New Competition Law 2013 for UAE

UAE Competition Law 2013

Recently UAE’s(Applicable in all 7 Emirates of UAE) first Competition Law (Federal Law No. 4/2012), came into effect in February 2013, which currently has provided a transitional period to UAE companies till July 2013. This Federal law is primarily regulated by the Ministry of Economy, aimed to prohibit and penalize organization entering into anti competitive agreements, abuse of dominant position within a given market against the consumers.

The essential features of the UAE Competition Law are:

Restrictive Agreements: Article 5 (1) of the Competition Law prohibits restrictive agreements between establishments, which:

  • Limiting the sale or purchase price of products/ services, by causing an increase, reduction or fixation of the prices to the detriment of competition.
  • Freezing or reducing the production, distribution and sale operations.
  • Colluding against buying from a specific establishment(s), selling or in supplying the same, as well as in preventing or obstructing the practice of their activities.
  • Restricting the free flow of products and services to specific market or withdraw the same from the said market in order to hide or store them unlawfully.
  • Refrain from dealing with the same or create a sudden abundance of such products and services that lead to trade of the same at an unreal price.

What are the Exception to the UAE Competition Law?

However, the Exclusive distribution agreements which are governed by the UAE Commercial Agencies Law (Federal Law No. 18 of 1981) are still kept outside the scope of competition law & continue to enjoy protection under the Commercial Agencies Law even though they contravene provisions on restrictive agreements.

Abusing of Dominant Position:

Article 6 of the Competition Law prohibits organization, from abusing their dominant position, particularly those aiming at the following:

  • Selling goods or services for a price that is lower than its real cost in order to obstruct the entry of the establishments to the market or to exclude them from it, or to expose them to big losses that makes it difficult for them to carry on with their activities.
  • Compel a client not to deal with another competing establishment.
  • Unjustifiably refrain from buying or selling products or services or restrict or obstruct such dealing in way causes unreal prices to prevail.
  • Knowingly spread wrong information concerning the products or prices thereof.
  • Decrease or increase the available quantities of the product in order to create a virtual shortage or abundance of the goods.

What are the Penalties of non-compliance to UAE Competition Law?

Companies are provided a six month grace period ending July 2013, to review their practices & rectify their transactions in compliance of the Competition Law, otherwise they will be liable to pay fines AED 500,000 – AED 5,000,000 or suspension of business from three to six months.

Finally a sign of relief to consumers, who can now rely on the fact that someone is watching & guarding them against unfair competition, but still foreign companies are not provided protection against Exclusive Distributorship Agreements from their local agents effecting their business.  But as of now it’s high time for organizations to check their anti competitive policies or get left behind.

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  • Dear Sir,
    I am working for a company where i am getting AED 5000 and my contract is limited.My education is 12Th and i have completed certificate course of 02 years in F&B service .
    Now I am getting a better opportunity in another company with salary of AED 10000.
    And I have completed only 15th Months.
    So Please suggest .Regarding bean.
    Thanks

    • Hi Ehtesham,Since it is limited contract there is a chance of getting automatic labour ban for six months. I would suggest you to check with the new company whether they will be able to lift the ban if it happened so. You may have to pay the company one and half months salary for breaking the contract before the expiry.

    • Dear Ehtesham,

      Thank you for your query.

      Please note as per Amendment in Labour law in 2011. An employee can switch job before completing 2 years of job, but buy doing so he will getting an Automatic Default Labour Ban of 6 months, which can be lifted. Following are the criteria as per which Automatic ban can be lifted 1) If you get new job with Salary 5000 or above & you 10 or 12th Class certificate, 2) Salary 7000 or above & you present with diploma or certificate, 3) Salary 12,000 or above & showing Professional Degree or masters. In such situation your ban will be automatic lifted. Further if you getting a Job in Free Zone Or government department, then there will be no Ban. But as per new amendment company can also put 1 year Labour Ban, if you violate article 120 of Labour Law, which will be applicable to the entire UAE & you will not be allowed to work for 1 year. Further If your contract has no competition clause, then you easily join your competitor, but if competition clause is their or the new job you are getting is exactly similar to current one, then chances are you cannot join the new company as due to violation of competition law. Further as per the Limited Facts stated from your side, its look you can come under clause 2, show salary 7000 & above with your certificate and join the new company by automatically lifting the default ban. Further we need to review your current employment contract with the company & Agreement registered with Ministry of Labour, without which we cannot give you a fool proof advice. If you need any clarification, please call me at 0507195839.
      Thanks & Regards

  • I just would like to know some details.
    I am newly joined with my current company, finished the probationary period of 6 months.
    In my contract my job description is medical secretary and my company would like to change my job description.
    They should make a new contract right? and they cannot just do that? they need the approval of ministry of labor right?

    • Hi Anne,

      well legally the correct way is to make a new contract, or amend the current contract with Ministry of labour & with Employee. Also it is a requirement to take approval with Ministry of Labour also. But in actual practise it entirely depends on the company, the employer may or may not inform & take approval from ministry of labour, since taking approval & amending the contract, will be extra cost for the company, so usually they do it internally without taking approval from ministry, provided the eemployee is okay with it. In many companies, employer do internal transfer or change of job profile for the employee, it is normal. It also depends upon your internal employment contract signed with employee, if it contains any clause, that employee can change your job profile during your course of contract. Further as an employee you have the right, to ask the employee, to not change the job profile and follow the same profile as mentioned in your current contract, also you can ask employer to amend your current contract & change your designation in your visa in the passport. Further if your employer is changing your job profile without your consent, then you can cancel / terminate your current contract & claim compensation from your employer. Thanks – Advocate Saxena, 0507195839

    • Internally they can change the designation. But to mention in your labour contract they should apply for new labour contract.

  • Hi,

    I worked with a company in JLT (Dubai), covered under DMCC (Free Zone) (Unlimited Contract). I join this company last Year in Dec 2013. I have resigned from this company this month.

    My problem is that my employer wants me to sign a separate contract whereby I have to agree that I will not share any information of existing or upcoming prospects with competitor or else I have to sign a contract where it will be specified that I will join any competitor for next 2 years.

    At the time of joining, I sign DMCC STANDARD contract of employment for UNLIMITED & undertaking with Article 127 of UAE Federal Law No. 8 of 1980 Article 909 of UAE Federal Law No.5 of 1985.

    As an employee I need to understand whether I am liable to sign these kind of contracts after resignation for my smooth relieving & is there any ban is applicable on me. My salary is more than 12K & I am an IT Eng. & MBA in IT/Marketing.

    Kindly advice.

  • My employer will no longer be operating in the UAE after January 1st, but has informed those of us who wish to remain with another company that we will be subject to the non compete clause. Is this correct?

  • Dear All,
    Please answer,
    In my contract it is mentioned if I leave within initial 3 years of job, I cannot join anyother competitor in UAE for a period of 1 year . Can this be lifted by settlement or by any means .
    Your response would be highly appreciated.

    Regards,
    Muneeb