Salient changes to the UAE Merger Control Regime
Competition Focus
The UAE's New Competition Law brings significant changes to merger control, including the introduction of a turnover threshold, adjustments to filing timelines and exemptions, and the implementation of fees and steeper fines for non-compliance.
Law Update: Issue 367 - Saudi Arabia & Competition Focus
Mariam SabetPartner,Competition & Antitrust
The changing landscape of competition regulation in our region is a clear indication that the UAE and its neighboring countries are shedding their latecomer status by enacting stringent new competition laws. Since the UAE’s New Competition Law (“New Law”) came into effect last December, with a strengthened enforcement regime, there has been high anticipation for the accompanying implementing regulations (“Regulations”) and relevant cabinet decisions.
As we await these pivotal developments, we offer a two-part article that examines the most significant changes from the previous competition law (“2012 Law”) and what’s next regarding the upcoming decisions.
Part 1 covers merger control in its entirety, while Part 2 will address topics related to competition law that fall outside the scope of merger control.
We explore below the main changes in Merger Control and what can be expected in the implementing regulations and subsequent decisions.
Introducing a Turnover Threshold:While the market share thresholds (percentages to be announced in the Regulations) remained under the New Law, notification can also now be triggered by a turnover threshold. The turnover threshold is triggered if 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.
This change is arguably one of the most significant introduced, given the impact a turnover threshold would have on the notifiability of transactions. Looking at the impact the 2019 turnover thresholds had on Saudi merger filings, it is easy to gauge what may be in store for UAE merger filings. The turnover threshold is based on the aggregate annual sales of the last financial year and does not determine the UAE as a market but only addresses the relevant market in terms of sales of relevant goods or services.
Timeline for filing:The timeline for parties to file for a notifiable transaction has now changed to 90 days under the New Law. Under the 2012 Law, the timeline was 30 days. Parties will need to factor in various timeline considerations when negotiating transactions.
The timeline for clearing a transaction remains the same under the New Law; that is, it is still within 90 days (calculated from when formalities are met), which can be extended by another 45 days. What has changed is that this timeline can be suspended if certain conditions are met (as detailed below)
Stopping the Review Clock:Review clock stoppage occurs under the following circumstances:
The Ministry requests additional information from the concerned parties, which can occur:
when inviting interested parties to express their views on the transaction (based on basic information published on the Ministry's website);
if any interested party wishes to submit data or documents to the Ministry related to the transaction;
when the Ministry requires a technical opinion or further information.
Every interested party has the right to file an objection with the Ministry regarding the transaction.
The Regulations should specify the modalities, timelines, and mechanisms for the aforementioned. Given these potential interruptions, the 90 days + 45 days review timeline should be regarded only as an estimated timeframe, which may be extended if any of the aforementioned events occur. Stoppage time must be considered when calculating the transaction timelines.
If a decision is not made within the statutory period, it is deemed to be rejected. This represents a change from the 2012 Law, which considered the end of the statutory period as implicit approval.
Sectorial exemptions:Another significant change introduced by the New Law is the removal of the list of sectors exempted under the 2012 Law. Now, the New Law will grant a sectorial exemption only if the relevant sector already regulates competition matters through its own laws or regulations—that is, it has established rules addressing anti-competitive practices, relevant exemptions, and procedures for approval of merger filings. Furthermore, the New Law allows sectors lacking specific competition rules to apply to the Ministry to request oversight in regulating competition within their sectors.
The Ministry's approach under the New Law demonstrates a commitment to collaborative governance with sectorial bodies to ensure that competition regulations are maintained across all sectors.
This confirms the intent that no sector should be categorically exempt from competition oversight.
Government Exemptions:The New Law does not specify whether an entity can be considered exempt if it is majority-owned (more than 50%) by a government. Therefore, pending the issuance of a clarifying decision, it is prudent to assume that an entity must be entirely government-owned to qualify for exemption. Even in such cases, a specific cabinet decision is required for the exemption to apply. In summary, federal government entities are exempt only with a specific cabinet resolution, while Emirate government entities require an exemption decision from the relevant Emirate government. As of now, no such decisions have been issued.
SME’s exemption The New Law also removes the previous exemption for SMEs that was in place under the 2012 Law. This change has been introduced to encompass nascent businesses which, although they may not yet have a significant market share, could still cause market disruption if they are capable of exerting influence and impact in the market. The turnover thresholds, once issued, will help to clarify the potential impact this could have on merger control filings.
Filing Fees:The New Law mandates the introduction of fees to facilitate the implementation of its provisions, which is expected to include, among others, fees for merger filings. These fees will be established through a cabinet decision, following a proposal submitted by the Ministry of Finance.
Steeper Fines:Under the New Law, penalties for failing to file have escalated, with fines ranging from no less than 2% to no more than 10% of the entity's total annual revenues. In cases where the relevant revenue amount cannot be ascertained, the fine will be imposed as a fixed sum ranging from AED 500,000 to AED 5,000,000
Administrative Penalties:Furthermore, the New Law establishes administrative penalties for entities that violate its provisions, including a penalty of AED 500,000 for any obstruction of the Competition Committee's work during an investigation.
The expected decision from the UAE Council of Ministers on the turnover thresholds is arguably the most highly anticipated decision given the impact it will have on the notifiability of transactions and multijurisdictional merger control assessments.
Other key decisions in the pipeline include, among others: exemptions for government entities, the value of filing fees, mechanisms for filing objections to merger applications, procedures for stopping the review clock, and details of the formalities required for merger filing applications.
For further information,please contact Mariam Sabet.
Published in April 2024
