With regard to competition or anti-trust laws, currently there
is no significant body of law in the UAE dealing with these issues.
Rather than encouraging vigorous competition, historically the UAE
has adopted, and to a large extent still does adopt, a cautious and
conservative attitude as evidenced by the various requirements
regarding local participation in business' carried out in the
UAE and the protections afforded to local registered agents under
the UAE Commercial Agencies Law (see our Article in this
month's Law Update entitled "Recent Changes to the UAE
Commercial Agencies Law").
UAE competition laws can be found in the UAE Consumer Protection Law of 2006 (the "Law") and its implementing Regulations of 2007 (the "Regulations").
The Law itself contains very few provisions regarding competition law. It does state that the implementing regulations of the Law shall set out the basis of determining when there has been an abnormal increase in prices of goods and what constitutes an unlawful monopoly.
The only other references to competition law principles in the Law are a statement that the functions of the Consumer Protection Department shall include the "monitoring and control of prices" and that it shall "work to attain fair competition and combat monopoly". The Law itself also places a direct prohibition on suppliers attempting to manipulate prices of goods by controlling supplies or imposing certain conditions on the acquisition of goods in order to inflate prices (these principles are repeated in the Regulations).
The Regulations deal with anti-competitive and monopolistic conduct in greater detail than the Consumer Protection Law. The focus of the Regulations, insofar as they relate to competition law issues, is on abnormal movements in prices resulting from certain prohibited practices. In our opinion, neither the Law nor the Regulations prohibit monopolies per se. As a consequence, there are no prohibitions on companies acquiring competitors and gaining a dominant market position, for example, but rather there may be prohibitions on actions taken by a dominant supplier if those actions are seen as affecting prices to the detriment of the national economy or consumers.
The Regulations describe the various situations which are considered to be cases of prohibited monopolies. These include selling goods or services at below cost for the purpose of creating a state of monopoly in the market which will damage consumers, the formation of alliances by more than one provider which causes harm to the national economy or consumers and agreements, explicit or implicit, between providers with regards to fixing prices again, that cause harm to the national economy or consumer interest.
The regulations also set out factors that must be taken into account when considering if there has been an "extraordinary" effect on pricing. These include the national inflation rate, the prices for the relevant goods or services over past periods and comparison with prices in neighbouring states.
It is worth noting that we have seen instances where the Consumer Protection Department has made investigations into price increases and the supplier has been required to justify such increases even where there has been no unlawful monopolistic behaviour. Acceptable reasons for increases can include increases in the cost of raw materials or other costs (such as transportation costs) that need to be passed on by way of a reasonable increase in the final price of the product.
The Regulations also prohibit all contracts and agreements that either aim to create, or have the impact of creating, a prohibited monopoly.
Consumer Protection Department
Finally, the Consumer Protection Department is empowered to take the necessary actions and measures against prohibited monopoly practices and dealings that cause damage to the national economy or the consumer interest. Such actions and measures would include ordering that prices of goods be reduced to what the department considers to be an acceptable level.
We are not aware of any other significant actions having been required by the Consumer Protection Department in respect of prohibited monopolies. However, the Regulations leave open what actions may be taken and, in our opinion, it would be open to the Consumer Protection Department to, for example, order that a supplier divest itself of all or part of a business that is the subject of a prohibited monopolistic practice (although, in practical terms, such an approach may be unlikely).
In summary, the Law and the Regulations do contain clear prohibitions on practices that are deemed to constitute unlawful monopolies. The underlying basis for assessing what does constitute an unlawful monopoly is the affect that any such practice has on prices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.