UAE Competition Law: Market Definition Decoded

Key Takeaways

• The Guidelines on Relevant Market Definition, published in July 2026, provide the clearest indication yet of how UAE authorities will approach market definition—a foundational step in any competition analysis.• Market definition directly determines whether an undertaking holds a dominant position (40% market share threshold) and whether merger notification is required (AED 300 million turnover or 40% combined market share).
• The Guidelines adopt internationally recognized tools—including the SSNIP test (hypothetical monopolist test) and the SSNDQ test (quality-based analysis for digital markets)—giving the UAE framework flexibility for modern business models.
• Businesses preparing merger control filings, exemption applications, or competition complaints should address market definition early. Article 10 of the Executive Regulations requires detailed market studies and economic analysis.
• With a mandatory 90-day pre-completion filing window and substantive review timelines under the Executive Regulations, early engagement with experienced competition counsel is essential for any transaction with a UAE nexus.

The UAE’s competition regime has developed rapidly over the past three years. Federal Decree-Law No. 36 of 2023 Regulating Competition (the “Competition Law”) is now supported by Executive Regulations and a growing body of implementing measures. The conversation has moved on: practitioners and businesses are less interested in the architecture of the new regime than in how it will actually work.

The Guidelines on Relevant Market Definition (the “Guidelines”), published in July 2026, are an important step in that direction. Market definition sits at the foundation of any competition analysis: an authority cannot meaningfully assess market power, dominance, restrictive agreements, or the effects of an economic concentration without first identifying the market in which it is looking.

What the Guidelines offer is the clearest indication yet of how UAE authorities are likely to approach that exercise. They set out a framework covering both the relevant product market and the relevant geographic market, drawing on established competition law concepts—demand-side and supply-side substitutability, the hypothetical monopolist test, price elasticity, switching costs, and homogeneous competitive conditions.

None of this replaces the Competition Law or its Executive Regulations. Cabinet Decision No. 59 of 2026 (the “Executive Regulations”) provides the procedural rules and review mechanics. The Guidelines are a practical reference—aimed at economic undertakings, legal advisers, market research firms, and other stakeholders—that translates broad statutory concepts into a workable analytical methodology.

Why Relevant Market Definition Matters

Market definition is often treated as a technical preliminary—a box to tick before the real analysis begins. In practice, it can shape the entire direction of a case.

Under the Competition Law, the relevant market has two connected dimensions. The first is the relevant product market, comprising goods or services regarded as interchangeable or substitutable by reason of their prices, characteristics, and intended use. The second is the relevant geographic market—a physical or digital place where supply and demand converge under similar competitive conditions.

Where those boundaries are drawn matters a great deal. Define the market narrowly, and an undertaking may appear to hold a materially higher market share; define it broadly, and the picture changes. The choice feeds directly into assessments of dominance, anti-competitive conduct, restrictive arrangements, economic dependency, and whether a proposed concentration raises competition concerns.

Under Cabinet Decision No. 3 of 2025, a dominant position is established where an undertaking—individually or together with other undertakings—holds a market share exceeding 40% of total transactions in the relevant market. The Executive Regulations expand on this: Article 2 provides that dominance arises where an undertaking can act independently of competitive pressure from competitors, customers, or consumers, and can obstruct, restrict, or distort competition. The Ministry of Economy (the “Ministry”) may also consider market share below 40%, domestic sales, financial power, presence in adjacent markets, the level of actual or potential competition, substitutability, pricing behavior, barriers to entry, and exclusive or long-term customer or supplier arrangements. This threshold underscores why market definition is so consequential: it directly determines whether an undertaking crosses the line into presumptive dominance.

There is no universal market definition that carries across every case. The market examined in an abuse of dominance investigation will not necessarily be framed the same way as in a merger control filing or an application for exemption. Context drives everything.

Competitive Constraints: The Starting Point

The concept at the heart of the analysis is competitive constraint. A properly defined relevant market should capture the products, suppliers and geographic areas that genuinely limit what the undertaking under review can do commercially.

The principal starting point is demand-side substitutability: if the price or conditions of a product change, can customers realistically and promptly switch to an alternative that meets the same need?

What counts is effectiveness and immediacy. A theoretical alternative does not amount to a competitive substitute unless it is sufficiently accessible and can exert genuine competitive pressure within a reasonably short timeframe.

Technical similarity alone does not place products in the same market if customers cannot realistically switch between them. Conversely, products that look different may still form part of the same market if customers regard them as genuine alternatives.

Supply-side substitutability offers a second lens. Could another supplier rapidly redirect its existing productive capacity to the product under review, without significant additional cost, investment or commercial risk?

If the answer is yes, that supplier may already be exerting a meaningful competitive constraint and may properly form part of the relevant market. However, if entry would require significant investment, regulatory approvals, new infrastructure, or substantial delay, the issue is better treated as potential competition—something to consider at a later stage of the analysis rather than in the market definition itself.

