Upholding Competition: Insights into Federal Law No (4) of 2012 in the UAE

The Federal Law No (4) of 2012 on the Regulation of Competition stands as a cornerstone in fostering a dynamic and competitive business environment in the United Arab Emirates. Aimed at protecting and promoting competition.

Ensuring Economic Freedom

At its core, this law is aligned with the principle of economic freedom, that prohibits restrictive agreements. These agreements, often detrimental to healthy competition, include those fixing prices, colluding in tenders, and other acts that impede fair market practices.

Combatting Dominant Positions

This legislation is vigilant against the abuse of dominant positions. Organizations, whether acting individually or in association with others, are prohibited from leveraging their market influence to prejudice, restrict, or prevent competition. Examples in economic terms are an oligopoly and a duopoly

Oligopoly: An oligopoly refers to a market dominated by a small number of large firms or companies. In an oligopoly, these few firms hold a significant market share and can influence the market price. Due to the limited number of competitors, actions or decisions by one firm often impact and provoke reactions from others. Oligopolistic markets are characterized by strategic decision-making, and a heightened awareness of competitors' actions.

Duopoly: A duopoly is a specific form of oligopoly where there are only two dominant firms in a market. These two companies essentially control the entire industry and hold a substantial share of the market. In a duopoly, the actions and strategies of one firm directly affect the other. For example, two dominant grocery stores in the market may collude to lower their product prices over a period of time. The intention is to lure customers from the smaller grocery stores. Clearly due to their size and financial standing, the stores will not survive the market in the long term and will ultimately have to close down, competition is thereby eliminated!

Monitoring Economic Concentration

The legislation also places emphasis on controlling economic concentration operations. By scrutinizing these transactions, the Ministry of Economy seeks to prevent situations where an organization or a group gain excessive control, either directly or indirectly, over others.

Ministry of Economy's Role

The Ministry of Economy plays a pivotal role in enforcing this legislation, with a focus on promoting fair competition, preventing monopolies, and ensuring the integrity of commercial transactions. This creates an environment where competition flourishes and hence contributes significantly to the overall economic development and prosperity of the United Arab Emirates.

Arkhurst & Abdellah Solicitors, UAE.