The UAE joins In and Amend Their Merger Control Regime

The United Arab Emirates (UAE) in late 2023 enacted Federal Decree-Law 36/2023 on the Regulation of Competition, comprehensively overhauling the country's competition regime. The new amendments will take effect on 31 January 2024.  Yet, at the end of January we are still waiting for the executive regulations to the new law. The UAE legislator announced that until the new executive regulations are enacted, the executive regulations to the old law remain in effect. This raises considerable problems as material parts of the new regime are to be determined by the new executive regulations—most notably the new merger control notification thresholds. Until the new executive regulations are issued, companies have to deal with considerable uncertainty regarding the UAE merger control regime. Furthermore, we have to date not seen any meaningful affords of the UAE government to increase capacities of the UAE competition authorities. That might mean that we are in for a bumpy start of the new UAE competition regime—and in particular merger control. This is particularly problematic since the new law provides that, if the authorities do not actively issue a decision on a transaction within the review period, the authorities are deemed to have objected to the transaction.

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. Such a dominant position was deemed to exist where the market share post-closing was 40 percent 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. Both the amended market share thresholds as well as the newly introduced turnover thresholds and the relationship between the two will be determined in the new executive regulations. Until these regulations are issued, the new merger control regime cannot be effectively applied. Based on discussion with the authorities we expect them to continue to apply the old regime until the new executive regulations are issued.

The new law also brought changes to (1) the expansive exemptions that substantially limited the scope of the old merger control regime, as well as (2) the filing process and deadlines. 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. The only statutory exemption that was upheld is the exemption for government owned entities.

Under the old regime there was some ambiguity regarding the filing deadline. In practice, the authorities required a notification to be made at least 30 days before closing. The new law now requires notification no later than 90 days before closing. Filings will be based on a filing form to be issued by the authorities. Furthermore, the new law explicitly allows for a voluntarily, additional submission that further expands on the transaction, its impact on competition in the relevant market, and outlining actions the parties intend to take to prevent or mitigate anti-competitive effects of the transaction. This supplementary filing document must be submitted no later than 30 days after the initial submission.

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. This puts the UAE merger control regime ad odds with international best practice. 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. This serves to provide clarity for companies. The UAE’s new approach poses the risk that a transaction may be objected to simply because the authority could not reach a decision in time, a scenario that is particularly worrying given the—even compared to other regulators in the MENA region—little experience and capacity of the UAE competition authorities and the fact that the government to date has taken no relevant steps to increase the authorities staff and other capacities.

Companies can appeal decisions of the authorities in the competent courts within 30 days of the authorities’ decisions being issued. We do expect that in cases where no decision is issued, the deadline for appeals would start on the date the review period lapsed. However, this is not explicitly stated in the law. Further clarification would be welcome.

The authorities may within the review process publish ‘basic information’ on the transaction to inform the public of proposed transactions. This serves to allow interested parties to comment on and raise objections to transactions. The law does not specify what information would be published and whether the parties can designate certain information as confidential. Given the lack of awareness for confidentiality issues and lack of experience in particular with PE structures and listed companies and related transactions, parties should actively engage with the authorities to prevent confidential information from being unintentionally disclosed by the authority.

Aside form the amendments to the merger control regime the new law also introduces changes to the UAE’s antitrust regime. It adds new prohibited practices such as exploiting economic dependency of customers and predatory pricing. Furthermore, the new law revises regulations on established concepts such as abuse of dominance. These changes include more expansive catalogues giving examples of practices prohibited or restricted by the relevant provisions.

The clarifications on the antitrust regime are very welcome. However, some of the amendments to the merger control regime raise concerns. Transactions being deemed objected to, if the authorities do not actively clear them within the review period, is particularly problematic. Not at least because there remain considerable ambiguity as to the regulation of merger control under the new law until the new executive regulations are issued. Concerns that the authority cannot adequately implement and administer an active merger control regime add to these concerns. There are no signs that necessary steps to change this have been taken. Hence, companies should expect a difficult start of the new UAE merger control regime. To mitigate resulting risk active engagement with the authorities—which has been difficult under the the old regime—will be required.