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A Comprehensive

Report
on
Commercial Law

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Table of Content
1. Commercial Law in the United Arab Emirates
2. Main Issue Identified
3. Objectives of the Project
4. Methodology
5. Different Aspects of Government Regulation of Business
6. Debates on regulation
7. Rationale for regulation
8. Typologies
9. Historical Review of Regulation
10. Rationale
11. Distinctive Characteristics of regulations
12. An assessment of the costs and benefits of the intervention
(regulation) for consumers, the industry, society as a whole
13. Evaluation and Recommendation
14. Conclusion
15. References

1. Commercial Law in the United Arab Emirates


To discuss it a broader term, when government laws and regulation start
encouraging competition in a privately operating marketplace it is known
as Competition Policy. Either way, it can be demarcated as policies and
actions of the state intended to prevent certain restraints of trade by
private firms. (Europa.eu, 2016) (Business, Government and Globalization:
An International Perspective, 2016) Competition policy promotes
economic efficiency, development and growth in the frugality. Competition
policy inhibits market concentration and detrimental effects that exist
along with it like broad inefficiencies, structural uprightness and nonadaptability to external blows. (Business, Government and Globalization:
An International Perspective, 2016)When not implemented at the right
time, it can give rise to a costly industrial restructuring in an early stage.

In a scenario when there is no existence of competition policy; the


organizations will collude, enterprises will merge in to their competitors,
and they may also behave as predators for keeping the prices plus profits
high and competition low. (Business, Government and Globalization: An
International Perspective, 2016) This Competition policy draws a thin line
between government and business where the action of the government is
concerned with how the market is operating. Sometimes the policy
behaves to be debatable as the enterprises are not very happy with the
means authorities watch over their operations. Very often the businesses
object on specific precincts and ask for their freedom of action. (Business,
Government and Globalization: An International Perspective, 2016)

2. Main Issue Identified


Over-Regulation- Many times it has been argued by the economists
that it is becoming the greatest constraint as they are not able to
function and are becoming a piece to be eaten by government.

(Tamimi, 2016)
Too Contracted- The law limits the business dealings greatly, it can
lead to potential competition to be left out or so much unrequired

competition to be introduced.
Compromise with Free & Open Trade Ideologies: When some
restrictions are being implied for certain forms of business activity as
free trade policy and this may eventually lead to competitiveness being

eroded completely. (ftp.zew, 2016)


The implication of business on competition cannot be pre-judged as the
economic state of affairs differs for each country in their own way. The
company law serves as a generalized law; which creates uncertainty for
the enterprises because the law does not focus on any specific sector of
concern, applies on each sector equally instead. (Business, Government
and Globalization: An International Perspective, 2016)
3. Objectives of the Project
When liberalization was introduced, it improved competitiveness via
increasing the production capacity for growth and efficiency. A monopolys
privatization would not have made that much impact as a healthy

competition does and therefore there was a need to challenge the market
power misuses and monopolistic practices of cartels, and protectionist
threats. In any country, in order to be eligible for being counted as
competition an initial screening is conducted by the policy consultants.
(Digital Commons, 2016)Competition law imparts a sense of security for
domestic establishments. In developing nations, the risk of foreign
competition stops several sectors from slackening trade blockades. Hence,
competition law is functional to make sure that firms do not perform
collusively and exploitation of market power does not take place.
(Business, Government and Globalization: An International Perspective,
2016)The report has been prepared in order to understand the
Commercial Law with few underlined objectives:

To understand how the competition policy secures the economically


efficient use of resources (Business, Government and Globalization: An

International Perspective, 2016)


To understand how the competition law regulates economic growth of

any country
How the goal of free, fair and open market has been made attainable
4. Methodology

The report develops a methodology for evaluating the competition policy.