The distinction between immediate supply substitution and future entry is likely to matter in regulated, capital-intensive and technology-driven sectors.

The SSNIP Test and the Increasing Importance of Non-Price Competition

Familiar economic tools now feature expressly in the substitutability analysis.

The Small but Significant and Non-Transitory Increase in Price test (the “SSNIP” or “hypothetical monopolist test”) poses a straightforward question: could a hypothetical monopolist controlling the product under consideration profitably raise its price—typically by 5% to 10% above the prevailing competitive level—without losing enough customers to alternatives to make the increase unprofitable?

If enough customers would switch, those alternatives probably belong in the relevant market, and the test is repeated with a wider boundary. If customers would absorb the increase and the monopolist’s profits hold, that suggests the proposed market is already sufficiently narrow.

The SSNIP test is not always straightforward to apply. Reliable pricing, volume and customer data may be unavailable, and the analysis may require quantitative techniques or customer surveys.

Other evidence may therefore be needed, including price elasticity of demand and observed switching behavior over time.

The Guidelines also recognize the Small but Significant and Non-Transitory Decrease in Quality test (the “SSNDQ test”), which is particularly relevant to digital markets and other sectors where competition does not take place primarily on price.

Where a service is offered at zero or nominal cost, conventional price-based tools have limited utility. Competition may instead turn on service quality, functionality, privacy, innovation, advertising intensity, access to data, or user experience. Recognizing quality-based analysis gives the UAE framework genuine flexibility when it comes to modern digital business models.

Defining the Relevant Product Market: A Multi-Factor Exercise

Defining the product market calls for more than a theoretical discussion of substitutability. The exercise is grounded in evidence, and the range of evidence that may be relevant is broad.

Product characteristics and intended use provide natural starting points, but neither is decisive on its own. Technical similarity does not establish substitutability, just as technical differences do not rule it out.

Pharmaceuticals illustrate the point. Two medicines for the same condition may fall into different markets if their active ingredients, composition, or pharmacological characteristics materially limit substitution. Conversely, products with different formulations or methods of administration may compete in the same market if they meet the same therapeutic need.

Price is another central consideration. Authorities may compare price levels and structures for the focal product and potential substitutes, examine historical movements in prices and quantities, and ask whether customers switched after a price increase.

Customer preferences carry equal weight. Brand loyalty, perceived quality, a preference for domestic products over imported ones, and other consumption characteristics can all materially affect substitution in practice.

Evidence of actual substitution in the recent past tends to be particularly persuasive. If demand shifted when a new product entered the market, when a supplier exited, or after a material price increase, that tells you something concrete about competitive interaction—more so than theoretical similarity alone.

Switching barriers also require close attention. Long-term contractual commitments, search costs, uncertainty about the quality of alternatives, investment needed to adopt a competing product, regulatory requirements and network effects may all prevent an apparently available alternative from exerting an effective competitive constraint.

Digital and platform markets make these issues acute. Network effects can lock customers in where switching would mean losing economic or digital benefits tied to an existing platform. Exclusive contractual arrangements can do the same.

Customer Segmentation May Produce Separate Markets

Customer segmentation is another issue that is likely to feature in future cases.

A particular customer segment may constitute a separate relevant market where an undertaking is able to apply differentiated pricing to that group and customers have limited ability to switch. Where the conditions are sufficiently distinct, the relevant market may be confined to that segment.

Travel and hospitality services provide the clearest examples: customers purchasing during peak and off-peak periods may face materially different prices.

Market definition need not stop at the product category. Depending on the evidence, authorities may also ask whether different distribution channels, customer types, purchasing patterns or commercial conditions justify narrower segmentation.

The upshot for businesses assessing their competition exposure: do not rely solely on headline industry classifications or aggregate national sales figures. The commercially relevant market may be considerably narrower than either suggests.

The Geographic Market: Local, National, Digital—or Potentially Wider

The geographic dimension raises its own set of questions.

A relevant geographic market may be local, emirate-wide, national, regional, or, where appropriate, international. The Competition Law also expressly recognizes physical, digital, and virtual markets—an important feature for online marketplaces, digital platforms, and businesses whose reach is not defined by conventional geography.

The central question is whether the proposed areas share sufficiently homogeneous competitive conditions.

Relevant evidence may include whether customers would travel to neighboring areas after a price increase, whether suppliers there could redirect supply into the focal area, whether prices and market shares are broadly comparable, and whether customers show local or national preferences.

Transportation costs, distance, and delivery time can be decisive. The Guidelines refer to a catchment area—the distance beyond which customers are unlikely to travel to complete a purchase. The concept is particularly relevant to retail outlets, shopping centers, and other businesses where proximity directly shapes competition.

