The new UAE competition law: what does it mean for M&A?

Federal Law No. 36 of 2023, the New Competition Law, contained important changes to the UAE’s oversight of major transactions. Chief among them: expanded scope, narrowed exemptions, a revised merger control process, and new enforcement mechanisms including substantial fines.

Expanded scope

The New Competition Law applies not only to economic activity within the UAE, but also to activity abroad that significantly affects the UAE market. If a UAE company enters into a transaction in France that affects its provision of goods and services in Abu Dhabi, the French activity forms part of the analysis.

Two foundational definitions were also revised. “Establishment” now expressly includes branches, and “market” encompasses digital places.

Narrowed exemptions

The previous regime exempted entire sectors, including financial services, transportation and telecommunications. The New Competition Law removed those carve-outs, except where another regulator has express authority to oversee anti-competitive practices.

Weak impact agreements and small businesses no longer qualified for exemption. Where parties had already concluded an agreement that might now breach the restrictive practices prohibitions, they could revise their contracts or apply to the Ministry of Economy for a special exemption.

The exemption for state owned establishments remained, with clarifying language. Only entities specifically identified by a Cabinet decision or by the local government qualify, irrespective of the proportion of state ownership.

Revised merger review

The New Competition Law addresses major transactions through the concept of an Economic Concentration: an action leading to the full or partial transfer of ownership or usage rights in assets, resulting in direct or indirect control over an establishment. Parties must notify the Ministry for approval where either threshold is met:

• Turnover threshold. Total annual sales of the parties in the relevant market during the last financial year exceed an amount set by the Council of Ministers.
• Market share threshold. The combined share of the parties’ transactions against total transactions in the relevant market during the last financial year exceeds a percentage set by the Council of Ministers.

That was a significant shift. Under the previous regime, parties filed only where their combined market share exceeded 40 percent, which is a high bar. A turnover based threshold was expected to increase filing volumes materially.

The timeline also changed. Parties could previously file as little as 30 days before a planned transaction. The New Competition Law set the deadline at 90 days. The Ministry must still decide within 90 days of a completed filing, with a possible 45 day extension where the Competition Committee requests further information.

During review, the Competition Committee assesses the transaction’s potential effect on competition, conducting market research and in some cases seeking public input. The Minister of Economy or an authorised delegate may then approve unconditionally, approve with remedies, reject, or decline jurisdiction where the filing conditions are not met.

The most consequential procedural change: if no decision is issued within the review period, absent an extension, the transaction is treated as rejected. Under the previous law, silence implied approval.

Enforcement

Parties that meet the filing requirements and fail to notify may face fines of between 2 and 10 percent of total annual revenues derived from the relevant product or service in the UAE in the previous financial year. Where relevant revenues cannot be determined, the fine is a fixed sum of between AED 500,000 and AED 5,000,000.

What it meant for deal planning

Entities that previously needed no approval for a major UAE transaction may now require a notification before proceeding. The clarity is welcome. The extended timelines are the practical point: they change when a transaction has to start, not merely how it is documented.