There are 9 building blocks of the methodology while an evaluation of
commercial law is made. Each of the three phases is further divided into
three building blocks that aim at validating the corresponding analysis.
(ftp.zew, 2016)

5. Different Aspects of Government Regulation of Business


There are basically three categories of regulation, namely- (Business,
Government and Globalization: An International Perspective, 2016)

Economic regulations- It interferes openly in the market resolutions


such as pricing of products, competition, market entry or exit of
establishments.
Social regulations- It safeguards the public welfares in zones for
example: health, security, the environment, and societal cohesion.
(Business, Government and Globalization: An International Perspective,
2016)
Administrative regulations- It is called as 'red tape' via which
government collects data and mediate in distinct economic judgements.
Most of the economists generally consider the Economic and Social
regulations to be the prime ones. What exactly is the goal of government
ruling of commercials: Government legalizes business in order to
eradicate abuses and to control conduct considered to be unreasonable.
(Business, Government and Globalization: An International Perspective,
2016)Economic regulations generally take the system of explicit

obstructions to entry and exit, licenses and tariff laws, price and
remuneration controller in particular industries. Social regulations, in
contrast, are rules or laws focussed at social goals, such as protecting

inhabitants, workers well-being and security, environmental objectives or


endorsing civil rights. (Business, Government and Globalization: An
International Perspective, 2016)
1. What is the goal of government for regulating the business?
Government legalises business in order to eradicate abuses and to control
behaviour considered to be unreasonable. The goal is to enhance the class
of life for society as a whole by setting the rules under which all
businesses compete.
2. Why does administrative agency regulation occur? It is arises due to the
tough nature of the part of regulation.
3. Who is running administrative agencies? How long do these individuals
serve? It might be the case that agencies are run by a single administrator
who serves at the wish of the executives, in the case of federal agencies it
might be run by the president of the United States or the governor in the
case of state agencies. Otherwise, a commission, the members of which
are selected for staggered terms, often of five years, may run agencies.
4. What do non-regulatory agencies do? Non-regulatory agencies, also
called social regulatory agencies, allot benefits for social and economic
wellbeing and issue regulations leading the spreading of benefits.
5. What are the three types of powers controlled by regulatory agencies?
Licensing power- Permitting a business to enter the field being regulated
Rate-making power- Setting the prices that a business may charge power
over business practices- Defining whether the action of the entity
regulated is acceptable or not.
6. Debates on regulation
Regulation is at the core of the relationship between business and
government and is perhaps the main reason why a perpetual state of
tension exists between the two. Government regulation of business
activity is constantly debated in terms of purpose, scope and means.
(Europa.eu, 2016)ln this debate two issues are generally prominent: first,
the extent to which government should use the coercive powers of the
state to regulate economic activity; and second, whether it is legitimate
for regulation to have social as opposed to economic objectives. (Digital
Commons, 2016)Neither of these issues is ever completely resolved.

Regulations are of following types:


1. Financial Regulation
2. Corporate Regulation
3. Workforce Regulation
4. Competition Regulation
5. Consumer Protection
6. Licensing
7. Environmental Protection
8. Utility Regulation
Why the government regulates: There are two primary propositions to it.
(Business, Government and Globalization: An International Perspective,
2016)The first is that governments intervene in economic activities to
promote what is broadly understood to be common good or the public
interest. The counter-argument is that government decisions are linked
not to the public interest but, as some economists argued, to 'the
clamorous importunity of partial interests', or in other words, the private
interests of powerful groups. The second instance suggests that advocates
of the public interest model argue that governments intervene when
confronted by market failure - when 'markets fail to produce either
economically or socially desirable outcomes' Under ideal conditions,
markets ensure an efficient allocation of resources, meaning that
consumers get good products at reasonable price. But in reality market
conditions are often sub-optimal. Competition may be less than perfect.
Private providers may not find a market for some essential services.
Information between buyers and sellers may be less than complete.
It is true that there is an international trend for governments to disengage
from some forms of regulation, but this has generally been accompanied
by a corresponding increase in other forms of regulation. In this sense,
regulation may seem as pervasive as ever. (Business, Government and
Globalization: An International Perspective, 2016) But concern about the
amount of regulation tends to distract attention from what is perhaps of
greater significance - namely, the effective less of regulation. (ftp.zew,

