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The Competition Law in the UAE was enacted in the summer of 2013. It includes regulations aimed at eliminating any unlawful practices as well as “anti-competitive behavior and monopoly practices” in the country (Milne par. 1). Before this law, there were hardly any regulations in the Emirati market that could safeguard the rights of companies. It is necessary to note that the rapid economic development of the country and its increasing integration into the global market have forced the Emirati government to introduce particular regulations (Dabbah 360). Notably, the rules refer to private-owned companies only while state-owned organizations, as well as SMEs, do not have to comply with the law (Fox and Healey 776). More so, such industries as oil and gas, sewage treatment, telecommunications, finance, transport, electricity, postal services, and pharmaceuticals are also excluded from the law (Oxford Business Group 297). However, the implementation of the Competition Law makes the Emirati market more attractive to international investors as well as local entrepreneurs who can be sure that there are transparent and effective rules to follow. It is possible to consider major dos and don’ts of the right competition practices to understand the benefits of the implementation of the Competition Law in the UAE.
Top 10 Dos and Don’ts
One of the major focuses of the law is merger control. Therefore, it is the right practice to make sure that the merger is transparent and lawful. Thus, the company should provide a written notification about the merger to the Ministry of Economy within thirty days before the completion of the merger. The Ministry provides its resolution on the merger and its lawfulness. Notably, the assessment is provided within 90 days, which is quite a long period that can prevent companies from proper development. However, when the company obtains a favorable resolution of the Ministry, proper reputation is developed and the organization is regarded as a reliable partner and producer of products or services. The government is also able to trace any unlawful or obscure mergers that can potentially undermine the proper development of the Emirati market or any of its niches. Unlawful acquisitions and mergers will be penalized.
The second right practice, which is also related to mergers and acquisitions, is the company’s responsibility to provide information on the economic impact of the merger (Reeves and Hilton 4). Thus, the organization, which is usually the buyer, should provide quite extensive reports (or any other documentation) where economic outcomes of the merger are identified. These outcomes should include the effects on the market and its development. Clearly, the company should provide correct and relevant information only. This can help in obtaining the favorable resolution of the Ministry.
Organization should also make sure that all their practices comply with the rules mentioned in the law (Shah et al. n. pag.). In this respect, one of the major don’ts is related to predatory pricing. Thus, organizations cannot drive down prices to force other competitors to leave the market (Seifert UAE/9). This practice can be quite easily detected, as the price should be higher than average variable costs, otherwise, it is regarded as predatory. If the company is involved in such a practice, it risks destroying its reputation and be assigned to pay a certain fine. The law addresses this issue as such practices negatively affect the development of the Emirati market as they may lead to monopolization of some sectors of the economy. Organizations with significant resources will be able to prevent new (especially small or medium) companies from entering the market.
Another important don’t is associated with trade restraints. When a company forces the customer or a partner not to have any business contacts with competitors, it is seen as trade restraint (Deepak n. pag.). The practice also involves differentiating between customers and partners, discriminating some of them due to some reason. Such actions will lead to certain sanctions (fines) by the new Competition Law. More importantly, it will have a negative impact on the organization’s reputation and its further development. It can be isolated as organizations will be reluctant to deal with the company that resorts to such unethical and unlawful practices. The new law addresses trade restraints as they can also harm the development of the Emirati market since some companies may be forces out of the market and the competition will be quite limited. Monopolisation can one of the possible outcomes of such practices.
The next don’t to be considered is concerned with the reduction of production or distribution of products. Some companies try to reduce their operations to create an increased demand and to make the prices go up (Deepak n. pag.). This is quite a common practice and companies that operate in different areas of the country sometimes reduce their production and distribution in some areas where competition is very weak or absent. This practice also involves agreements between companies that ensure the operation of particular companies in the area. This artificial deficit can also lead to the deterioration of the market. Of course, it violates the rights of consumers who have the right to choose the best products at the most appropriate prices. As for companies behaving in such a way, the practice can lead to the fines imposed under the Competition Law.
