Pre Merger Notification under the New Competition Law

The businesses are expanding through mergers and acquisitions, a great strategy to increase the business size. There could be some mergers that may create a monopoly in the market, affecting adversely the healthy competition and interests of the consumers. The United Arab Emirates (UAE) has also updated the legal requirements for mergers. It has included a Pre-Merger Notification under the New Competition Law. This law has ensured fairness and transparency in the business environment. Hiring lawyers in Dubai is a good idea in businesses especially when mergers have to happen. We have most trusted lawyers and legal consultants.

In recent years, the UAE has made significant developments which has led it to be a global business hub. The economic growth of the UAE has attracted investors and so competitive markets are created. To have healthy business competition and prevent monopolistic practices, competition laws have been introduced.

The Federal Decree-Law No. 4 of 2012 (Competition Law) has been created to avoid harmful business practices, involving monopoly. The law promotes fair competition and protects consumer rights and interests in the UAE. Let’s explore it more:

When a business wants to do joint ventures or mergers in the UAE, they have notified the business expansion step to the authorities. The notification sent to authorities before doing any merger, acquisition, or joint venture is known as pre-merger notification. The purpose of this notification is to ensure if the idea is good for the consumer interests or if will it have harmful effects on healthy business competition. If businesses fail to provide the pre-merger notification and continue with the proposed transaction, the stakeholders will have to pay legal penalties. To avoid any penalty, businesses should get professional guidance from corporate lawyers in Dubai.

Under the New Competition Law that is issued through Federal Decree-Law No. 14 of 2022, merger control has been enhanced. However, it upholds the commitment to keeping the market competition healthy and safe from harmful business practices. Additionally, clarity for businesses for mergers and acquisitions has increased.

The New Competition Law is developed with certain aspects:

• Mergers and acquisitions can take place if they have met the market thresholds and a certain amount of the turnover.
• The Ministry of Economy has more authority than anyone else. Therefore, market assessments and merger approvals have to come through the Ministry.
• The law also evaluates businesses over their impact on the market, ensuring no harmful practices are applied in the market.
• The procedure and timelines for approvals and submissions are also discussed under the New Competition Law.
• Timelines and procedures for submitting notifications and obtaining approvals

Businesses that are new in the UAE or looking for business expansion for the first time should consult attorneys in Dubai. It will help them in saving extra costs on legal services.

Not every corporate transaction indeed needs a pre-merger notification. Depending on the market share, turnover, and market structure, the pre-merger notification is required. Transactions that specifically need notification are the ones creating a monopoly by doing the merger. Also, acquisitions where the total turnover from both parties exceeds the legal threshold. However, joint ventures that may affect the business competition may also require pre-merger notification.

The Ministry of Economy has to ensure that thresholds and definitions in the business environment shall be updated. It helps the lawyers in Dubai and business owners to know about the legal process of mergers and acquisitions in the UAE.

The procedure of pre-merger notification is strategically designed into structured steps for better assessment:

1. Initial Assessment

The businesses should be assessed to see if they meet the criteria for notification. In this case, the lawyers in Dubai could be handy as they will evaluate the market shares, and look into the turnover figures and potential concerns for business competition.

2. Submission of Notification

The notification is submitted to the Ministry of Economy. It must have the details of the business profiles and parties involved in the business. Further, financial statements and market data and structure shall be shared with the Ministry. Additionally, the transaction shall be fully described with clarity in the document and justify the need for a merger or acquisition.

3. Regulatory Review

Once the Ministry goes through the document and assessment, it will have to ensure whether the transaction will strengthen the market position or will be able to reduce the competition. The Ministry is mindful of the interests of the consumers throughout the process.

4. Approval or Prohibition

Once the review has been made by the Ministry, it might approve the transaction easily or may have some conditions to fulfill. In rare cases, the Ministry may not allow the transaction as it can harm the healthy market competition in the UAE business environment.

Knowing that it could create problems, business owners should hire attorneys in Dubai. They can get a successful pre-merger notification and make smooth business transactions in the UAE.

The New Competition Law has been exercised in the UAE with strict penalties. It includes fines based on the business’s turnover, suspension of prohibited mergers, and other legal actions that can be taken by the authorities. The businesses can avoid legal penalties if they ensure legal compliance at every stage of the mergers and acquisitions.

The pre-merger notifications assist with the administrative tasks of the corporate transactions. It adds value to the business and protects the market competition. However, the notification also creates sustainability and transparency in a legal way for the parties who are merging in the UAE business environment. There may not be any legal dispute about market competition once the pre-merger notification has been issued.

However, seeking legal help from the lawyers in Dubai for pre-merger notification could help businesses. They can avoid unnecessary obstacles and delays in the merging process. Foreign companies are not impacted negatively by the New Competition Law. They can do mergers and acquisitions as per the law.