2016)Regulation can take many forms and it cannot be assumed that all
of these will be equally effective. (Business, Government and
Globalization: An International Perspective, 2016)Indeed, it is possible that
a regulatory instrument will exacerbate or compound the problem it was
meant to address. Knowing when to regulate, whom to regulate and how
to regulate are surely some of the most difficult challenges confronting
any government.
7. Rationale for regulation

Till date, there have not been any noteworthy implementation actions
taken by the Ministry of Economy in UAE (the appropriate authority tasked
with governing the competition law) nor any prime UAE law court cases
administering the comestibles of the competition law. (Europa.eu, 2016)
One of the main motives for this is the law anticipates a number of
processes being thorough in supplementary executive regulations which,
until the recent times, had not been issued. (Europa.eu,
2016)Nevertheless, the Federal Cabinet of Ministers (Cabinet) of the UAE
has now dispensed executive protocols which took upshot on 27 October
2014. (Business, Government and Globalization: An International
Perspective, 2016) These regulations pact with processes relating to:
(i) Seeking absolutions from rules recitation to obstructive agreements
and abuse of prevailing situation.
(ii) Pre-merger authorizations where the cumulative suitable marketplace
share of the people involved exceeds a definite percentage.
(iii) Grievances being made by a concerned person to the Competition
Department of the UAE Ministry of Economy (Department).

In wide-ranging terms, applications for absolutions or pre-merger


endorsements will be defer to to the Department along with definite
quantified complementary statistics or certification and the concerned
department shall then make a commendation to the Minister of Economy
of UAE. The Minister shall approve, provisionally approve or reject the
application within a supreme of 135 days from the date that the
apprehensive parties have been informed of the Ministers reception of
the application. (Europa.eu, 2016) Grievances, over which must be
complemented by particular data or certificate or documentation, are
made to the Department which will either regulate that there are ample
grounds for auxiliary exploration or may discard the complaint. (ftp.zew,
2016) If the complaint is acknowledged for further exploration, the
Department will acquaint all parties convoluted, allow them to make
suggestions in respect of the problems raised, pursue auxiliary material if
required and then issue a statement and commendation to the Minister.
(Business, Government and Globalization: An International Perspective,
2016)The Minister shall then issue a determination with regards to the
matter within 30 days of receipt of the report from the Department.
Although the issuance of the guidelines should be realized as an optimistic
step, they raise a number of further issues and it rests to be seen how
they will be executed in practice. (Europa.eu, 2016)By the method of

example, one of the papers compulsory to be submitted as part of the premerger endorsement is the draft contract with respect to the merger. It
is indistinct whether this permits parties to arrive into a lawfully obligatory
sale arrangement that is provisional on endorsement being established.
(ftp.zew, 2016) Further, while the guidelines allow a party to necessitate
that information and documents that are submitted to the Department
remain trustworthy there is also a compulsion on that party to yield a nonconfidential summary of such information or documents that is adequate
to designate the content of trustworthy data. (Europa.eu, 2016) It is
indistinct as to what extent of detail such a summary will oblige.
In conclusion, additional primary breach that still remains with respect to
the UAE competition policy is that there are definite substances that are
mentioned to in the law as being the topic of distinct particular
determinations to be issued by the Department. (Europa.eu, 2016)One
such material is the pertinent percentage market portion edge that will
prompt the requirement for pre-merger endorsement. Till now these
resolutions have not been issued and till the time they are, and until
further guidance is received from the Department or the UAE Courts on
how definite ideas referred to in the law will be construed (for instance,
what organizes the relevant market for goods), the influence of the
competition law on economic movement within the UAE remains
indistinct. (Europa.eu, 2016)
8. Typologies

The eminence of competition law denotes to the inclusive strategy of the


competition policy administration and assesses the degree to which it
underwrites to the triumph of the objectives personified in the authority's
competition law. (Tamimi, 2016)The solicitation of competition rules is
based on announcements, strategies and regulations that need to be
revised intermittently. Any policy improvement should comprise an expost valuation of prevailing guidelines before selections for reform are
well-thought-out. (Tamimi, 2016)

