The UAE’s New Competition Law: Key Changes and Business Implications

Introduction:

The UAE has taken a major step in modernizing its competition framework with the introduction of Federal Decree-Law No. 36 of 2023 on the Regulation of Competition (the ‘New Competition Law’), replacing Federal Decree-Law No. 4 of 2012 (the ‘Old Law’). This new legislation reshapes the country’s merger control regime by incorporating a turnover-based notification threshold and refining market share criteria, bringing it more in line with international best practices. It also broadens the scope of regulation to include economic activities outside the UAE that could impact domestic competition. While businesses await further clarity through the anticipated ‘Implementing Regulations’, recent ministerial decrees have already outlined crucial details, including the notification thresholds. Below, we break down the key changes introduced by the ‘New Competition Law’ and what they mean for businesses operating in or dealing with the UAE market.

Key Changes in the New Competition Law:

1. Expansion of the 'Relevant Market' Definition

One of the most notable changes is the expansion of the ‘relevant market’ concept. Article 1 of the New Law now recognizes competition in ‘digital places’ and situations where competition conditions are ‘similar or homogeneous’. This means businesses operating in digital markets, such as e-commerce and online platforms, must now assess their market impact within this broader definition.

2. Introduction of Turnover and Market Share Thresholds

Under Article 12 of the ‘New Competition Law’, the requirement to notify the UAE Ministry of Economy (MOE) of an 'Economic Concentration' – defined 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 of another’ and which, when completed, results in direct or indirect control of such establishment – no longer depends solely on a high market share threshold. Previously, only transactions where the parties had a combined market share exceeding 40% required notification. The new regime introduces two alternative thresholds:

• Turnover Threshold: Notification is mandatory if the combined total annual sales of the parties in the 'relevant market' exceed AED 300 million (approximately USD 81.7 million).

• Market Share Threshold: If the combined market share of the parties exceeds 40% of total sales in the 'relevant market', a filing is also required.

These new thresholds significantly lower the bar for mandatory filings, leading to a higher number of notifications compared to the previous regime.

3. Extended Review Period for Merger Filings

Another significant shift is the extension of the review period. Previously, the MOE had only 30 days to issue a decision on a proposed transaction. Under Article 13 of the ‘New Competition Law’, the timeline is now:

• A 90-day initial review period following submission of a complete filing.

• A possible 45-day extension, with further extensions at the MOE’s discretion.

• If the MOE does not issue a decision within the stipulated period, the transaction is deemed rejected (as opposed to the Old Law’s default approval in such cases).

4. Stricter Enforcement and Higher Fines

The ‘New Competition Law’ introduces stricter enforcement mechanisms. Companies that fail to file a required notification could face fines ranging between 2% and 10% of their total annual revenues in the UAE. If the revenue cannot be determined, fines will range between AED 500,000 and AED 5 million (approximately USD 136,000 to USD 1.3 million). These penalties underscore the importance of compliance with the new merger control regime.

5. Sectoral Exemptions and Removal of SME Exemptions

Previously, entire sectors were automatically exempt from competition regulations. Under the ‘New Competition Law’, exemptions apply only where a specific sector is regulated by another law that governs antitrust matters. This change means companies operating in regulated industries must now determine whether their sector-specific regulations provide an antitrust exemption.

Additionally, the broad exemption for small and medium-sized enterprises (SMEs) under the ‘Old Law’ has been removed, potentially increasing compliance obligations for smaller businesses engaging in mergers or acquisitions.

Implications for Businesses:

With the UAE adopting a more stringent and structured competition regime, businesses engaging in Mergers and Acquisitions (M&A) activity must carefully assess their notification obligations. The introduction of a turnover-based threshold means companies that previously avoided filing requirements due to low market share may now be caught by the turnover criterion. Moreover, the longer review period requires businesses to factor in regulatory clearance timelines when structuring transactions.

As the UAE continues to refine its competition framework, businesses should stay alert for further guidance from the MOE, particularly regarding the anticipated ‘Implementing Regulations’, which will provide additional clarity on procedural and substantive aspects of the law. Companies operating in the UAE or engaging in transactions that could affect UAE competition should review their compliance strategies and seek legal counsel to navigate the evolving regulatory landscape effectively.