New UAE competition law ushers in new era for merger control

The new law will impact entities operating in or looking to do business in the competitive landscape of the UAE.

The implementing regulations to accompany the law are expected to follow in the next six months. In the meantime, the decisions and decrees that accompanied the previous law continue to be in effect.

Merger control

As under the previous law, merger notifications are required for proposed transactions which can impact competition in the market and lead to an entity occupying a dominant position in the relevant market. The recent amendments bring about significant changes to the merger control regime, introducing additional mechanisms and stricter timeframes to enhance transparency and stakeholder involvement.

Previously, a merger notification was required if the merging entities meet the ‘market share’ threshold – i.e., the total share of the establishments exceeds a percentage (as determined by the cabinet) of the total transactions in the relevant market. Under the new law, an additional threshold test of ‘annual turnover’ has been introduced; this threshold is met where the total annual sales of the establishments in the relevant market during the last fiscal year exceeds an amount to be determined by the council of ministers. Guidance regarding the market share percentage and threshold amounts are to follow in the implementing regulations.

It is expected that the additional threshold will result in more transactions requiring a merger control filing.

Under previous legislation, a merger notification was required to be made to the ministry at least 30 days before completion. However, the more stringent timeframes under the new law require that merger notifications are reported at least 90 days before completion. When making merger filings, businesses now can voluntarily file an undertaking outlining the actions they will implement to prevent the anti-competitive consequences of the proposed transaction. This undertaking can be submitted for the evaluation of the ministry within a maximum period of 30 days from the submission of the merger application.

Upon making a merger filing, the ministry has the authority to invite the views of ‘interested parties’ on the proposed transaction by publishing ‘basic information’ on its website. Subsequently, the interested party holds the right to raise an objection with the ministry, accompanied by the submission of supporting data and documents. Further details regarding the process of inviting views from parties and the procedure for filing objections will be clarified in the forthcoming implementing regulations.

The ministry has 90 days (extendable by 45 days) from the filing being made within which to issue a decision. Crucially, if the ministry does not render a decision within this period, it will be considered an implicit rejection of the application. This marks a departure from the previous regime where the lapse of the 90-day period without a decision was construed as implicit acceptance by the ministry. It is possible to file an appeal against a decision of the ministry in the competent court within 30 days from the date of notification of the decision.

Limiting the exemptions available under the old law

Exemptions for small and medium-sized enterprises (SMEs) – businesses with less than 200 employees or, for manufacturing companies, 250 employees – have been removed, with SMEs now subject to the competition law. Sectorial exemptions (for telecoms, financial services, utilities, transport, oil and gas, and pharma) under the old law have also been removed, with such exemptions now applicable only if authorised by the regulator in the relevant sector. Further, exemptions for weak impact agreements – i.e., agreements between entities that control less than 10% of the market have been removed under the new regime. The new law stipulates that only government owned entities identified by a cabinet decision (at the federal level) or by local government (at the local level) are exempt from the application of the law – this means that generally speaking, government owned entities are now subject to the competition law.

Other additions relating to anti-trust

From an anti-trust perspective, the new law has broadened the list of abusive practices that establishments are prohibited from engaging in – this includes conduct exploiting the economic dependency (of a customer that lacks alternative sources of marketing/ supply) and predatory pricing. Through the introduction of a provision on predatory pricing, establishments are now expressly prohibited from pricing products and services in a manner that significantly undercuts production, processing, or marketing costs with the intent or consequence of excluding another establishment from the relevant market. These prohibitions are aimed at deterring entities which may engage in short-term pricing strategies with the goal of driving rivals out of business.

Co-written by Nida Shareef.