory authority. The Federal Law exempts such sectors as the telecommunication sector, cultural activities, financial sector, oil and gas sector, the production, distribution and transportation of water and electricity. Additionally, the production and distribution of pharmaceutical products, postal services, and the treatment of sewage, hygiene, garbage disposal and the like as well as the supportive environmental activities, land, air, rail, or marine transport and services are the sectors exempted by the Federal Law. Moreover, small and medium-sized businesses are also exempted. According to Federal Competition Law, the Ministry of Economy is responsible for monitoring, implementing, and enforcing the Competition Law in the UAE. This is different from the European Union`s tradition, where some of its member states have their competition authority autonomous from government (Miller, 2013).

The typical example of a restrictive agreement, which the Competition Law seeks to regulate, is where a cartel shares customers or markets, or fixed prices. Explicitly, the Competition Law proscribes all arrangements, treaties, or practices that target to violate, diminish, or inhibit competition. However, subject to some exceptions, the proscription on obstructive agreements under the Competition Law does not apply to weak agreements entered into between institutions, whose overall market share does not surpass a certain percentage of the total transactions on the relevant market.

According to the Federal Law, some practices can be taken to amount to the abuse of the dominant position. Under the Competition Law, companies that have taken up a dominant position are not restricted but are only liable to the law when they abuse such a position. The UAE Cabinet will determine the overall market share of an establishment for it to achieve a dominant position. The Competition law further describes a dominant position as the position, whereby any institution can either individually or in collaboration with other units control or impact the relevant market.

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According to Lewis (2012), the Competition Law provides that the dominance threshold may be augmented or shrunk, according to the prevailing economic conditions, at the decision of the UAE Cabinet based on the proposals from the Minister of Economy. The Competition Law vetoes any dominant entity from abusing that position by engaging in, for instance, fixing the prices or the terms of resale of services or products. The abuses also include selling a product or service for a lower price than its real cost with the aim to drive others out of the market or expose them to massive losses and make it difficult for them to conduct their activities. Furthermore, coercing customers to stop dealing with competing entities, declining to sell in accordance with standard trading conditions, and discriminating, without reason, between the customers of analogous contracts are among the abuses vetoed by the Competition Law. These circumstances and practices of abuse of the Competition Law aforementioned are contemplated to be anti-competitive even without the need to prove that they essentially have an anti-competitive effect (Lewis, 2012).

The Competition Law also addresses the issue of merger control. The Competition Law refers to mergers as an Economic Concentration that covers a variety of commercial transactions, whereby bodies are involved in the acquisition of assets, shares, usufruct or proprietary rights, permitting one entity to acquire directly or indirectly the other entity. The Law sets out the guidelines on procedures and conditions, under which merges may prevail.

The Competition Law also affects international companies. Over 120 countries globally have a set of competition law, and more states embrace or appraise their competition laws. The fundamental ideas tend to be very akin, but there can be national law distinctiveness. The entity's experience of competition laws working internationally can be helpful when navigating the competition law in a regime where published guidance is limited (Hurley, 2001).

The Competition Law also stipulates penalties in case of violations. Any defilement of any provision of the Competition Law regarding the restrictive agreements and abuse of a dominant position will attract a minimum fine of UAE Dirham 500,000 (equivalent to about U$ 136,000) and a maximum of UAE Dirham 5,000,000 (equivalent of close to US$ 1,360,000.)

Summing up, one should state that the Competition Law regulates various transactions from cartels to the retrogressive tender rigging. Furthermore, it outlines clear steps in the circumstances of mergers of business units. Additionally, the Federal Competition Law serves to protect from the unfavorable agreements by standardizing the market behavior.