In most states, there are elaborate laws that are put in place for the sake of customer safety and for setting a guideline for companies to operate their businesses. The motive for setting up such laws is to ensure that there is an equal opportunity for similar kinds of businesses to operate in the market without any of them becoming the powerhouse in the competition. In other words, it is mostly implemented from preventing any of the businesses to play any dirty games for the sake of profit. These laws are known as competitive laws or antitrust laws. The implementation of competitive law takes place through two pathways- public and private. Antitrust law as a term is used in the United States while in China and Russia, it is known as anti-monopoly law. The United Kingdom and Australia have been using the term trade practice laws. The European Union on the other hand uses both competition law and antitrust law.
What is Competition Law?
Competition law or antitrust law dates back to the Roman Empire where the various business practices in the markets, guilds, as well as governments, were under great scrutiny. However, it was not until the 20th century that the competition law came to be implemented in the international market. Only after the passage of a century, the biggest and most extensive system of regulated competition laws were implemented by the United States antitrust law and the European Union competition law. Various nations along with their regional authorities have also formed their respective international support as well as enforcement networks.
The present form of competition law has been mostly undergone a form of evolution and hence has been limited to the nation where fair competition in the market is maintained. Any activity that goes beyond the borders of the state does not come under the jurisdiction of the national competition laws. However, exceptions lie with the nation-state level where some countries allow the implementation of the extraterritorial jurisdiction for that competition to be based on the effects doctrine.
When the international market comes into question, the competition is supervised by the international competition agreements.
Elements of the competition law or the anti-trust law:
There are three main elements of the competition or the anti-trust law.
Prohibition of the agreements or practices which lead to any kind restriction to free trading along with competition between various businesses. Special care is taken to ensure that the cartels cannot become a barrier to free trade and repress it in any form.
Zero tolerance policy for exhibiting any abusive behavior projected by a firm that is in a position to dominate the market or any kind of anti-competitive practices which could lead to reaching such a dominating position in the first place. The methods that are usually used for the implementation of such practices are predatory pricing, tying, price gouging, and refusal to deal.
Lastly, principles are also used to supervise the various mergers and acquisitions of big corporations, along with a few of the joint ventures. Any transaction that might seem to be a threat in the process of a competition runs the risk of being prohibited in the first place.
What are the objectives of Competition Law?
There are a few objectives of competition law, the most important ones are to maintain as well as encourage competition as a means of promotion of economic efficiency while trying to maximize the welfare of the consumers. The form of regulation takes place through the implementation of laws that help promote or maintain the competition in the market, which in turn is regulating anti-competitive conduct. However, the ability of a business firm to cause the breach of the competition laws requires the market power of the business firm to be influential enough, making the bigger firms and companies more vulnerable to the scanner.
How do Competition Laws affect businesses?
The effect of competition laws on business is mostly positive. The reason being the establishment of a proper business culture, which in turn is helpful in maintaining the competition, and hence allowing the growth of the businesses.
In order words, competition law works as a barrier between the businesses and the harmful business practices such as incorporate price-fixing, sharing of the market, controlling production, and bid rigging. In case any of your businesses are included within the various anti-competitive agreements, there are chances that you will be at risk. Thus, it is absolutely important to ensure that the competitions are enforced by the various regulative bodies in order to prevent any anti-competitive behaviour of organisations.
It is also important for the organisations dominating the market, not to dominate the position and try to make things work to their advantage. One such case was reported in 2017 when Google was found guilty by the European Commission for abusing the position it held in the market. By doing so, Google was able to place its goods (Google Shopping) at a higher position in the search engine which became a disadvantage for various other shopping services. Following this event, the Competition and Markets Authority (CMA) along with the European Commission enforce competition laws with utmost care and compulsion in both UK and the EU. It is only then businesses can thrive in an ethical manner and any kind of corruption is eliminated from the business sector.
