UAE Law and Practice Contributed by: Alex Saleh, Asad Ahmad, Khaled Abu Orabi and Khaled al-Khashab, GLA & Company
2.2 Failure to Notify Failure to notify a reportable economic concentration transaction may result in a fine of between 2% and 10% of the turnover generated in the UAE by the rele - vant undertaking during the last financial year or, if this data is not available, a fine of between AED500,000 and AED5 million. Nevertheless, the Ministry has, as far as we are aware, never disclosed any penalties that have been imposed for violating an economic concentration transaction. Penalties imposed by the Ministry are usually made public through the Ministry’s official channels (ie, websites and social media pages), as well as local newspapers, which are likely to pick up the news immediately. 2.3 Types of Transactions Competition Law The Competition Law defines three terms that are key to understanding the regulatory framework for merger control in the UAE. The first definition is “relevant market”, which means, “The market that is based on two elements: • concerned products: the product or service or all products or services, which are, in view of their prices, characteristics and uses, interchangeable to meet a particular need of the consumer; and • specific geographical location: it means the physi - cal or digital place where supply and demand con - verge for a product or service and where competi - tion conditions are similar or homogeneous.”The second is the definition of “economic concentra - tion”, which is “any act resulting in a total or partial transfer (merger or acquisition) of a property, usufruct rights, rights, stocks, shares or obligations from an undertaking to another, empowering the undertaking or a group of undertakings to directly or indirectly control another undertaking or another group of undertakings”. In line with the Competition Threshold Rules, “eco - nomic concentration” exists if the relevant person(s) or undertaking(s) meet the thresholds mentioned in 2.1 Notification . The definition of “economic concen - tration” is broad and encompasses several types of
transactions, including internal restructuring or reor - ganisation. The Competition Law does not consider control a determining factor in triggering the regula - tory requirement for notification. The determining fac - tor will always be whether or not these transactions create “dominance” or “economic concentration”. Transactions that do not involve the transfer of shares or assets (such as shareholders’ agreements and changes to articles of association) can still be caught under the auspices of the UAE Competition Legisla - tion if they constitute a “restrictive agreement” or lead to an abuse of a dominant position. This brings us to the third significant term: the defini - tion of “agreements”. These are defined as “agree - ments, arrangements, coalitions or practices between two or more undertakings or any co-operation among establishments or resolutions issued by undertakings’ consortia, whether they are written or oral, explicit or implicit or public or confidential”. The Competition Law considers “agreements” between undertakings which aim to create prejudice within, limit or prevent competition in the UAE as “restrictive agreements”, especially those: • specifying the prices for buying or selling com - modities or services, directly or indirectly, by creat - ing an increase, decrease or stabilisation that may negatively affect the competition; • specifying the conditions of buying, selling or per - forming services and/or any other similar obliga - tion; • colluding in bids, tenders, practices or any other supplying offers; • phasing out or limiting the operations of produc - tion, development, distribution, marketing or any other aspects of investment; • colluding to refuse to buy from or to sell or supply to certain undertaking(s) and to halt or impede the undertaking(s) from carrying out their activities or transactions; • limiting the freedom of commodities or services flow to the “relevant market(s)” or withdrawing them from the market, including the conceal - ment or storage of these commodities or services unlawfully, abstaining from dealing with these
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