Changes to the UAE Consumer Protection Law: what you need to know

On 14 October 2023, the long-awaited Executive Regulations to the Consumer Protection Law in the UAE will come into force. All businesses that supply services or goods in the UAE should ensure they are aware of and comply with their new obligations. The consequences of non-compliance with many of the key provisions are criminal and can lead to penalties including imprisonment and/or a fine.

The Cabinet Decision No. 66 of 2023 concerning the Executive Regulation of the Federal Law No. 15 of 2020 on Consumer Protection (the Executive Regulations) was published on 14 July 2023 and comes into force on 14 October 2023, providing further clarification to the Federal Law No. 15 of 2020 on Consumer Protection (the Consumer Protection Law). 

The objective of the Consumer Protection Law and Executive Regulations is to protect consumer rights and health and safety. In addition, misleading advertising and anti-competitive practices are addressed by these laws, all of which are positive developments for fostering a fair and free market for consumers and making the UAE an attractive place to live and trade.

The scope of the laws is very broad. The Consumer Protection Law applies to all goods and services within the UAE, including free zones, and operations which are carried out by the supplier, advertiser or the commercial agent, along with any e-commerce operations if the supplier is registered in the UAE.

The  term “consumer” includes both individuals and “legal persons”, which would include companies. “Goods” is also broadly defined to include “every natural, industrial, agricultural, animal, transformative, intellectual, or technical product, including the raw materials of the substances and components of the product.” Similarly, the term “service” is defined as being anything provided to a consumer, with or without consideration, meaning even services provided free of charge would be covered.

Importantly, the Executive Regulations prohibit a supplier from relinquishing any of their obligations owed to the consumer under the Consumer Protection Law or Executive Regulations such as amending the contract to include unilateral rights in favour of the supplier to amend or terminate the contract or to diminish the rights of the consumer including the right to claim compensation. Any contract, documentation or invoice which seeks to do so shall be null and void.

The key updates introduced by the Executive Regulations are as follows:

Advertising & Promotions

The Executive Regulations reinforce the obligations of the supplier when advertising goods or services.  A supplier must ensure that:

• the price is clearly declared on the goods or on a label at the place displaying the goods or services,
• advertisements are not misleading to avoid directly, or indirectly, creating a false impression to the consumer,
• the invoice, warranty information, and other mandatory labelling information must be in the Arabic language (and may also be in additional languages).

A supplier is also required to notify the consumer of any promotional discounts if the date fixed for the promotion is within one week from the date of purchase, failing which the consumer has a right to the difference in price. This is a particularly consumer-friendly provision, and may require an overhaul of sales practices and processes, although it remains to be seen how this provision will be monitored and enforced in practice.

Invoices

Following any sale, the supplier is obligated to provide the consumer with a dated invoice containing specific particulars including the supplier’s commercial registration and tax number along with a description of the goods or services, quantity, condition and warranty period.

Warranties & Spare Parts

In accordance with the Executive Regulations, a supplier must adhere to specific requirements informing the consumer of the warranty period and extent of coverage including any obligations on the consumer and any exclusions.

A supplier must provide the consumer with the mechanism for spare parts and/or written documentation for maintenance, along with the warranty which should also be published on the supplier’s website.

In addition, the Executive Regulations stipulate fixed timeframes for a supplier to provide spare parts to the consumer. If a spare part falls within an agency agreement, suppliers must liaise with the commercial agents to provide the spare part within 30 days of the request. Therefore, it is imperative that a supplier (and its agent) is equipped to handle any requests for spare parts efficiently.

Defects

The Consumer Protection Law contains obligations on the supplier upon discovering a defect or hazard with goods that would endanger consumers, including mandatory reporting to the Ministry or competent authority, immediately announcing the hazard and recalling the goods. The Executive Regulations clarifies the procedure that a supplier must follow:

1. Notify the consumers of the defect.
2. Cease the trading of the goods or provision of service. The supplier is prevented from re-selling any defective goods on e-platforms.
3. Recall the goods from the market.
4. Return and replace the defective goods at its own expense or repair the goods and return the whole price paid by the consumer.

Although the Executive Regulations introduce the procedure for dealing with defective goods in line with international standards, it remains to be seen how this is implemented and enforced in practice. Compliance with processes such as a product recall could be a very expensive exercise as well as brand-damaging if not handled properly, and businesses would be well-advised to put in place plans and processes to ensure any defect incidents can be reported internally very quickly to be addressed by the right advisors at the right time.

Monopolistic Practices

Another aspect of the Executive Regulations aims to tackle monopolistic practices by a supplier.  The Executive Regulations include administrative sanctions which the Ministry may impose upon a supplier following any violation. These include an administrative fine of up to a maximum of AED 1 million, suspension of activity up to 90 days or revocation of the license and striking off the supplier from the commercial registry.

Introduction of Dubai Corporation for Consumer Protection and Fair Trade

In a related development, the Dubai Corporation for Consumer Protection and Fair Trade (the Corporation) was established by Dubai Law No. 5 of 2023 in February 2023. The Corporation is to implement the regulatory procedures to uphold the principles of Fair Trade and Competition, intellectual property along with combatting monopolistic practices throughout Dubai, including the free zones (subject to the request of the Supervisory Authority of the free zone). To regulate and monitor the market, the Corporation is mandated to request data from commercial establishments and form committees to conduct investigations to combat commercial fraud.

Recommendations

Whether the labelling requirements extend to distributors is yet to be clarified but we recommend suppliers should take steps to ensure distributors adhere to the provisions under the law, for example by requiring regular reporting and including spot check and audit rights in distribution contracts.

The Consumer Protection Law has been in force since 2020 but the introduction of the Executive Regulations, which introduce additional obligations and set out more detail of existing obligations, as well as the establishment of the Corporation also this year may signal an intention for the more proactive enforcement of the law within the UAE, particularly in Dubai.

In view of the potential criminal penalties for non-compliance, as well as brand reputation and consumer protection and confidence, we recommend that any supplier of goods and services in the UAE (whether or not via a distributor or agent) takes steps to comply, such as:

1. Ensuring that you are aware of your obligations under the law;
2. Reviewing existing practices to ensure compliance, for example to ensure labelling, warranty and spare parts obligations are adequately addressed;
3. Consider implementing processes to ensure that if and when the situation does arise, you can deal with any defective products quickly and in accordance with the law, while mitigating brand and reputation risks;
4. Reviewing existing contracts with suppliers, distributors, and agents to ensure the compliance of third parties with relevant laws and that risk is appropriately apportioned in the contract, for example by including reporting obligations, indemnities, and audit rights.

For more  information please contact Alexandra Lester or  Joanna Stewart.