Regulatory differences can also divide geographic markets. Two areas may appear commercially similar yet constitute separate markets if businesses in one face different licensing requirements, price controls, tax treatment, technical standards or other regulatory conditions.

This has particular relevance in the UAE. Free zones may, depending on the competitive conditions that apply, constitute geographic markets distinct from areas outside those zones. Conversely, where businesses operate across several emirates under broadly consistent competitive conditions, the appropriate geographic market may be national rather than emirate-specific.

Imports Do Not Automatically Broaden the Market

The treatment of imports is another area where the Guidelines take a practical line.

Imported products do not automatically expand the relevant geographic market beyond the UAE. Foreign suppliers must be capable of exerting an effective competitive constraint on domestic suppliers within a reasonably short timeframe.

An overseas supplier may not belong in the geographic market if it would first need to build substantial distribution infrastructure, incur significant marketing costs, obtain regulatory approvals or make other material investments before responding to UAE demand.

None of this makes cross-border conduct irrelevant. The Competition Law applies to all economic activities practiced outside the UAE that affect competition within it. International sources of supply and cross-border conduct therefore remain part of the substantive assessment, even where the geographic market is ultimately defined as national.

Evidence Will Become Increasingly Important

At its core, relevant market definition is an evidence-driven exercise.

Undertakings can draw on their own market studies and commercial knowledge, but the evidential base is broader. Sector studies, consumer surveys, information from customers and competitors, regulatory materials, decisions of domestic and foreign competition authorities, and the governing legal framework may all inform the analysis.

Nor does every case call for the same evidential package. A single strong piece of evidence may be enough in straightforward matters; more complex cases will demand a combination of economic, commercial and technical material.

For businesses preparing merger control filings, exemption applications, or competition complaints, the practical takeaway is straightforward: address market definition before preparing the legal submission.

Commercial teams may need to be involved early to identify competitors, customer switching behavior, distribution channels, historical price movements, and relevant internal market studies. Technically complex sectors may also require specialist economic or industry evidence.

Implications for Market Participants

For businesses contemplating an economic concentration, the Guidelines provide a useful roadmap for the market definition component of a filing. Undertakings should expect closer scrutiny of assertions about product substitutability, geographic scope, competitors, and market shares—particularly where those assertions bear on whether the transaction raises competition concerns. As noted in Article 13 of the Executive Regulations, the Ministry will consider the parties’ market shares, competitor market shares, whether the transaction creates or strengthens dominance, substitutability of products and services, and the impact on consumer welfare.

It is worth noting that Cabinet Decision No. 3 of 2025 establishes the thresholds triggering mandatory merger notification: either (i) combined annual sales in the relevant market exceeding AED 300 million during the last fiscal year, or (ii) a combined market share exceeding 40% of total transactions in the relevant market during the last fiscal year. A precise market definition is therefore critical not only for substantive assessment but also for determining whether notification obligations apply in the first instance.

For businesses that may hold significant market power, the implications run deeper. An internal dominance assessment should ask whether the company’s perceived competitive alternatives genuinely constrain its behavior—not just whether those alternatives exist in some broad commercial sense. Switching costs, exclusivity arrangements, network effects, regulatory barriers, and customer segmentation can all mean that the actual market is materially narrower than management assumes.

Complainants, meanwhile, can use the framework to build a more coherent competition case. Evidence that customers cannot switch despite apparent alternatives, that suppliers face regulatory or financial obstacles to entering the market, or that prices remain above competitive levels without significant customer loss may be central to showing market power.

For legal practitioners and economists, the message is clear: UAE competition enforcement is entering a more evidence-intensive phase. Legal analysis of the Competition Law will increasingly need to be grounded in market economics, customer behavior, and the commercial realities of the sector at hand.

Looking Ahead

The Guidelines signal that the UAE competition framework is moving into a more mature phase.

Market definition is hardly a new concept—it has always sat at the center of competition law. What these Guidelines do is give businesses and practitioners much greater visibility into how UAE authorities are likely to approach the exercise.

The Guidelines place the SSNIP test, price elasticity analysis, and the SSNDQ test alongside detailed treatment of switching costs, network effects, digital markets, regulatory barriers, and geographic substitutability. Together, these features point to a regime increasingly focused on economic reality rather than formal market labels.

For market participants, that shift has real consequences. How a company describes its industry internally, or the competitor set it identifies in strategy documents, will not necessarily define the relevant market for competition-law purposes. What matters is where genuine competitive constraints lie, how quickly customers can move, which suppliers can respond and whether competitive conditions are truly comparable across products and geographies.

Each assessment will remain case-specific—but the framework for conducting it is now considerably clearer.

As enforcement develops, businesses involved in mergers, restrictive arrangements, or highly concentrated markets should incorporate market definition analysis into competition compliance and transaction planning at an early stage.