News & updates

In a significant overhaul of its competition framework, the United Arab Emirates unveiled the Federal Decree-Law No. 36 of 2023 on the Regulation of Competition on December 29, 2023, marking a pivotal departure from the country’s 2012 competition statute. This legislative update introduces critical changes to the UAE’s merger control regime, aligning it more closely with international standards and regional developments in merger control thresholds. Among the notable adjustments are the introduction of turnover-based notification thresholds and the expansion of merger notification requirements, reflecting a broader regional trend towards more nuanced and economically focused competition regulation. This update provides a comprehensive overview of the new law’s implications for merger control in the UAE, detailing the revised notification thresholds, the implications for small and medium-sized enterprises (SMEs), and the challenges posed by the yet-to-be-issued executive regulations.

Merger Control:

Among other things the new law introduced a turnover based notification threshold. Under the old law, merger notifications were mandatory where a transaction would create or further an undertaking with a dominant position in the relevant market where the market share post-closing was 40% or more. The new law now introduces a turnover threshold.

With this the UAE follows a regional trend that saw turnover thresholds being introduced in Saudi Arabia in late 2019 and in Kuwait in the summer of 2021 as well as reforms of existing merger control regimes in Egypt in December 2022 and Morocco in May 2023. The UAE thresholds will follow the Moroccan example and establish a duality of market share and turnover thresholds.

Parties intending to participate in an “Economic Concentration” (such as mergers or acquisitions) must notify the UAE Ministry of Economy and obtain clearance before implementing the proposed transaction.

The notification can be triggered if either of the following conditions is met:

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.

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 the percentage to be determined by the Council of Ministers.

Timeframe:

Following the authorities confirming completeness of the submission, they have 90 days to issue a decision on the transaction. The review period may be extended by 45 days. If the authorities do not issue a decision within the (extended) review period, the transaction is deemed rejected.

Exemptions from filing:

Exemptions for small and medium-sized enterprises have been removed. SMEs will be fully subject to the new competition law. Sector specific exemptions established by the old law are now subject to specific regulations. The new law abandons all sector specific exemptions in favour of giving sector specific regulators authority to implement such exemptions for the industry they oversee. Under the Old Law, entire sectors were automatically exempt from the law. In practice, we expect this to mean that the wide sector exemptions under the Old Law will bring a wider number of transactions within the scope of the New Law. The only statutory exemption that was upheld is the exemption for government owned entities.

Fines:

In the event that a potential transaction meets the filing conditions but the parties do not make the relevant Filing, the violating party may be subject to a fine of not less than AED 100,000 and no more than 10 percent of the total annual revenues achieved by the party from the relevant product or service in the UAE during the previous fiscal year. Where the relevant revenue cannot be determined, the fine shall be set between AED 500,000 to AED 5,000,000.

Key Challenges:

The fact that the executive regulations have yet been issued poses an element of uncertainty on some of the procedures and thresholds, such as the turnover or the market share thresholds to trigger notification.

In case the authorities do not revert with a decision on the application during the 90 days period or in case it is extend for 45 days, this shall be deemed as rejection of the application. Typically, merger control regimes provide that, if the authority does not issue a decision within the review period, the transaction is deemed cleared as was also the standard under the old UAE competition law.

Author:

Malack El Masry

Galal Elhamamsy