Commentary on the new UAE Competition Law (Federal Law No. (4) of 2012)

by Reed Smith


The UAE’s first antitrust/competition legislation recently came into effect on 23 February 2013. Federal Law No. (4) of 2012 (Law), primarily regulated by the Ministry of Economy, aim to prohibit and penalise anticompetitive agreements, abuse of dominant position within a given market and provides a framework for merger control and regulation. Enterprises falling within the scope of the Law will benefit from a six month transitional period to review their practices and align themselves within the parameters of the Law.

Affected Persons

To begin with, the Law does not apply to the UAE Government or its related entities. Entities operating within the oil and gas, electricity and water, financial services, pharmaceuticals, transportation, telecommunications and waste management sectors are also currently exempt from the Law. Additionally, enterprises with a small market share, or whose agreements would have a negligible effect on the market, fall within a de minimis category, exempting them from the effects of the Law. These exclusions limit the scope of the Law, however, it is understood that amendments, by way of Executive Regulations, are likely to be released shortly and these may enhance its reach.

The Law does apply to any natural or legal persons or consortia of such persons who engage in economic activity and/or hold intellectual property within the UAE. Interestingly enough, the Law also applies to economic activity occurring both within and outside of the UAE which may have the ability to affect competition within the UAE, prompting concerns over extraterritorial reach on group companies with a presence in the UAE.

Scope of the Law

At first glance, the Law bears some resemblance to antitrust legislation of regional counterparts and the key focus is directed toward three areas:

1. Restrictive Agreements: These include (but are not limited to) horizontal collusion, agreements limiting the availability of essential infrastructure to various competitors, price fixing and exclusive distribution agreements. Note however, the exclusive distribution agreements which are governed by the Commercial Agencies Law (Federal Law No. 18 of 1981) continue to enjoy protection under the Commercial Agencies Law even though they contravene the Law’s provisions on restrictive agreements.

2. Abuse of Dominant Position: Per se, the Law does not prevent enterprises from enjoying a dominant position within the market and it is evidently clear that the UAE encourages and promotes superior products and services by vendors and producers alike. The lens of the Law, however, zooms in on those who take undue advantage of their market dominance; such actions having an anticompetitive effect horizontally (i.e. competitors) and ultimately the end consumer. Predatory pricing and trading restraints are examples of where the Law will be concerning itself the most. What is different and perhaps unclear however is determining how one holds a dominant position within the market. EU, Saudi and Kuwaiti competition legislation tend to peg dominance based on a percentage of market share that the enterprise enjoys. The Law does not set out the relevant percentages but instead will position the total number transactions undertaken by that entity against the total number of transactions in the market to determine the degree of dominance it may hold within the relevant market. This may lead to a distortion between volume of transactions as opposed to a greater value of smaller transactions.

3. Merger Control: The Ministry of Economy will now assess potential deals within certain timeframes if they are likely to result in the acquisition of direct or indirect market control via merger or acquisition in equity, shares and assets between enterprises. The Law in this respect affords wide discretion to the Ministry of Economy and potential deals will not only include traditional share acquisitions, but also asset transfers from one enterprise to another. Approval from the Ministry of Economy will also be required if potential deals exceed market share thresholds or affect competition by creating or possibly enhancing a dominant position within the relevant market. At present, there are no numerical thresholds to determine the above possible scenarios, however it is understood that further Executive Regulations may clarify the necessity of seeking Ministry of Economy approval for a potential deal.

Going forward and avoiding penalties

The Law provides a number of mechanisms for imposing fines and penalties if any of the above contraventions take place by an entity falling within the scope of the Law.

Restrictive agreements and abuse of dominant position may result in fines between AED 500,000 – AED 5,000,000, depending on the competent court’s ruling. Additionally, failing to notify the Ministry of Economy of a potential deal requiring approval may result in fines between 2%–5% of the violating entity’s total annual sales revenue for the previous fiscal year. The courts may also temporarily suspend a contravening entity for anywhere between three to six months and may order a publication of its judgement within local newspapers.

It is critical that enterprises conducting business in the UAE take full advantage of the transitional phase (ending 22 July 2013) by carrying out internal assessments on their business practices, agreements, relationships with suppliers and distributors, alliances with competitors and carrying out a business evaluation to determine whether or not they fall within the scope of the Law. International entities, medium sized companies, and longstanding international/local joint ventures are likely to fall within the scope of the Law and whilst the financial penalties may not be considered draconian, there is exposure to reputational damage and the possibility of having trade suspended for an effective period of time.

On carrying out the above legal and business assessments, where anticompetitive behaviour may be identified, it is advisable that enterprises, via legal representation, amend or terminate such agreements or practices or alternatively, if an arguable case exists for such behaviour, make an application to the Ministry of Economy for a waiver of such practices can be made.

The Law serves as an indication of the UAE economy’s continued sophistication, where authorities are keen to take a multi-faceted approach to preventing relapses of the regional 2008-10’ economic downturn. Amongst others, refining competition and preventing abusive business practices by way of competition and consumer protection laws serves as reinforcement of sage practices to those wishing to enter into and carry out business within the UAE.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Written by:

Reed Smith

Reed Smith on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.