The UAE's new Competition Law (Federal Law 4 of 2012) has been published in the Official Gazette and will come into force on 23 February 2013.
The aim of this legislation is to protect and enhance competition, as well as to fight monopoly practices in order to promote a free market economy. This law is a welcome move for the UAE's regulatory environment and follows a number of emerging markets, including China, which have also enacted anti-competition legislation.
Some sectors are exempted from the application of the law, including:
- financial services
- oil and gas
- electricity and water
Importantly, the law also exempts actions by Federal and Emirate governments, and by establishments owned or controlled by the Federal Government or an Emirate government. The exact application of this exemption is unclear, but presumably activities of some government-owned companies (outside the above sectors) may be excluded.
The law's ambit covers economic activities within the UAE, abuse of intellectual property rights within and outside UAE, and any business practices conducted abroad that may influence competition within the UAE. The exact scope of this is unclear and its application remains to be seen.
The law establishes a "Committee of Competition Regulation" which will be in charge of the general policy to protect competition in the UAE and will report directly to the Minister of Economy. The law prohibits restrictive agreements between establishments that hinder or reduce competition; for example, by:
- price fixing
- collusion tendering
- limiting production to increase prices
- price discrimination
- dividing the market between competitors by geographical area.
It also prohibits dominant companies in a relevant market from taking any actions that may violate or reduce competition by undertaking practices such as selling products below its cost price, obliging a customer not to deal with a competitor, false marketing and other practices associated with unfair competition.
However, the law also permits the Minister on recommendation of the committee to exempt the restrictive agreement or practice if certain conditions are met. For example, if the restrictive agreement or practices will improve economic development and realise specific benefits to consumers.
Although it remains to be seen how the law will in practice be enforced, it contains a number of sanctions designed to deter companies from engaging in anti-competitive behaviour. Sanctions include: closing down an establishment for a period between three and six months and the suspension of those activities considered to be in violation of the law until judgment is rendered.
Fines for breach include:
- for breach of provisions prohibiting restrictive agreements and dominant market practices - a fine of between AED 500,000 and AED 5 million
- for breach of provisions relating to the confidentiality of information regarding commercial practices - a fine of between AED 50,000 and AED 200,000.
For repeat offenders, the penalty amounts automatically double.
Companies continue to be subject to any other applicable laws, and hence could potentially be penalised twice. In addition, offending companies remain exposed to civil claims for damages.
Concerned companies may file a claim with the Ministry of Economy regarding any violations. Alleged violators may appeal a decision issued by the Ministry of Economy before the competent courts of law within two days of the announcement of the decision. This period is clearly very short and it remains to be seen if in practice there will be some flexibility for offenders to seek redress against the Minister's decision.