Any person conducting any form of economic or business activity in the UAE requires a relevant license issued by a relevant authority
UAE residents are being warned against selling food, garments, accessories and other such items on social media without a license. The sale of such items or goods through social media platforms falls under the categories of online selling and consumer protection.
This article covers the following general points:-
1) What the UAE law says on residents selling items or goods on social media without a license
2) What the potential penalties/fines are
3) A rise in number of residents doing this activity, along
with some case studies
4) Some of the trends that we are seeing in terms of unlicensed sales on social media and chatting platforms
1) What does the UAE law say on residents selling these things without a license on social media?
Any person conducting any form of economic or business activity in the UAE requires a relevant license issued by a relevant authority. This applies to UAE residents selling items or goods through social media platforms.
The Dubai Department of Economic Development (DED) has introduced a number of e-trading licenses with a view to positioning Dubai as an e-commerce hub. A list of e-trading activities is available on their website. Similarly, the Dubai DED and other Departments of Economic Development have a helpline that offer a wide range of business advise and other services.
Separately, the Dubai DED has developed an 'e-trader'
scheme which is specifically aimed at individuals looking to sell items or goods through popular social media platforms. The advantage of this scheme is that there may be a waiver on the general requirement for an individual or business to have a physical office space or store to sell their items or goods. The Dubai DED has also recognized the growing trend of usage of social media platforms such as Instagram, Facebook, Snap Chat and others and as such have created flexible licensing options to regulate and permit the sale of items and goods online.
Furthermore, where the sale of perishable items such as food is concerned, additional approvals over and above those required with the relevant DED will be required. In Dubai, this may involve applying for approval from the Dubai Municipality and any other authorities.
To ensure companies and individuals are operating within their means and in compliance with the law, it would be worthwhile referring to Federal Law No. 2 of 2015 on
Commercial Companies. This law provides a foundation on the regulation of corporations and corporate bodies in the
UAE and familiarity of it would help to ensure that certain standards of compliance are maintained throughout the
lifespan of a business.
Finally, it is useful to be mindful of the cyber laws in the UAE. In particular, Federal Law No. 5 of 2012 prohibits the use of people's pictures without their permission, requires for people's privacy to be respected and is very clear that nothing should be posted online that could be interpreted as being against the principles of Islam or the values of society, the system of ruling, or that could harm the interest of the state. In addition, Federal Law No. 3 of 1987 (the Penal Code) sets out rules which prohibits the use of statements that are defamatory in nature against one or more persons.
2) What are the penalties/fines?
All UAE residents must register with the relevant authorities and/or obtain a relevant license if they are undertaking any form of commercial activity online.
UAE residents who sell products or trade online without a relevant license are putting themselves at risk of fines and potential terms of imprisonment. Financial penalties could range anywhere between AED 20,000 and AED 500,000.
More severe circumstances may result in an even higher penalty.
If found guilty of an offense under the Penal Code for making defamatory statements, individuals could face up to two years in prison or a fine of up to AED 20,000.
3) Do you see a rise in number of residents doing this activity? Can you share a case study of a client?
We have come across a number of cases, involving online catering, bakery and homecraft businesses selling interesting items and goods to online customers but as a result of not being properly licensed, some cannot accept card payments as they are unable to procure appropriate payment terminals etc. Furthermore, in the event that their customers face adverse health issues as a result of items or goods sold to them, then these businesses could find themselves in a vulnerable position as they are unregulated and therefore, could be exposed to further penalties by the relevant authorities.
In another case, some stay-at-home mothers were found
to be running garment and beauty businesses where they would sell tailor-made clothes, accessories and beauty
products through social media platforms without official approval or having a license. Individuals conducting such
business may consider what they are doing as seemingly innocuous, however, they are putting themselves at risk of
incurring fines and possible criminal sanctions.
4) What are some of the trends you are seeing in terms of unlicensed sales on social media and chatting platforms?
The inexorable rise in the use of social media platforms has led to an increase in opportunities for people to sell items and goods through popular online platforms. Many people choose to take advantage of the relative ease of selling items and goods online. It can be done quickly without much cost attached to it (if any) and this makes it very appealing and attractive. Many people choose to assume the risks involved, most likely as a result of being unaware of the legal requirements involved, however, if the authorities come across and identify these instances, then the potential repercussions for an individual can be significant.
In our experience, once people become aware of the legal requirements involved in selling items or goods online – whether through popular social media platforms or otherwise – along with the risks associated with non-compliance of the relevant rules, they usually tend to approach us for expert advise to help them make their business "legal" and in compliance with the relevant rules and regulations. More
often than not, people just need someone to advise and guide them on the processes involved and that's where we
normally step in to advise and help.
Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.
Senior Lawyer, Davidson & Co Legal Consultants
Yousif is a senior lawyer with extensive business and legal experience. He is based at the firm’s Dubai office and acts for clients all around the World including the UAE, the Middle East & GCC, UK & Europe and beyond. Yousif maintains a broad and varied practice in all aspects commercial law. His core practice areas include: Real Estate (both residential and commercial); Corporate and Company Law; Commercial Contracts; and general counsel corporate and commercial advisory work. His work is often complex and frequently involves cross-border, multi-jurisdictional elements.
Corporate Associate, Davidson & Co Legal Consultants
Rhea is a Corporate Associate based in Davidson & Co's Dubai office having joined the team in 2014. Rhea has spent over 23 years in Dubai and graduated with Honors in Law (LLB Hons) from the University of Warwick in the United Kingdom. She completed her LPC and Masters in International Legal Practice at the University of Law, London. Her areas of practice include corporate restructuring, mergers & acquisitions and commercial transactions, both in the UAE and internationally, with a broad experience in emerging markets, cross-border and multi-jurisdictional mergers and acquisitions, commercial dispute resolution, corporate governance, compliance and advising clients from business start-ups to seasoned companies as well as high net-worth individuals. Rhea has been described by clients as “a great young legal mind to work with” and “willing to go the extra mile to meet deadlines and get the job done”