Understanding the New Competition Law in the UAE

Introduction:
The UAE has introduced a new competition law and abrogated the old competition law, federal law No. 4 of 2012. The new federal decree law No. 36 of 2023 on the regulation of competition sets forth competition practices and measures against commercial monopolies. By introducing new rules and regulations, as well as penalties that will prohibit practices that damage competition and establish regulatory support, this new competition law will help improve fairness, competition, and consumer protection.

In accordance with Article 1 of the new competition law, it stipulates the important definitions, such as:

Competition:
Participating in economic activities within the market system without any adverse influence or restrictions that may be detrimental to consumer interests, development, or trade.

The Relevant Market:
A geographical area that refers to identical products or services that may satisfy specific consumer needs based on price, characteristics, and uses.

• Establishment:
  Any entity that is engaged in economic activity, irrespective of its legal structure, including its main office, branches, or associated individuals or groups.
• Agreements:
  Any written or verbal, explicit or implicit, partnership between two or more establishments.
• Dominant Position:
  An organization with the ability to control and influence activities in a relevant market. Businesses operating in sensitive market positions should consult the best lawyer in Dubai to assess whether their conduct could be interpreted as monopolistic or dominant.

Scope of the new competition law:
Article 3 of the new competition law applies to all businesses in the UAE, no matter what kind of legal structure they have. This includes individuals, groups of individuals, head offices, branches, and representative offices. Additionally, the utilization of intellectual property rights within or outside the UAE and economic activities that are conducted outside of the UAE influence competition within the UAE. Commercial agency laws also prohibit allowing agreements that are intended to divide markets or assign customers in a way that harms competition or makes it impossible for new companies to enter the market. Companies should obtain legal advice in Dubai from a reputable law firm in UAE.

In accordance with article 6 of the new competition law, businesses are prohibited from engaging in activities that abuse their dominant position. Article 7 states that businesses cannot exploit customers without alternative marketing or supply sources, discriminate between similar contracts, or apply pricing or resale conditions that force customers to avoid competitors or refuse common trading conditions without legal reason. Further, article 8 prohibits low-priced products from excluding a business. General price reductions under Federal Law No. (15) of 2020 on consumer protection, and the liquidation of commercial shops are exempt from these provisions. The council of ministers may reject offers or practices that are too low in price, depending on the state of the economy. Moreover, Articles 6 to 8 of the new competition law regulate fair competition through an extensive regulatory structure that targets abuse of monopoly status, unfair pricing conditions, discrimination, and excessive control over production.

Administrative Penalties:
According to Article 23, the council of ministers may decide on the administrative penalties to be imposed on businesses for violations.

The following articles 24–29 specify the legal consequences for violators. The administrative penalties may be imposed up to AED 100,000 and fines ranging from 2% to 10% of total annual sales in the previous fiscal year. However, if it is impossible or difficult to calculate the total sales, the fine may be imposed at a minimum of AED 500,000 and a maximum of AED 5,000,000. Moreover, the court may order the business’s closure for three to six months, and it may issue orders prohibiting or preventing actions until a final decision is taken.

Procedure for Addressing Violations:
In accordance with new competition law, a structured framework has been established for the purpose of addressing violations through specific and easily accessible procedures.

The ministry or the concerned authority may allow the right to file complaints to interested parties. In specific circumstances, criminal proceedings may be initiated upon receipt of a written request from the minister. Additionally, within 15 working days of the notification date, there is an opportunity to file a written grievance, as well as the right to file an appeal in the event that the grievance is rejected.

Conclusion:
New competition law promotes economic freedom, prohibits anti-competitive agreements, monitors economic concentration to promote fair competition, prevents monopoly status, and safeguards consumer welfare.