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.