UAE Federal Decree Law 36/2023 on the Regulation of Competition, issued on 28 September 2023, governs merger control in the United Arab Emirates. It abrogates and supersedes the previous statute, Law 4/2012.
The implementing regulations of Law 36/2023 are still to be issued at the time of writing.
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The Ministry of Economy and the Competition Regulatory Committee – a regulatory authority emanating from the Ministry of Economy – oversee all matters relating to Law 36/2023 and are responsible for:
- setting policies and strategies for competition and for enforcing Law 36/2023;
- drafting legislation;
- studying various issues with respect to the implementation of Law 36/2023;
- preparing annual reports on the committee’s activities; and
- submitting recommendations to the Ministry of Economy.
Law 36/2023 governs transactions which may impact competition in the market or enable an entity to occupy a dominant position in the relevant market.
Furthermore, any more merging parties that meet either of the thresholds set out below will be subject to Law 36/2023:
- Annual 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
- 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 a percentage to be determined by the UAE Council of Ministers.
Guidance on the market share percentage and threshold amounts will follow in the executive implementing regulations which are still to come.
The term ‘control’ is not defined under either Law 36/2023 or its predecessor.
However, the following definitions are provided:
- A ‘dominant position’ is a condition in which an entity – whether solely or in participation with other entities – can control and affect activity on the relevant market.
- An ‘economic concentration’ is any act which results in the full or partial transfer (merger or acquisition) of title or usufruct rights in property, rights, stocks, shares or obligations of an enterprise to another that enables an entity or a group of enterprises to control – directly or indirectly – another entity or group of entities.
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Joint ventures, like any merging entities, are subject to the same restrictions and prohibitions applicable to all other activities and transactions. A joint venture will be subject to Law 36/2023 if it:
- meets the annual turnover or market share threshold set out in question 2.1; or
- in any way constitutes a restrictive agreement or an economic concentration.
In such cases, the filing of a notification is mandatory.
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Law 36/2023 applies to all undertakings in relation to any economic activity, to the exploitation of IP inside the United Arab Emirates and to activities outside the United Arab Emirates that may affect competition in the United Arab Emirates.
However, certain entities are exempt from the requirements of Law 36/2023, including all entities owned by the UAE federal government or a local emirate’s state government.
In addition, Law 36/2023 exempts all agreements, contracts or conduct relating to any economic activities or specific goods or service that are regulated by another law, provided that the other law governs the competition aspects of the relevant sector, including with regard to the approval of transactions. This is a significant change from the position under the repealed legislation, under which entire sectors (eg, telecommunications, financial services, utilities, transport, oil and gas, and pharmaceuticals) were automatically exempt. Each entity will therefore need to review all other laws applicable in its sector to verify whether such laws include specific competition provisions that exempt the company from Law 36/2023.
The market threshold and the annual turnover threshold are the applicable criteria for determining whether:
- notification of the Ministry of Economy is required; and
- its prior, mandatory and suspensory approval must be obtained.
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Law 36/2023 has increased the deadline for filing a notification with the Ministry of Economy from at least 30 days to at least 90 days prior to conclusion of the relevant contract or transaction. Parties must plan their transactions accordingly.
The merging entities cannot conclude any contract or transaction unless approval of the merger or restrictive agreement has been granted by the Ministry of Economy and/or the Competition Regulatory Committee.
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The review period of the transaction is 90 days, with a potential 45-day extension. If a decision is not issued by the Ministry of Economy within this timeframe, the notified transaction will be considered to have been rejected.
The review period may also be extended where the Competition Regulatory Committee issues requests for additional data and information from the parties. The review period will be suspended until the parties have provided the information required.
Upon receiving a merger filing, the Ministry of Economy has the authority to invite the views of ‘interested parties’ on the proposed transaction by publishing basic information on its website. Subsequently, an interested party can raise an objection with the Ministry of Economy, accompanied by supporting data and documents.
The executive implementing regulations will determine the time limits and controls for requesting interested parties to submit their opinions and raise any objections.