Competition law in UAE
In the UAE, competition law is known to target promotion as well as protection of competition, along with discouragement of any anti-monopoly practices. By doing so, the efficiency of the market, as well as the interest of the consumer, is maintained.
The aim of the implementation of the competition law is to ensure that sustainable development is practiced which would thereby be possible only when a healthy and productive environment exists between various organizations with the help of fair market competition. UAE implements Federal Law Number 4 of 2012 on the Regulation of Competition (Competition law) in order to govern the market competition in UAE. Any kind of exclusion or act of prohibition of agreements that are restrictive in nature is addressed with urgency.
For the implementation of Federal Law no. 4 of 2012, Cabinet Decision No. 37/2014 is used which is also known as Implementing Regulations. It is Cabinet Decision No. 13/2016 that provides the ratios and controls that are in relation to the application of Federal Law No. 4 of 2012.
The competition regulator under UAE Laws is the UAE Competition Regulation Committee, which comes under the establishment of the Competition Law. The functioning of the same is supervised by the Ministry of Economy. The committee came to see the light of the day in 2018, and to date, it regulates any of the competition in the business market of UAE.
Areas that are under the scanner of the Competition Law:
Various restrictive agreements such as Article 5 of the Principal Legislation, which has put prohibition of agreements between various establishments that include the influence or fixes the prices of goods, or controls the supply of products that are detrimental to the entities in the market competition; creates a collusion in the holding of tenders; or in general colludes against the buying or the selling of a product or services of a particular establishment; creating divisions in the market that would lead to selective allocation of customers based on their geographical locations; creating hindrance in the market for establishments, denying them entry to the market or complete exclusion of concerns from the market.
Any such behaviour is levied a penalty of minimum of AED 500,000, and it can go up to 5,000,000.
In cases of abuse of the dominant market position, the Article 6 of the Principal Competition Legislation prevents any entities from enjoying the dominating position in their respective market spaces. The violation of the competition law have been recorded to take place in many forms such as imposition of conditions before reselling any product or service, whether direct or indirect; making barriers that hinder new players from entering the market; exposition of old players by lowering the cost of any product or service; creating difference between customers; violation of previously established trade practices; manipulating prices; etc.
If any business establishment is caught committing the crime of abusing the position of dominance, is liable to be fined at least AED 50,000, and this amount can go up to AED 5,000,000.
However, there are a few social objectives of competition laws as well. Since the main focus of competition laws has been the safeguarding of the public’s welfare, various sectors of the public interest also come under the radar of the competition laws.
Some of them are education, employment, and health of public. Since each and every law needs to be in regards to the basic human rights, the competition law too comes under the sane parameters. Hence, it is important that the market imperfections are addressed immediately in order to ensure that basic freedom of individuals are not threatened. By doing so, general public shall have access to a dignified life by enjoying equal opportunities in every sector of the society- education, employment and health.
Proper implementation of the competition law is also necessary for the optimum allocation of the resources that are available. To further elaborate, the production of good, supply, distribution, acquisition, and finally the regulation of goods and services would be possible in a condition where the resources are utilized properly. This in turn would be possible when the resources are optimally allocated in a competitive market. For doing so, it is necessary to be fair and reasonable.
Minimising wastage is also necessary for the optimal usage of resources.
Exceptions and exemptions
However, there are some exceptions to the law- entities that are owned by the government (federal or local), any establishment that has been decided upon by the federal government; entities whose ownership is more than 50% lies with either the Federal or the Local government.
Other establishments that do not come under the competition law are small and medium establishments or SME. Under the Cabinet Resolution No. 22 of 2016, financial thresholds have been set up for the micro, small, and medium enterprises on the basis of their trading, manufacturing, or service sector.
Exclusive distribution agreements are also exempted from the implementation of the Competition Law since it comes under the jurisdiction of the Commercial Agencies Law or Federal Law No. 18 of 1981. Some sectors are also exempted from the Competition law, but the distinctions are not very clear.