In most jurisdictions, complex rules have been enacted to ensure the protection of customers and to provide a framework for enterprises to operate within. The goal of enacting such rules is to ensure that similar types of firms have an equal opportunity to compete in the market without one of them being the dominant player. In other words, it is primarily implemented to prevent businesses from engaging in unethical commercial practices for the sake of profit. These laws are known as competitive laws. The public and private sectors are both involved in the implementation of competitive law.
Definition of competition law
Antitrust law, also known as competition law, stretches back to the Roman Empire, when diverse commercial practices in markets, guilds, and governments were closely scrutinized. However, it was not until the twentieth century that competition legislation was enforced on a global scale. Only after a century had passed had the United States antitrust law and the European Union competition law adopted the largest and most extensive system of controlled competition laws.
The current type of competition law has mostly evolved and so is limited to countries where market competition is maintained fairly. The national competition regulations do not apply to any activity that takes place outside of the state’s borders. However, there are exceptions at the national level, where certain countries enable extraterritorial jurisdiction to be implemented in order for competition to be based on the effects doctrine. When the international market is in question, international competition agreements oversee the competition.
Elements of Competition Law:
Prohibition of any agreements or actions that impede free trade and competition between enterprises. It is taken extra precautions to ensure that cartels do not constitute a barrier to free commerce or repress it in any way. There is a zero-tolerance policy for any abusive behavior displayed by a corporation in a position to control the market, as well as any anti-competitive actions that could lead to such dominance in the first place. Predatory pricing, tying, price gouging, and refusal to comply are common ways used to conduct such behaviors. Finally, principles are utilized to oversee numerous mergers and acquisitions involving large firms, as well as a few joint ventures. Any transaction that appears to be a danger during the competitive process stands the risk of being disallowed from the start.
Goals of Competition Law
The most important goals of competition law are to maintain and encourage competition as a method of economic efficiency while attempting to maximize consumer well-being. The manner in which regulation is implemented is through the use of legislation that encourages or preserves market competition, which then controls anti-competitive behavior. However, the market power of a business organization must be strong enough to allow it to break competition laws, making larger businesses and enterprises more prone to scrutiny.
Effects of competition laws on businesses
The effect of competition rules on business, on the whole, is beneficial. The reason for this is that a good corporate culture may be helpful in preserving competition and hence allowing businesses to develop. Competition law, in other words, serves to separate businesses from illegal business practices such as price fixing, market sharing, production control, and bid rigging. If your company is covered by any of these anti-competitive pacts, you may be in danger. As a result, it’s critical to have the various regulatory bodies ensure that competition is maintained to prevent business anti-competitive activities. It’s also critical for market leaders not to take over the situation and try to make it work in their favor. In 2017, the European Commission fined Google for unfairly promoting its services in violation of EU antitrust rules. Google’s success benefited from a lack of competition among merchants. As a result, it was able to improve its goods (Google Shopping) ranking in the search engine, which became an obstacle for other shopping sites. Following this event, the Competition and Markets Authority (CMA) as well as the European Commission enforce competition laws with great sensitivity and force in both nations. It’s only then that companies may grow and survive in an ethical way, and any form of corruption is driven from the business sector.
UAE’s Competition Law
In the UAE, competition law is known to target both advertising and protection of competition, as well as any anti-monopoly activities. As a result, market efficiency and consumer interests are protected. The purpose of the competition law’s implementation is to ensure that sustainable development may be achieved, which might otherwise be impossible when diverse organizations operate in a healthy and productive environment via fair market competition. The UAE has implemented Federal Law Number 4 of 2012 on the Regulation of Competition (Competition law) in order to govern the market competition in the country. Any type of restriction or prohibition on restrictive agreements is addressed with urgency.
Cabinet Decision No. 37/2014, commonly known as the Implementing Regulations, is used to execute Federal Law No. 4 of 2012. The ratios and controls in regard to the application of Federal Law No. 4 of 2012 are set forth in Cabinet Decision No. 13/2016. The UAE Competition Regulation Committee, which was established by the Competition Law, is the competition regulator under UAE Laws. The Ministry of Economy oversees the operation of the system. The committee was established in 2018, and it currently regulates any form of competition in the UAE’s corporate market.
The following are some of the areas where the Competition Law is being scrutinized:
Various restrictive agreements, such as Article 5 of the Principal Legislation, which prohibits agreements between various establishments that include the influence or fixing of goods prices, or controls the supply of products that are harmful to market competition; creates a collusion in the holding of tenders; or in general colludes against the buying or selling of a product or services of a particular establishment;
Any such behavior carries a penalty of at least AED 500,000 and as much as AED 5,000,000.
Article 6 of the Principal Competition Legislation prohibits any entity from enjoying a dominant market position in their respective market spaces in circumstances of abuse of the dominant market position. The imposition of conditions before reselling any product or service, whether direct or indirect; creating barriers that prevent new players from entering the market; exposing old players by lowering the cost of any product or service; creating differences between customers; violation of previously established trade practices; manipulating prices; and so, on are all examples of competition law violations.
If a business is detected misusing its position of dominance, it will be penalized at least AED 50,000, with a maximum fine of AED 5,000,000.
Competition rules, on the other hand, have a few societal goals. Because the primary goal of competition laws is to protect the public’s welfare, they also cover a wide range of public interests. Education, employment, and public health are a few among them. Because every law must respect basic human rights, the competition law must also adhere to reasonable guidelines. As a result, it’s critical to resolve market defects as soon as possible to ensure that people’s core freedoms aren’t jeopardized. As a result, the general population will be able to live a dignified existence by having equitable chances in all aspects of society, including education, employment, and health.
The proper application of competition law is also required for the most efficient allocation of available resources. To elaborate, in a situation where resources are correctly employed, the creation of commodities, supply, distribution, purchase, and finally regulation of goods and services would be conceivable. This would be conceivable if resources were distributed optimally in a competitive market. It is vital to be fair and reasonable in order to do this. In order to make the best use of resources, it’s also vital to reduce waste.
However, there are several exceptions to the law: entities owned by the government (federal or municipal), any establishment decided upon by the federal government, and entities having a majority of ownership held by either the federal or local government.
Small and medium establishments, or SME, are another type of business that is exempt from competition laws. Financial criteria have been established for micro, small, and medium firms based on their trading, manufacturing, or service sector under Cabinet Resolution No. 22 of 201
