The United Arab Emirates is the latest country in the Middle East to overhaul its competition regime. On December 29, 2023, a new competition law comes into effect, including a new merger control regime that can be triggered by the parties' turnover and would suspend transactions by up to 90 days pending completion of the review. Failure to comply is subject to potentially steep fines.
On September 28, 2023, the United Arab Emirates ("UAE") issued Federal Decree-Law No. 36 of 2023 on the Regulation of Competition (the "New Competition Law"), which will come into effect this week on December 29, 2023.1 The New Competition Law replaces the previous Federal Decree-Law No. 4 of 2012 (the "2012 Law") but it does not create a new competition authority.2 Instead, the Competition Regulatory Committee ("Competition Committee") within the UAE Ministry of Economy will oversee all matters related to the New Competition Law.3
Several articles in the New Competition Law refer to the Implementing Regulations for more details on the specifics of how the new regime will operate, including with respect to merger control (the "Implementing Regulations"). The Implementing Regulations are not issued yet, but are expected within the next six months. In the meantime, the regulations, decisions, and decrees that were issued based on the 2012 Law shall continue to be effective until they are replaced.5 We highlight here some of the key features of the New Competition Law focusing on the merger control regime.
Notification Thresholds Based on Turnover or Market Share
The New Competition Law defines an "Economic Concentration" as "any action that leads to the full or partial transfer (merger or acquisition) of ownership or usage rights in properties, rights, stocks, shares, or obligations of an establishment to another," and which results in the "direct or indirect control" over the establishment.6 Parties intending to participate in an Economic Concentration are required to notify the UAE Ministry of Economy and obtain clearance before implementing the proposed transaction, if any of the following conditions are met:
(a) Turnover Threshold: The total annual sales of the parties in the relevant market during the last fiscal year exceeds an amount to be determined by the UAE Council of Ministers; or
(b) Market Share Threshold: The combined share of the parties' transactions as compared to the total transactions in the relevant market during the last fiscal year exceeds the percentage to be determined by the Council of Ministers.7
The specific turnover amounts and the market share percentage are expected to be provided in the forthcoming Implementing Regulations.
This is a significant change from the old regime where transactions were required to file only if the combined market share of the parties exceeded 40%, which was a high threshold to meet for most transactions and led to very few filings in the UAE. The introduction of a turnover-based threshold under the new regime will likely result in more transactions meeting the conditions to file. This is to be confirmed after the details of the turnover threshold are released in the Implementing Regulations.
Merger Review Timeline
Under the 2012 Law, parties to a notifiable transaction were required to submit a merger control filing within 30 days prior to completion of the transaction. The New Competition Law changed this such that filings must now be submitted at least 90 days prior to completion of the transaction.8
However, in effect, the timeline for clearing an Economic Concentration under the New Competition Law remains the same as under the 2012 Law, because the Minister of Economy must also issue a decision within 90 days from when a filing is deemed complete, subject to a 45-day extension.9 The period may also be extended when the Competition Committee issues requests for additional information from the parties, which stops the clock until the parties comply.10
During the review period, the Competition Committee will review the filing and conduct its own market research to evaluate the transaction's potential impact on competition in the UAE. The Competition Committee may also decide to publish a brief description of the transaction on its website and invite interested parties to submit their views or raise any objections they might have. In such cases, the review period may be further extended.
After the review, the Minister of the Economy or his authorized delegate (at the recommendation of the Competition Committee) shall render one of the following decisions regarding the proposed transaction:11
(a) Unconditional approval, if the transaction does not have an adverse impact on competition or generates positive economic benefits that outweigh any adverse impact;
(b) Approval that is conditional on the parties implementing remedies to mitigate any potential adverse effects;
(c) Rejection of the transaction; or
(d) Declining to exercise jurisdiction, if the transaction does not meet the conditions for filing.
In the event that a decision is not rendered within the 90-day review period, unless extended, the notified transaction will be considered rejected.12 This is a change from the old regime where, under the 2012 Law, the lack of a decision at the end of the period was considered an implicit approval.13
Changes to the Exemptions
The New Competition Law applies to any economic activity inside the UAE and to activities outside of the UAE that can affect competition in the UAE.14 However, certain entities are exempt from the requirements of the New Competition Law, including any entity owned by the UAE federal government or a local Emirate's state government.15
In addition, the New Competition Law exempts any agreement or conduct related to a specific good or service that is regulated by another law, provided that the other law governs the antitrust aspects of that sector, including with regards to approving transactions. This is a significant change from the position under the 2012 Law where entire sectors (e.g., Telecommunication, Oil & Gas) were automatically exempt. Each company will therefore need to review any other laws applicable to its sector to verify whether such laws include specific antitrust provisions that qualify the company for an exemption from the New Competition Law.