Typology of Economic Evaluations of the Commercial Law


9. Historical Review of Regulation
Competition law in years has shifted towards a more economic layout. The
essential goal is focused towards consumer welfare; a more neoclassical
economic thought rather than cases. The assumption personified in the
"more economic approach movement" is, however, that neoclassical
economics itself provides the norms and goals for UAE competition law.
(Business, Government and Globalization: An International Perspective,
2016) It also provides the main means for applying those norms. The main
function in the law is the use of economic analysis.
In Medieval times, a significant economic activity involving incorporated
bodies was started and these incorporated bodies were known as
companies. (ftp.zew, 2016) In response to the commercial requirements
and opportunities, individuals started pooling their resources. Hence, the
need for the legal recognition arises related to such arrangements.
The earliest form of the recent company grown in order to facilitate stateapproved foreign trade. In order to exploit foreign territories, The Hudson's
Bay Company and the East India Company both were set up by Royal
Charter on behalf of the British Government. (Europa.eu, 2016)
From such bodies, the ideas of cooperatively owned stock and profits
developed, with the help of specific requirements and structures of
companies.
By the time companies became more in number, hence, the need for
effective regulation develop. By this way, Company law has been
developed and evolved to offer a regulatory framework in which
companies or corporations operate. (Business, Government and
Globalization: An International Perspective, 2016)

The scope and application of company law differ but basically they
include: the obligations of officeholders within the company to
shareholders; the duties of directors; financial reporting; members'
remedies; the laws governing takeovers and insolvency, and the forms of
protection afforded to shareholders and stakeholders. (Europa.eu, 2016)
10.
Rationale
The rationale for this policy was to prohibit anti- competitive practices in
the company like abuse of a dominant position and unfair trade policies.
Preferably, the motive of the competition is to apply new technologies to
the business by which companies can gain knowledge on how to modify a
technical idea to use in the marketplace. (Digital Commons, 2016)Though,
it was stipulated by other entrepreneurs that dealings involving
technology are too expensive, and it is only kept for big firms. In essence,
with better application of competition policy, UAE is expected to achieve
financial wealth to its people, hence, improved living standards. (Business,
Government and Globalization: An International Perspective, 2016)
With the increase in penalties for those who engaged in the anticompetitive activity is too risky for both companies and individuals. High
penalties and prison terms for individuals indicate that executives will
rethink about involving in anti-competitive conduct. With this, competition
authorities are also using a leniency policy which means that penalties
can be waived for the first member of a cartel to become an informer on
the other members. (ftp.zew, 2016)This increases the risk in engaging
with other firms to form a cartel. Even having a meeting with executives
from another firm in the same industry could be risky, as not only is there
a chance that emails, phones or the meeting itself are under surveillance,
but, in addition, the executives present from the other firm might already
be informers for the competition authority. (Europa.eu, 2016)
Over two centuries ago Adam Smith observed that markets are not
naturally competitive and are thus susceptible to anti-competitive
practices including collusion, predatory pricing, takeovers, resale price
maintenance and exclusive dealing arrangements. As a consequence,
many governments now vigorously pursue pro-competitive regulation with

the objective of realizing free, fair and open markets. (Business,


Government and Globalization: An International Perspective, 2016)
A free-market system is based on several premises, one of which is that
competition between providers will drive down prices, force competitors to
provide better services and increase innovation, all to the benefit of
consumers. In the real world, it does not necessarily work like that.
(Tamimi, 2016)There are many instances where a business facing a
difficult competitive environment will find it more advantageous to get
together with its competitors and agree to fix prices or to engage in a
merger or other anti-competitive practices than to compete vigorously.
(Digital Commons, 2016)
Mergers need to be examined as part of competition policy as they may
have the effect of reducing competition. If firms that are dominant are
permitted to merge without restriction they may be able to become
effective monopolies or, at least, monopolies. For a time being companies
are able to charge higher prices. (Europa.eu, 2016) On the other hand,
there can be advantages for firms in merging by gaining economics of
scale. Part of the logic of a market system is that poorly performing firms
should face the possibility of being taken over; the threat of merger can
be a way of improving the performance of management. (Europa.eu,
2016)But mergers may also be anti-competitive if the merged firm is
sufficiently large to have a degree of market power. (Business,
Government and Globalization: An International Perspective, 2016)
11.
Distinctive Characteristics of regulations
It involves antitrust law that avoids a business competitor from forcefully
abolishing others out of the market through various strategies such as
implementing higher prices for the products. In addition, competition laws
in the UAE ensure that trademark infringement does not occur when a
manufacturer of a product uses a logo of another company to deceive the
buyers. (Europa.eu, 2016) Notably, the policies apply to all business
entities operating inside as well as outside the country as long as they
have an impact on the competition of the UAE. However, some sectors are
exempted from this law, such as air transport, cultural activities among
others. Additionally, the UAE Competition Law mainly focuses on merger