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Sectoral regulatory agencies with no laws or bylaws regulating their own competition rules may consider anti-competitive practices, related exemption applications and applications for the approval of economic concentrations that would affect competition and the general balance in the relevant sector:
- where a written request to this end is filed with the Ministry of Economy; and
- subject to the approval of the Ministry of Economy.
The Ministry of Economy may participate in the sectoral regulatory agency’s consideration of the same.
The sectoral regulatory agency must:
- consider the case in accordance with the procedures and requirements stipulated in Law 36/2023 and its executive implementing regulations; and
- inform the Ministry of Economy of any decision taken thereon.
The executive implementing regulations of Law 36/2023 will establish the controls for considering anti-competitive practices, related exemption applications and applications for the approval of economic concentrations by sectoral regulatory agencies.
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The Ministry of Economy will consider whether the merger transaction or the relevant transaction:
- will not adversely impact competition on the market; or
- will have a positive impact which outweighs its adverse impact on the competition in the market.
When making merger filings, businesses can now voluntarily file an undertaking outlining:
- the actions they will implement to prevent the anti-competitive consequences of the proposed transaction; or
- the measures they intend to take to eliminate the harmful impact on competition resulting from an economic concentration.
This undertaking can be submitted for the evaluation of the Ministry of Economy within 30 days of submission of the merger application.
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Any interested party has the right to file a written grievance or complaint to the Ministry of Economy or the Competition Regulatory Committee with respect to decisions issued pursuant to Law 36/2023 within 15 business days of the date of notification of the decision. The complaint must be supplemented by all supporting documents.
The Ministry of Economy will review and issue a final decision within 30 days of the date of filing. Failure to respond within this period is deemed an implicit rejection or dismissal of the complaint.
The aggrieved party may appeal a dismissal decision within 30 days of:
- the date on which it is notified of such dismissal; or
- the date of failure to respond to the aggrieved party within the specified timeframe.
No appeal before the court is permitted unless:
- a prior grievance has been filed and a dismissal decision has been issued; or
- there has been a failure to respond to the aggrieved party within the specified timeframe.
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Transaction parties that meet the filing requirements or conditions of Law 36/2023, but that do not notify the Ministry of Economy accordingly, will be subject to potentially stringent fines. Failure to file a notification exposes the violating party to a fine of between 2% and 10% of the total annual revenues generated by the party from the relevant product or service in the United Arab Emirates during the prior fiscal year.
If it is not possible to determine the relevant revenues, the fine will be set as a fixed amount of between AED 500,000 and AED 5 million.
Law 36/2023 provides that during the review period, the merging parties cannot undertake any acts or procedures to complete the economic concentration until a final decision has been issued by the Ministry of Economy or the Competition Regulatory Committee.
Failure to comply exposes the party in violation to a fine of between AED 50,000 and AED 500,000.
Under Law 36/2023, the Ministry of Justice or the judicial authority, as the case may be – in agreement with the Ministry of Economy, the competent relevant authority and the sectoral regulatory agency, as the case may be – each within its respective area of competence, will appoint employees in the capacity of law enforcement officers to detect, monitor and prove violations of the compliance provisions of Law 36/2023.
Details in this regard will follow in the executive implementing regulations which are yet to come.
Contemplated mergers are more challenging under Law 36/2023, which imposes stringent regulatory requirements on merging parties – especially the Annual turn-over threshold which is the threshold of generating revenues. Hence, Law 36/2023 has significant implications for businesses operating in the United Arab Emirates – in particular, those which generate substantial revenues.
These changes are indicative of transformative shifts in the United Arab Emirates, as the Ministry of Economy is becoming more active in terms of regulatory oversight and is collaborating with the relevant authorities on new initiatives to bolster competition enforcement. Businesses are advised to stay informed and adapt to the evolving regulatory landscape to ensure compliance and assess any potential risks under all applicable merger regimes.
The Ministry of Economy is expected to issue detailed implementing regulations within six months of the effective date of Law 36/2023 which will provide further guidance and clarity on the application of the merger control regime. These developments should be seriously considered by any entities that are contemplating mergers, as the Ministry of Economy will be monitoring those entities.
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