The UAE’s competition framework is designed to foster a robust and dynamic market environment by safeguarding and promoting anti-competitive practices and ensuring compliance with fair pricing mechanisms across industries. The UAE’s Competition Law, governed by Federal Law No. 36 of 2023 (“Competition Law”), establishes a framework designed to prevent monopolistic practices, encourage market fairness, and promote healthy competition. Whether businesses are operating directly within the UAE or conducting activities abroad that impact the local market, they fall under the law’s purview. 

The oversight and enforcement responsibilities rest under the Ministry of Economy (“MOE”), supported by a committee called the Competition Regulation Committee. This body, chaired by the Deputy Minister of Economy, plays a pivotal role in driving the implementation and enforcement of the Competition Law, ensuring alignment with the UAE’s economic policies. This legal framework seeks to balance market dynamics, ensuring that dominant players do not misuse their market position and that anti-competitive agreements are strictly regulated. 

Key Areas of Regulation: Mergers, Acquisitions, and Market Dominance

The UAE’s Competition Law targets three main areas: 

1. Economic Concentrations (such as mergers and acquisitions) 
2. Restrictive Agreements 
3. Abuse of a Dominant Market Position 

For businesses, especially those involved in mergers and acquisitions, understanding how these regulations apply is critical to avoiding legal risks. 

Scope of Competition Law 

The provisions of the Competition Law shall apply to all companies/businesses, that conduct their economic activities in the UAE and also extend to those businesses that exploit the intellectual property rights (“IPR”) inside and outside the UAE. The Competition Law covers economic activities conducted outside the UAE, but only if they have an impact on competition within the UAE market. However, federal or local government-owned entities may be exempt, subject to specific exclusions issued by relevant authorities. As of now, no such exemptions have been granted. Additionally, certain industries may be governed by bespoke competition regulations issued by sector-specific regulators.  

Mergers and Acquisitions: Merging Companies in UAE

Any transaction that may lead to economic concentration, including mergers, acquisitions, or joint ventures, is subject to prior notification and clearance from the MOE. According to the Competition Law, economic concentration is defined as an act that occurs when a business acquires enough control over another entity or group of entities, partially or completely, to potentially impact the competitive landscape.  

For businesses undergoing mergers and acquisitions, the process includes: 

• Pre-notification: Businesses must notify the MOE at least 90 days before completing the transaction. 

• Clearance and Approval: MOE has the authority to either approve or reject the transaction based on its potential to distort market competition. 

• Penalties for Non-compliance: Failing to file a notification or proceeding with a transaction before receiving clearance can result in hefty fines—ranging from 2% to 10% of the business’s annual turnover or AED 500,000 to AED 5 million if the annual turnover is not determinable. 

For acquiring companies, understanding the notification requirements and adhering to clearance procedures is paramount to ensure compliance and avoid significant penalties. 

Restrictive Agreements: Ensuring Fair Competition 

The UAE Competition Law also prohibits restrictive agreements between businesses that aim to distort, limit, or restrict competition are prohibited, particularly those that result in: 

• Direct or indirect price fixing, increasing, or decreasing, diverging from the usual market norms. 

• Imposing conditions that hinder market competition. 

• Engaging in price-fixing or coordinated actions in tenders, auctions, or bids. 

• Freezing or restricting production, distribution, or marketing activities. 

• Refusing to deal with certain entities or obstructing their market activities. 

• Artificially restricting the flow of goods or creating an oversupply to distort pricing. 

• Agreements that divide markets or customers based on geographic regions, customer types, or time periods, which negatively affect competition, are also prohibited. Additionally, any actions to block new entrants or exclude competitors from the market are strictly forbidden. 

Businesses involved in any such agreement must seek prior approval from the MOE, as failure to comply can result in fines ranging from AED 100,000 to 10% of the annual turnover or AED 500,000 to AED 5 million if turnover is indeterminable. 

Abuse of Market Dominance 

Entities holding a dominant position and economic dependence in a relevant market—or a significant part of it—are prohibited from engaging in practices that distort, limit, or restrict competition. Key examples of abuse include: 

• Imposing prices or conditions for the sale of goods/services, either directly or indirectly. 

• Selling goods or services below the actual cost to drive competitors out or block market entry. 

• Unjustified price or quality discrimination between customers under identical contracts. 

• Forcing customers to avoid dealing with competitors. 

• Rejecting or limiting transactions without valid reasons, imposing unrealistic prices. 

• Conditioning sales on accepting unrelated goods or services. 

• Intentionally providing false product or pricing information. 

• Manipulating product supplies to create scarcity or oversupply. 

• Denying competitors access to essential infrastructure, obstructing market entry. 

A dominant position is established if an entity, alone or with others, holds a market share exceeding the percentage determined by the MOE, or has sufficient influence to harm market dynamics. 

Both the abuse of a dominant position and economic dependence are strictly regulated to ensure fair competition and prevent market manipulation. 

Penalties for abusing a dominant position mirror those for restrictive agreements and can include additional sanctions such as temporary closure of the business or public announcements of the violations. 

Key Takeaways for Businesses 

Understanding and complying with UAE’s Competition Law is critical for businesses, particularly those involved in M&A transactions. Here are some essential points to keep in mind: 

• Pre-notification is mandatory: Businesses must notify the MOE well in advance of completing any merging companies in UAE, acquisitions, or joint ventures that may lead to an economic concentration. 

• Clearance is crucial: Without MOE approval, any economic concentration is at risk of legal challenges, heavy fines, and potential reversal. 

• Abide by anti-competition rules: Restrictive agreements and the abuse of market dominance can attract severe penalties. 

As the UAE’s economy continues to diversify, understanding and adhering to Competition Law is not just a legal requirement but a strategic imperative for long-term business success. Companies looking to expand through M&A or maintain a dominant market position should consult legal experts to ensure full compliance with competition regulations.