Changes to merger control thresholds

The Decision clarified the thresholds that must be met in order for a transaction to be notifiable to the UAE Ministry of Economy. The following two tests must be satisfied under the Competition Law for a merger control filing to be triggered:

• The transaction must be an "economic concentration". This includes any complete or partial transfer of the ownership or usufruct rights of property, rights, equity, shares or obligations of one entity to another, empowering the entity or a group of entities to directly or indirectly control another entity or group of entities. However, some crucial uncertainties remain in this respect: (i) the concept of an economic concentration currently appears broad enough to capture potentially joint venture arrangements; and (ii) neither the Competition Law nor the Decision provide any additional guidance on the meaning of "control" for these purposes. In particular, it is unclear whether the acquisition of minority shareholdings would trigger a notification requirement.
• The new turnover threshold or market share threshold must be met. In addition to being an economic concentration, a transaction must meet one of the following thresholds:
  • Turnover threshold: the annual sales of the parties in the relevant market in the UAE exceed 300 million dirhams (approx. USD 81.7 million and EUR 79.2 million) during the last fiscal year; or
  • Market share threshold: the combined market share of the parties exceeds 40% in the relevant market in the UAE during the last fiscal year.

The market share threshold remains consistent with the position under the old law. However, the new turnover threshold presents an additional mechanism to bring a potentially wide number of transactions within the scope of the Ministry of Economy's review. This is particularly the case given the turnover threshold does not specify whether it considers the parties' combined turnover or can be met on the basis of one party's turnover alone.

Where a transaction is notifiable, parties must submit an application to the Ministry of Economy at least 90 days prior to completion of the transaction (compared to 30 days under the previous regime). Unlike the old law where a non-response by the Ministry was considered acceptance, under the Competition Law, silence of the Ministry before the expiry of the statutory review period amounts to a refusal of the transaction.

Abuse of dominance

The Decision now also confirms the market share threshold required for the purposes of establishing whether a party holds a "dominant position". This is the case where: (i) the share of any entity, singly or in partnership with other entities, in the relevant market exceeds 40%; or (ii) the entity has the ability to influence, which would cause harm to the relevant market as will be further clarified in the Implementing Regulations accompanying the Competition Law.

Comments

It is clear that the Competition Law, alongside the clarifications now introduced by the Decision, broadens the scope of transactions likely to be captured by the new UAE merger control regime. This development underscores the UAE Ministry of Economy's commitment to more rigorous enforcement and oversight.

Going forward, where a transaction has any UAE nexus, it is recommended for parties and advisors to consider whether a potential UAE merger control filing is required. This proactive approach is advisable given the stricter financial and administrative penalties for failure to notify.

Notwithstanding these advancements, several points remain to be clarified, which the anticipated Implementing Regulations are expected to address in the coming months, including on jurisdiction, transaction approval timelines, and the Ministry of Economy's approach to penalties and sanctions for failure to notify. Further, while it is encouraging that the new turnover-based threshold introduced by the Decision considers domestic turnover, it nonetheless appears to be a combined threshold. This means that transactions will be captured even where the target has no revenues in the UAE and there is no overlap between the parties' activities in the UAE. This issue is certainly not uncommon in the region but the upcoming Implementing Regulations will hopefully clarify this point to exclude such transactions from the scope of the UAE merger control regime. This would be in line with the ICN's recommended practices for merger notification and review procedures, which state that, in order to be notifiable, a transaction should have a material nexus to the reviewing jurisdiction, particularly through a significant local presence on the part of the target.

We will keep you updated on further developments as the Implementing Regulations are issued and further guidance becomes available.

To speak with us in relation to the Competition Law, or any commercial matters or issues more generally, please contact one of the Baker McKenzie team members above.