Few people are aware of the Competition Protection and Monopoly Prevention Law, RD 67 of 2014 (“CPMPL”). Yet its scope of operation is very broad, and the consequences of being in breach are severe. It is particularly important that any chairman, CEO, director or authorised senior manager of any major company be aware of the CPMPL and its potential consequences.
The CPMCL applies to all activities of production, trade, services, intellectual property rights and other economic activities that may have a damaging effect on competition.
What is unlawful?
The CPMCL sets out a new merger control regime and prohibits restrictive agreements and abuse of market dominance. Private sector businesses with a position of dominance in the market are prohibited from engaging in practices that would undermine, lessen or prevent competition.
The new law does not apply to wholly owned government entities. However, it otherwise has significant implications for private sector businesses that have a dominant market share. In broad terms, any of the following behaviour is likely to be prohibited:
- entering into an agreement to create a monopoly in the importation, production, distribution, sale or purchase of any commodity (Art 8);
- engaging in monopolistic behaviour (Art 8);
- entering into an agreement concluded with the intent to prevent, limit or weaken competition (Art 9); and
- any act to reduce or limit competition by a person or company that is in a “dominant position” (Art10).
Each of these activities is separately defined as a criminal offence, although there is considerable potential overlap between them. For the purposes of the CPMPL, a person or company is in a “dominant position” if it has control, or has an influence over, the relevant market, including the acquisition of the market volume by more than 35%.
Articles 9 and 10 of the CPMPL give a series of examples of what may constitute limiting, weakening competition or reducing competition. The examples are very broad, and include things such as:
- predatory pricing;
- refusing to deal with specific people to prevent market entry;
- creating artificial shortages by reducing quantities;
- suddenly increasing the quantities of products available;
- fixing prices or conditions of resale;
- colluding in tenders;
- making it a condition that a purchaser also purchase another commodity or service; and
- forcing a manufacturer to not deal with a competitor.
The effect is that the CPMPL could have an operation in relation to a whole range of businesses, from selling basic goods, providing transport, providing labour, construction, pharmaceuticals, quoting for services or even consultancy services.
Penalties for breach of Articles 8, 9 or 10 include:
- imprisonment for between 3 months and 3 years;
- a fine equivalent to the profits on the sales of the relevant products; and
- fines of between 5% and 10% of total annual sales.
Where a corporation is involved, the Chairman, members of the Board of Directors, the Chief Executive Officer and authorized managers can all be potentially penalized if they are aware of the breach.
In any of these violations a court may also require the company or individual to rectify the violation, dispose of shares or assets or make the payment of OMR 100 – 1,000 until the violation has been stopped.
In the case of a second offence, the above penalties may be doubled, and the business may be closed for up to 30 days. The CPMPL includes other penalties relating to procedural issues as well.
If a person or corporation wishes to carry out any step or enter into any agreement that may potentially be in breach of the CPMPL, there is a procedure available under the CPMPL to apply to the Public Authority for Consumer Protection for permission to do so under Article 11. The Authority must issue a decision within 90 days. The Authority can not permit any procedure that would result in an acquisition of more than 50% of a relevant market.
The primary rationale for laws of this type is to protect the consumer from unfair market practices that exist in many countries. For example, Federal Law 4 of 2012 (also known as the “UAE Competition Law”) performs a similar function in the United Arab Emirates. The CPMPL is broader than the laws in some countries, as it protects other businesses, not just consumers. We are not aware of any prosecutions so far, under the CPMPL, but we are aware of one case where an Omani Court held that an agreement was void as it breached the CPMPL.
The most important point to note is that if your business is proposing to enter into any agreement or carry out any act which may lessen competition, you should seek legal advice and consider applying to the Public Authority for Consumer Protection for permission.