controls, abuse of dominant position and restrictive agreements. For


instance, merger controls entail all business transactions that are referred
to as economic concentration. Restrictive agreements are practices and
arrangements that aimed to protect competition through product
limitation and price fixing in the UAE. On the other hand, abuse of
dominance is applied by the UAE Competition Law to prohibit transactions
that have dominated the market. (Digital Commons, 2016)
12.

An assessment of the costs and benefits of the

intervention (regulation) for consumers, the industry,


society as a whole
Costs and benefits of the competition regulation of the consumer, the
industry, and society as a whole cost benefits analysis denotes to the
several ways by which decisions of a business are analysed. Thus, this
benefit is calculated by deducting costs related to taking an action from
the summation of the business-related activities. (Tamimi, 2016) The costbenefit analysis on consumers, endorses defence of the consumer from
false practices that can lead to political interests to chip in and replace
fair- trading laws. Additionally, competition regulation will be too
expensive for the industries due to the government forcing every firm to
license its business. (ftp.zew, 2016) For instance, in the UAE if a person
wants to purchase a car he or she, must pose a license that shows the
payment fee for it. Resultantly, the benefit of this is to discourage
monopoly practices, eliminate cases of corruption and enhance free and
fair competition. (Business, Government and Globalization: An
International Perspective, 2016)
There are some goods which are characterized by declining marginal cost,
that is, when supplied to one customer it becomes cheaper to provide
them to the next. It is in utilities with networks - telephone, electricity, gas
and water - that the problem of natural monopoly is most prevalent.
(Digital Commons, 2016) Adding an extra user is likely to be much
cheaper than establishing a whole new network. A new entrant to the
industry is faced with a large sunk cost before the first consumer is
connected. (ftp.zew, 2016) Competition is constrained, as the cost of a

new customer for a new entrant must be higher than the rate which could
be charged by the incumbent. This is most often the case with public
utilities, where, without regulation, monopoly prices can be charged as an
effective competitor is not likely to emerge. (Europa.eu, 2016)
A monopoly exists when there is only one seller to produce and sell a
particular kind of product in the market. As monopolists have no
competition, they are allowed to abuse their powers and price their
products at whatever price they wish. (Europa.eu, 2016) Monopolistic
competition occurs when a market consists of small businesses, fixed
costs and low barriers to entry and the economic model determines the
differentiated products. (Tamimi, 2016)
The fundamental connection between a policy and a developmental
process in the economy is the fact that competition policy and competitive
markets bring about the goal of enhanced economic efficiency in the
market, both in the static and dynamic sense.
(http://ec.europa.eu/competition/publications/reports/expost_evaluation_c
ompetition_policy_en.pdf, 2016)
Competition promotes efficiency ensuring that businesses produce at the
lowest attainable costs, providing incentives for businesses to undertake
research and development (R&D) and to quickly introduce new products
and production methods into the marketplace. (Digital Commons, 2016)
When competition is encouraged in an economy the primary goal is to
have numerous corporations under one market, selling the same types of
products. In order to compete with each other and survive in the market,
the corporations need to appeal to their consumers by lowering their
prices. Lower the prices, the greater positive consumer reaction. (Tamimi,
2016)
Competition policy prevents market concentration and associated
detrimental effects that include extensive inefficiencies, structural
integrity and non-adaptability to external shocks. (ftp.zew, 2016)
If a competition policy is not implemented at the right time, in the early
stage of economic development, it can cause costly industrial
restructuring at a later stage. (Tamimi, 2016)
13.