Another practice to refrain from is to knowingly present wrongful data on some products and/or prices (Deepak n. pag.). Organizations sometimes spread information that encourages customers and partners to buy more (and at higher prices) or to refrain from buying some products or using some services. This practice also prevents proper development of competition in the market. This practice is often associated with deterioration of quality, higher prices, limited competition. Of course, the practice also includes the spread of wrongful information about other companies. This can lead to the forced exit of some organizations from the market. It is also noteworthy that when the company’s unlawful actions are revealed, it will have to pay certain fines under the Law and it can also lose its reputation. Admittedly, the organization will be seen as an unreliable producer and partner, and it can be difficult to win customers’ and partners’ trust back.
Under the Competition Law, it is forbidden for companies to make agreements with their partners, suppliers or other organizations on specific (fixed) prices of products or services. This undermines the development of the market and often leads to deterioration of the quality of products and services (Low 130). Setting higher prices violates the rights of customers. Besides, if the companies agree to set low prices, this can prevent new competitors from entering the market. Of course, this undermines the development of the market, as no new entrants will be able to provide their services and products, which can raise the market (or one of its niches) on a new level. Companies involved in such practices will be fined by the new law.
It is also forbidden for organizations to be involved in the collusion of bids. This practice involves entering agreements with other companies and fixing some bids value. This can also include participation in tenders with the use of similar agreements. In this way, companies manage to make contracts that are favorable for them and lead to larger financial gains. However, such practices deteriorate the development of the Emirati market where companies that can provide better products at better prices will be excluded from the process of bidding, as organizations with more resources will prejudice the bidding process. Of course, new competitors often fail to enter the market due to such actions of companies that have already occupied certain niches.
Another don’t take into account is related to essential facilities. Thus, some companies may limit access to other companies to certain facilities. For instance, a company can provide access to specific suppliers while discriminating against others. Some organizations that have some control over some facilities or infrastructure try to make this control complete and provide particular companies with additional opportunities. Of course, these organizations fulfill certain conditions (for example, provide discounts or agree to set fixed prices on services and products, and so on). Of course, this leads to unequal opportunities and deteriorates the market. It can also lead to certain monopolization of the market. According to the Competition Law, such actions will be fined accordingly.
Finally, companies cannot “unjustifiably” refrain from buying products or services form other organizations (Deepak n. pag.). Some businesses that have the necessary resources try to use this practice to force their partners to reduce the price or even force some companies to leave the market. Of course, this leads to deterioration of principles of competition as small companies are often unable to compete and they have to reduce prices and eventually leave the market. Under the Competition Law, the companies that resort to such practices are fined.
On balance, it is possible to note that the Competition Law addresses quite many practices that can undermine the development of the Emirati market. The law quite effectively regulates competition in the market. However, there are quite significant flaws in the law as there are no sufficient details on some types of punishments, the deadlines are also quite blurred and the law does not reach many organizations and sectors of the economy. At the same time, the Competition Law can be regarded as the first important step of setting rules that are common for the global market. This will make the Emirati market more attractive to investors.
The existence of specific regulations will also ensure the proper development of companies as well as the entire market. It is also important to remember that the existence of regulatory bodies ensures that companies’ practices will be monitored and unlawful or unethical behaviors will be revealed. Hence, the public, as well as various actors in the market, will be able to develop certain views on this or that company. Organizations will try to refrain from unlawful practices to avoid fines and destruction of their reputation. At the same time, it is important to remember that more steps should be undertaken to enable the UAE to gain its position in the global market.
Dabbah, Maher M. International and Comparative Competition Law. Cambridge: Cambridge University Press, 2010. Print.
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Low, Linda. Abu Dhabi’s Vision 2030: An Ongoing Journey of Economic Development. London: World Scientific, 2012. Print.
Milne, Eric J. “UAE Competition Law Update: Consequences for M&A Transactions in the UAE.” Jones Day. Web.
Oxford Business Group. The Report: Dubai 2014. Oxford: Oxford Business Group, 2014. Print.
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Shah, Omar, William Seivewright, Adeola Adeyemi and Alia Dajani. “How New UAE Competition Law Will Impact Businesses.” Al-Mirsal. Web.