Lebanon’s New Competition Law 2022:
Fostering fair play and economic growth
Lebanon has recently introduced its first long-awaited Competition Law No. 281[1] (“Law”) that aims to modernize its regulatory framework and promote fair competition. This legislation is a significant milestone for Lebanon, signaling its commitment to fostering a vibrant and competitive market economy.
Background
Known also as Antitrust Law[2] or Anti-Monopoly Law[3], competition law promotes or maintains market competition by regulating anti-competitive practices and abuse of dominance, thereby maximizing consumer welfare and promoting economic efficiency and innovation.
Situation before the enactment of the New Competition Law 2022
Lebanon has long recognized the importance of a competitive market environment for economic development. However, until 2022, the country lacked a comprehensive legal framework specifically addressing competition and antitrust issues.
In the past, Lebanese judges traditionally handled competition cases by referring to numerous legal provisions, such as Articles 97 and 98 of Decree Law No. 2385/1924[4] concerning industrial drawings and designs in competition cases, Article 122 of the Code of Obligations and Contracts granting compensation to victims of illegal competition, in addition to Article 714 of the Lebanese Criminal Code addressing unfair competition, and Article 14 of the Legislative Decree No. 73/1983[5] that limits competition and that results in an artificial increase in prices, or in preventing prices from falling, and several other laws tackling various aspects of competition within Lebanon’s economic landscape[6].
The adoption of a competition law was essential to align the country with best global practices and fulfill its obligations under international agreements, Lebanon being among the countries that were not in full compliance with international trade and standards. As a member of the World Trade Organization (WTO), Lebanon is obliged to follow fair competition practices, emphasizing the need for this regulatory reform.
Key features
- Abolishment of dealerships and exclusive commercial representation: The Law amended the exclusivity right granted to the exclusive distributor by Decree-Law 34/67[7]. As such, the statutory exclusivity right granted to the exclusive distributor within Lebanon shall apply only between the company and the distributor, and shall have no effect vis-à-vis third parties. As a result, Article 5.1 (2) of the Law has granted any person the right to import any product which is subject to an exclusive distribution agreement, whether for personal or business use. However, and in case of import of products for business use, the importer shall provide the consumers – as per Article 5.1 (3) of the Law – the same services and after sale warranties as those set forth in the registered distribution agreements.
- According to Article 5(3) of the Law, in case of a dispute submitted by the appointed exclusive distributor against the company, a new distributor may be appointed before the issuance of a final judgement without being subject to any restrictions or obligations; and the new distributor may register the distribution agreement in accordance with applicable laws without any restrictions.
- As per Article 5(4) of the Law, in case of a final judgment awarding damages to the exclusive distributor and recorded on the company’s records, the terminated distributor has the right to apply for a suspension of the import of products in Lebanon until the importer of said products submits a certificate proving that the judgement is no longer recorded on the company’s records subject to the below restrictions:
- The suspension of the import of the products in Lebanon shall be valid for a maximum period of three (3) years from the issuance date of the final judgement and its registration on the company’s records.
- The right to apply for such suspension shall not apply on the products that were shipped to Lebanon before said judgment is recorded on the company’s record and notified to the customs administration.
- National Competition commission (NCA): The Law establishes an independent regulatory body, that has administrative and financial independence and that operates under the supervision of the Ministry of Economy and Trade. The NCA oversees the proper functioning of the markets, promotes free competition, and controls and evaluates restrictive businesses. It also has exclusive jurisdiction to decide on competition matters.
- Prohibition of anti-competitive agreements and abuse of dominant position: The legislation prohibits certain anticompetitive horizontal and vertical agreements, decisions, and practices, as well as the abuse of dominant position. Violations are subject to potential fines of a maximum of 10% of the relevant turnover, and the Law allows affected parties to seek compensation and damages in civil legal action.
- Consumer protection: The Law aims to prevent practices that may harm consumers and empowers consumers to report anti-competitive behavior.
- Merger control: The Law also establishes merger control provisions. Companies contemplating mergers or acquisitions that may lead to a significant reduction in competition[8] must obtain approval from the NCA.
Prior to Lebanon’s recent implementation of merger control provisions, other countries, like Saudi Arabia, have established long-lasting anti-trust law[9], which mandates parties to inform the General Authority for Competition (GAC) and obtain its clearance, before concluding any merger transaction. The merger control threshold required for merger filing is being constantly amended by the GAC, the latest being recently announced on 1 November 2023[10]. Our next article will center on the anti-trust legislation within the Kingdom of Saudi Arabia.
Challenges Ahead
Implementing the new competition law is not without its challenges. Top of FormOIn IIn In fact, the new regime has not become fully operational, because the NCA has not been established yet. Therefore, ensuring the effective operation of the NCA, raising awareness about competition issues among businesses and consumers, and developing effective enforcement mechanisms are crucial for the success of the Law.
Mayssa Abboud
Associate
11/11/2023
For personalized guidance regarding the new competition law, please do not hesitate to contact our team by sending an email to: attorneys@omlfirm.com.
DISCLAIMER: This blog post does not constitute legal advice, and no attorney-client relationship is formed by reading it. Additional facts or future developments may affect the content of this blog post. Before acting or relying upon any information within this newsletter, please seek the advice of an attorney.
[1] Competition Law No. 281 of 2022 dated 21 February 2022 and published in the Official Gazette on 17 March 2022.
[2] Denomination used in the United States of America.
[3] Denomination used in China and Russia
[4] Resolution No.2385/1924 issued on January 17, 1924, amended by the law of 31/1/1946.
[5] Legislative decree No. 73/1983 of 9 September 1983, on Possession of and Trade in Goods, Products and Crops.
[6] Privatization Law No. 228 of May 2000 that establishes the Investment Development Authority (IDAL) and accorded the highest priority of information technology projects.
Law No. 360 dated 16/08/2001 relating to promoting investments in Lebanon.
Consumer protection law No. 659 dated February 4, 2005.
[7] Decree-Law No. 34 of August 5, 1967 related to the commercial representation in Lebanon.
[8] The parties’ combined market share shall exceed 30% of the relevant market.
[9] Royal Decree No. M.75 dated 29/6/1440H (corresponding to 6 March 2019) and its anticipated implementing regulations that came into effect on 25/1/1441H (corresponding to 24 September 2019), and its amendments in 2023.
[10] A merger filing before the GAC is required if three different thresholds are collectively met: (i) the combined annual worldwide turnover of the parties to the transaction is at least SAR200 million, (ii) the annual worldwide turnover of the target is at least SAR40m, and (iii) the combined annual turnover of all parties to the transaction in Saudi Arabia is at least SAR40m. This marks a significant change from the previous thresholds, which required only that the combined annual worldwide turnover of all parties exceeded SAR200m.