Evaluation and Recommendation

The fact is that which led to the selection of this topic of competition
policy in the UAE is because a lot of consumers are extremely exploited by
the companies and manufacturers. (Business, Government and
Globalization: An International Perspective, 2016) Hence, the government
must come up with the different kind of laws in favour of the consumers,
its people and at the same time it tries to save the companies as for
growing the economy you need more companies to come to UAE.
(Europa.eu, 2016) If competition increases in the UAE it will give more
doors of choices to consumers to choice of the product depending on the
price and quality. (Business, Government and Globalization: An
International Perspective, 2016)
At the same time, competition law must check what the need of the
consumers is as it might be the case that competition law is stopping the
companies to enter into the market which their people are needed. So, it
is necessary that competition law must analyse the need of its people and
adapt itself to the same. (ftp.zew, 2016)
If the statutory bodies start involving into the UAE demand and
requirement, free and fair competition can be maintained and practiced.
The same can also be updated with the time. (Digital Commons, 2016)
It is also seen that very few mergers are truly investigated in last few
years. If we see that after the implementation of Enterprise Act (2002), in
real even not a single cartel was investigated by OFT.
(http://ec.europa.eu/competition/publications/reports/expost_evaluation_c
ompetition_policy_en.pdf, 2016)
Heavy fines are there for such acts but it becomes difficult to prove them.
Hence, new powers have been given to regulators to capture such
activities. Their main focus has been to check on the firms if they found
any kind of establishment of collusion is taking place. (Digital Commons,
2016)
But such kind of collusion is very difficult to prove even impossible to
prove. Hence, to capture the same statistical techniques can be used to
build the correlations between the price movements in theory and
practice. (Business, Government and Globalization: An International
Perspective, 2016)

So, it has become crucial to find such kind of activities to save the interest
of the consumers and maintain healthy competition in the market. Only
then the free and fair market is maintained and builds. (Tamimi, 2016)
14.
Conclusion
Essentially, competition policies should be properly followed and
maintained, so that the UAE citizens will continuously meet their economic
demands and it continues to grow. (ftp.zew, 2016) Notably, all has not
been accomplished till now due to many factors; hence, the Government
of UAE should come up with more regulation measures that can protect
the consumer from being exploited by the seller. (Europa.eu, 2016) The
major role of competition policy is to maintain the competition in the
market so the fight for better quality, price and design are maintained and
consumers rights are not exploited by the private companies. (Business,
Government and Globalization: An International Perspective, 2016)
At the same time, if the United Arab Emirates want to encounter its
economic power it has to maintain new standards for transparency. So,
different companies can also rely on the government policy and see in
longer time working in the UAE. (Tamimi, 2016) As all the big companies
like to see stability in the market and government plays a key role on the
same. If competition will be more till a certain limit it will be a win-win
situation for everyone. Otherwise, big companies will exploit the smaller
companies and will try to monopolise the market. As, the same happen in
different industries and countries many times.
(http://ec.europa.eu/competition/publications/reports/expost_evaluation_c
ompetition_policy_en.pdf, 2016)
As in the year 2005, a OECD Policy Roundtable exchanged views on the
topic Evaluation of the Actions and Resources of Competition Authorities
and concluded that Considerable work remains to be done to refine the
methodologies used to evaluate the effectiveness of completed
competition policy interventions. (Digital Commons, 2016)
15.

References

Business, Government and Globalization: An International Perspective by


Deirdre O'Neill, Owen Hughes (2008 edition)

(n.d.). Retrieved April 29, 2016, from


http://ec.europa.eu/competition/publications/reports/expost_evaluation_co
mpetition_policy_en.pdf
Dec/Jan. (n.d.). Retrieved April 29, 2016, from
http://www.tamimi.com/en/magazine/law-update/section-11/decemberjanuary-2/uae-competition-law-new-regulationsissued.html#sthash.pK1HRHUa.dpuf
(n.d.). Retrieved April 29, 2016, from
http://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=3033&context=etd
(n.d.). (2016, April 29). Retrieved from http://ftp.zew.de/pub/zewdocs/dp/dp10081.pdf