September 2020 – Regulatory Update on Competition and Fair Businesses Act

REGULATORY UPDATE: COMPETITION AND FAIR BUSINESS PRACTICES ACT

INTRODUCTION

The Government of the Republic of Maldives has ratified the Competition and Fair Business Practices Act on 31st August 2020, which is intended to promote positive competition and fair business practices, while prohibiting agreements and conduct that prevent, restrict and distort market competition that would hinder economic growth. The Act also vests the Ministry of Economic Development with the discretion to take administrative measures to sustain a competitive business environment.

The Act will come into effect on 1st March 2021. In this bulletin we provide a high-level overview of the key provisions of the Act.

PART 1: PURPOSES AND SCOPE OF THE ACT

Key Purposes (Section 2)

  • To promote competition and fair trade and business practices.
  • To encourage new technology and developments in the market.
  • To ensure micro, small and medium-sized enterprises have equitable opportunity to participate in the Maldivian economy.
  • To provide consumers with competitive prices and product choices.
  • To prohibit restrictive business practices that impede competition and affect economic development.

Prohibited Practices

  • Agreements that prevent, restrict or distort competition.
  • Abuse of dominant position in the market.
  • Mergers resulting in restriction of competition in the market.

Scope of Application (Section 3)

  • Business transactions, practices and agreements within Maldives.
  • Business transactions outside Maldives that affect competition within Maldives.
  • State-owned enterprises operating in competitive markets.

PART 2: AGREEMENTS THAT PREVENT, RESTRICT OR DISTORT COMPETITION

Prohibited Agreements

  • Agreements or conduct that prevent, restrict or distort competition are prohibited.
  • This includes agreements with the effect of restricting competition in any market.

Examples of Prohibited Conduct

  • Price fixing (purchase or sale prices).
  • Fixing trade conditions in addition to pricing.
  • Market division or customer allocation.
  • Limiting or controlling production.
  • Refusal to deal with certain parties.
  • Controlling technological development.
  • Controlling investments.

Exemptions

  • Group companies are exempt from these restrictions.
  • The Minister may grant exemptions for efficiency or development benefits.
  • Block exemptions may be issued for certain agreement types.

Enforcement

  • The Minister of Economic Development may order cessation or amendment of prohibited conduct.
  • Fines range from MVR 10,000 to MVR 100,000.

PART 3: ABUSE OF DOMINANT POSITION

Definition of Dominant Position

  • Assessed based on market structure and share.
  • Includes market power over pricing, supply, and terms.
  • Control of significant market share.

Abusive Conduct

  • Predatory pricing.
  • Unfair pricing practices.
  • Refusal to deal with certain parties.
  • Limiting production or development to consumer detriment.
  • Discriminatory trading conditions.
  • Unrelated contractual obligations imposed on counterparties.

Enforcement

  • Fines between MVR 10,000 and MVR 100,000 may be imposed.

PART 4: MERGERS AND ACQUISITIONS

Merger Control

  • Mergers that significantly impede competition are prohibited.
  • Includes mergers of entities or acquisition of control over assets.
  • Control includes voting rights or board influence.

Exemptions

  • Mergers between state-owned enterprises are exempt.
  • Control acquired by a liquidator is exempt.

Enforcement

  • The Minister may order amendments to merger agreements.
  • Fines range from MVR 10,000 to MVR 100,000.

FURTHER REGULATIONS

  • Block exemption rules to be issued by regulation.
  • Merger thresholds and competition tests will be defined later.
  • Sector-specific regulations (banking, telecom, insurance) remain applicable.

The Act is based on principles from UK and EU competition law frameworks.

CONCLUDING REMARKS

This Act represents the first comprehensive legislative framework addressing competition and unfair business practices in the Maldives.

SHC Lawyers LLP

The contents of this document are intended as a general guide and should not be treated as legal advice.

No responsibility is accepted for reliance on this material.

For further information, please contact SHC Lawyers LLP.

Cover Photo by Mockaroon on Unsplash.

📄 Looking for the document? Click here to download the PDF file

Author