New Law Aims to Protect Consumers and Businesses in Maldives

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Maldives Enacts New Competition Law to Promote Fair Business Practices

On August 31, 2020, the Government of the Republic of Maldives ratified the Competition and Fair Business Practices Act, which will come into effect on March 1, 2021. The purpose of this act is to promote positive competition and fair business practices, while prohibiting agreements and conduct that prevent, restrict, and distort market competition, hindering economic growth. It also vests the Ministry of Economic Development with the discretion to take administrative measures to sustain a competitive business environment.

Section 2 of the Act sets out the main purposes of promoting competition, fair trade and business practices, encouraging new technology and developments, ensuring equal participation of micro, small, and medium-sized enterprises in the Maldivian economy, providing consumers with competitive prices and product choices, and prohibiting restrictive business practices, including agreements that prevent, restrict, or distort competition, abuse of dominant position in the market, and mergers resulting in restriction of competition in the market.

Section 3 of the Act outlines the scope of application of the Act, which includes business transactions, practices, and agreements within and outside Maldives that influence competition within any market in Maldives, and state-owned enterprises conducting business in a market in competition with other undertakings.

The Act also prohibits agreements and conduct by two or more undertakings that prevent, restrict, or distort competition within a market. The agreement or conduct that may result in the prevention, restriction, or distortion of competition is also prohibited. Exceptions include group companies, agreements that result in improvements to production and distribution, and those that promote technological or economic development. The Minister of Economic Development is empowered to provide exemptions and determine block exemptions for certain types of agreements.

Undertakings that have entered into prohibited agreements or conduct will face orders to amend such agreements or cessation of such conduct. The Minister of Economic Development may impose a fine ranging from MVR 10,000 to MVR 100,000.

The Act also prohibits the abuse of dominant position by an undertaking in the market. A dominant position is determined based on the nature of the market, number and share of undertakings in the market, market power of the undertaking, and control of a significant share of the market. Where an undertaking in a dominant position in the market commits prohibited conduct, such as predatory pricing, imposition of unfair prices, refusal to sell/deal with certain parties, or making the conclusion of the contract subject to acceptance by the other parties of supplementary obligations that have no connection with the subject of the contract, it will be prohibited.

Mergers that significantly impede competition or strengthen a dominant position within the market are not permitted. A merger between two state-owned enterprises is exempt from the Act, and a merger is not deemed to arise where control is acquired by a liquidator for the purposes of winding up an undertaking.

Several key matters, including rules on granting block exemptions for agreements and exemptions for certain types of agreements, will be determined under subordinate regulations due to be published by September 2021. The Competition and Fair Business Practices Act will ensure a competitive business environment in the Maldives by promoting competition and fair business practices while prohibiting agreements and conduct that prevent, restrict, and distort market competition.

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