A new competition law will come into force in the UAE on 23 February 2013 with the aim of creating a more business-friendly environment in the country.

The law consolidates and adds to existing competitive legislation, specifically defining what is considered as anti-competitive behaviour.

“The competition law takes it a step further,” says Rebecca Kelly, a partner at the Dubai office of the UK-headquartered law firm Clyde & Co.

“The law provides the framework to deal with issues of resale pricing, collusion, abuse of market position, restrictions on predatory and resale pricing, and interestingly enough the toughest penalties are for breaches of confidentiality,” she says.

It also bans any efforts to limit the flow of commodities and services or flood the market with products.

There are a number of exemptions to the law. Sectors such as financial, pharmaceutical, utility, waste disposal and transportation industries are exempt from the regulations.

Although the law comes into force in February 2013, the legislation will not come into full effect until a set of executive regulations are issued. These are expected to be released no later than August next year.

Once these regulations are available, companies will know exactly how the law will be enforced.

“How it is going to be implemented and policed is really going to dictate how it is going to affect the industry,” says Kelly.

The competition law has been discussed in legal circles for many years, and is the first of four new pieces of legislation that will be introduced in the coming months, all of which aim to strengthen regulations governing business in the UAE.

“This [law] along with the proposed companies law amendment, the insolvency law and the small to medium-sized enterprises law – which we hope will be issued in the next two to three months –  will create a more stable legal regulatory environment that will encourage companies to continue to invest in the region,” Kelly says.

The majority of international companies active in the UAE will already have standard competition practices in place across their global operations. However, those companies which have been active in the UAE for many years, with no presence elsewhere, may not realise what constitutes anti-competitive behavior.  

Affected companies will have six months from the date the competition law comes into force to ensure they are complying with the regulations.

Breaches of the new law could carry fines of between AED500,000 ($136,132) and AED5m.