It is also worth noting that while the 2012 Law contained an exemption for small and medium sized enterprises, that exemption was removed from the New Competition Law.16 In the context of merger control, the reduced scope of exemptions may result in potentially more filing requirements in the UAE, even if one of the transaction parties does not have a substantial-sized business yet. The details of the turnover threshold will shed light on this.
Potentially Steep Fines
Transaction parties that meet the filing conditions under the New Competition Law, but do not notify the Ministry of Economy, will be subject to potentially steep fines. Failure to file exposes the violating party to a fine in an amount no less than 2% and no more than 10% of the total annual revenues achieved by the party from the relevant product or service in the UAE during the prior fiscal year.17 If it is not possible to determine the amount of relevant revenues, the fine will be set as a fixed amount between AED 500,000 and AED 5,000,000 (approximately USD 136 thousand to USD 1.3 million).
Other Substantial Changes
The New Competition Law introduces substantial changes to several antitrust topics besides merger control. For example, the geographic scope in the definition of the "relevant market" has been expanded to recognize that competition could occur within a "digital place where supply and demand converge for a product or service and where competition conditions are similar or homogeneous."18 In addition, there is now a new prohibition on any conduct that "exploits the economic dependency of a customer who lacks alternative sources for marketing or supply,"19 which is separate from the existing prohibition on abusing a dominant position in the market. The New Competition Law also prohibits predatory pricing if it "significantly undercuts the costs of production, processing, or marketing, where the intent or consequence is to exclude" or prevents the entry of a business or product into the relevant market.20 These changes could have significant implications on how businesses operate in the UAE.
Conclusion
The New Competition Law will result in new regulatory requirements for businesses operating in the UAE and any company contemplating a transaction that includes an entity with UAE revenues. The scope and some of the specifics of these new requirements are still unclear at this stage, but more details are expected in the coming months when the new Implementing Regulations are issued. Companies that might be affected by the UAE competition regime are advised to consider with antitrust counsel any potential implications on ongoing deals or other business arrangements.
The UAE is the latest jurisdiction in the region to revamp its competition laws, following similar overhauls in neighboring countries across the Middle East and North Africa.21 These changes are indicative of transformative shifts in the region, as competition authorities are becoming more active in regulatory oversight and collaborating with one another on more initiatives to bolster antitrust enforcement.22 It is therefore critical for companies to ensure antitrust compliance and assess any potential risks under all applicable competition regimes.
1 Federal Decree Law No. 36 of 2023 on the Regulation of Competition (the "New Competition Law").
2 Federal Decree Law No. 4 of 2012 on the Regulation of Competition (the "2012 Law").
3 New Competition Law, Article 16.
4 New Competition Law, Article 38.
5 New Competition Law, Article 39.
6 New Competition Law, Article 1.
7 New Competition Law, Article 12.
8 New Competition Law, Article 12.
9 New Competition Law, Article 13.
10 New Competition Law, Article 14.
11 New Competition Law, Article 15.
12 New Competition Law, Article 13.
13 2012 Law, Article 10.
14 New Competition Law, Article 3.
15 New Competition Law, Article 4 (specific entities to be identified by the Council of Ministers or Emirate government).
16 2012 Law, Article 4.
17 New Competition Law, Article 25.
18 New Competition Law, Article 1.
19 New Competition Law, Article 7.
20 New Competition Law, Article 8.
21 See, e.g., White & Case client alerts: Egypt to Overhaul its Merger Control Regime | White & Case LLP (whitecase.com) (December 2022); New Competition Regimes and Increased Antitrust Enforcement across the Middle East & North Africa | White & Case LLP (whitecase.com) (January 2023); Morocco Competition Council Announces Merger Control Amendments | White & Case LLP (whitecase.com) (June 2023); Saudi Arabia: New Thresholds for Merger Filings, and New Conditional Approvals | White & Case LLP (whitecase.com) (November 2023).
22 See, e.g., the Arab Competition Network comprising of the heads of most competition authorities in the region.
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