UAE Competition Law: New Turnover-Based Merger Control Threshold | Baker Botts L.L.P.

The impact on local and foreign-to-foreign M&A transactions

The United Arab Emirates (“UAE”) recently announced a turnover-based threshold for merger control filings that supplements the Federal Decree-Law No. 36 of 2023 (“UAE 2023 Competition Law”). The 2023 law stated that a subsequent cabinet decision would establish new merger thresholds. UAE Cabinet Resolution No. (3) of 2025 has now set that turnover threshold at AED 300 million (~ USD 81.67 million / EUR 79.2 million) in annual sales. The new threshold is applicable to all relevant transactions that are not closed by March 31, 2025.

The practical impact of the new rules should not be underestimated: parties to local and international M&A transactions who could until now legitimately take the position that merger filings in the UAE were not required, may now be faced with an additional regulatory requirement on the critical path of the closing of their transaction. This new requirement is likely to be reflected in SPAs, JVAs and other agreements bringing about structural changes to companies’ governance structure.

The new rules bring the UAE merger regime closer to the International Competition Network Recommended Practices for Merger Notification and Review Procedures and merger control practices in many jurisdictions within and outside the MENA region. However, some concerns remain with regard to the proper scope of the UAE new filing thresholds and the impact of those rules on both foreign-to-foreign and local M&A transactions. In particular, it remains unclear whether the new AED 300 million threshold may also be met by only one party to the transaction.

Maintaining the Market Share Threshold

Previously, parties were required to notify the UAE Ministry of Economy (“MoE”) when their post-transaction market share exceeded 40 percent in the relevant market during the previous fiscal year. This market share threshold remains in place as an alternative merger control standard. While this criterion is already well-established (albeit sometimes difficult to apply in practice), the new turnover threshold is expected to significantly expand the range of transactions that need to be reported to and require the approval of the MoE before they are implemented.

Introduction of the Turnover Threshold

Under the new turnover-based threshold for merger control, if the combined total annual sales of the merging entities exceed AED 300 million, the merger will be subject to review, regardless of market share. This turnover threshold serves as a clear trigger for mandatory filings, particularly in sectors that generate high revenues but are less concentrated. Additionally, as mentioned above, this threshold does not specify a minimum, so it can potentially be met by only one of the parties.

Notification Period

Under the 2023 Competition Law, filings must be submitted to the MoE at least 90 days before the completion of covered transactions. This mandatory review period can be extended, and the review clock pauses when parties respond to requests for additional information. It is important to note that if the MoE has not announced a decision within the 90-day period, the transaction is automatically deemed rejected. Therefore, transaction parties should plan well in advance and include an assessment of whether a transaction is reportable in the UAE as part of their transaction planning and risk analyses.

Penalties

The UAE 2023 Competition Law has updated the penalties for noncompliance. Failure to file can result in fines ranging from 2 to 10 percent of the annual sales in the relevant market within the UAE. If it is not possible to determine annual relevant sales, the fine may be between AED 500,000 (approximately USD 136,128 / EUR 131,357) and AED 5,000,000 (approximately USD 1,361,285 / EUR 1,313,577).

Implications for M&A Activity in the UAE

The introduction of the total turnover threshold is expected to increase the number of transactions subject to review. This change may have a more noticeable impact on large industries with many participants that do not have a high market share but generate significant revenue. Companies that previously engaged in significant M&A activity in the UAE without meeting the market share threshold will now need to assess their total annual sales to determine if their deals meet the AED 300 million threshold.

Key Takeaways

• While maintaining its 40 percent market share threshold for merger filings, the UAE will implement a new turnover-based threshold effective March 31, 2025. This change is expected to increase the number of reportable transactions in the UAE.
• The new turnover-based threshold may encompass previously unreported transactions within high-revenue, unconcentrated sectors.
• Given that deals are automatically considered rejected if not approved within the 90-day review period, it is advisable for parties to conduct preliminary assessments early on to assess whether a transaction falls within the new turnover-based threshold and are reportable to the MoE.

Parties involved in M&A activity involving the UAE will experience increased scrutiny from the MoE and are advised to evaluate whether they meet the new thresholds. The MoE is anticipated to provide further details on the implementation of the UAE 2023 Competition Law. Discussions with the MoE suggest that they are open to receiving inquiries from parties regarding their transactions and any potential reporting requirements. The MoE has emphasized their commitment to achieving the objectives of the UAE Competition Law while also streamlining their review processes.

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