Saudi Arabian Law Overview

Competition Law

The current Competition Regulation was passed by Royal Decree No M/75 of 29 Jumada Thani 1440 Hejra (corresponding to 6 March 2019), and came into force on 24 September 2019, replacing the Competition Regulation of 2004.

The essential purpose of the Competition Regulation is to protect and encourage fair competition, and to combat monopolistic practices affecting lawful competition. The Competition Regulation applies to all business entities operating in the Saudi market. Previously, there was a broad exemption for public establishments and companies wholly owned by the government. Under the new law, the exemption only applies to public institutions or wholly state-owned companies who have been granted exclusivity by statute.

Article 3 (1) (b) of the Competition Regulation provides that the legislation applies to any activities taking place outside Saudi Arabia which affect lawful competition within the Kingdom. Accordingly, a non-Saudi entity with no presence in Saudi Arabia can fall foul of Saudi competition law in certain circumstances.

The General Authority for Competition (the GAC) is in charge of supervising the implementation of the Competition Regulation and its Implementing Rules, and monitoring the market to ensure fair competition. The Committee for Review and Adjudication of Competition Law Violations is in charge of adjudicating violations of the law.

There are three major areas of law to be considered under the substantive competition legislation:

1. conduct that no business may engage in;
2. additional restrictions on businesses in a dominant position; and
3. restrictions on economic concentration.

Anti-Competitive Practices

The generally prohibited practices include anything which is done with the intention of restricting trade or to disturb competition. Particularly singled out, and always illegal, are:

1. fixing or proposing prices for goods and consideration for services and conditions of sale or purchase and the like;
2. fixing the volumes, weights or quantities of production of commodities or the performance of services;
3. restricting the freedom of flow of commodities or services to the markets, or wholly or partially removing the same therefrom by concealment or storing of the same without right, or refusing to deal therein;
4. any conduct tending to impede the entry of an enterprise to the market, or excluding it therefrom;
5. withholding commodities or services available on the market wholly or in part from a particular enterprise or enterprises;
6. dividing up the markets for the sale or purchase of commodities or goods, or allocating them in accordance with any criterion, particularly according to geographical areas, distribution centers, types of customers, or seasons and periods of time;
7. freezing operations of manufacture, development, distribution and marketing and all other modes of investment, or restricting the same; and
8. colluding or coordinating in bids or offers in governmental or other auctions or tenders in such a manner as to disturb competition.

Dominant Businesses

Additional restrictions on dominant businesses apply where the market share of a business entity or group of business entities reaches at least 40% market-share or if a business entity or group of business entities are able to influence the prevailing make price.

Article 6 of the Competition Regulation sets out the following non-exclusive list of practices that are prohibited for dominant businesses:

1. selling a commodity or service at a price less than the total cost, in order to exclude enterprises from the market or to expose them to grave loss, or to impede the entry of potential enterprises;
2. fixing or imposing prices or conditions for the resale of commodities or services;
3. reducing or increasing the available quantities of products in order to control prices or fabricate a non-genuine abundance or shortage;
4. discriminating in dealings between enterprises in respect of similar contracts with regard to the prices of commodities or consideration for services or conditions of sale or purchase thereof;
5. refusing to deal with another enterprise without objective cause, in order to restrict its entry to the market;
6. imposing a requirement on an enterprise that it should refrain from dealing with another enterprise; and
7. making the sale of a commodity or the providing of a service conditional upon the assuming of obligations or the acceptance of goods or services that – by their nature or under commercial usage – are unconnected with the commodity or service that is the subject matter of the original contract or transaction.

Economic Concentration

Article 1 of the Implementing Rules defines economic concentration as any act resulting in the total or partial transfer of ownership of assets, rights, shares, stakes or obligations of an enterprise to another enterprise by way of merger, takeover or acquisition, or the combining of two or more managements into a joint management, or any other form resulting in control over one or more enterprises, including influencing its decisions or the composition of its management structure or voting mechanism therein. The GAC has issued a Guide on the Reporting of Economic Concentrations, which states that the creation of a stand-alone joint venture is economic concentration.

If the combined total value of annual sales of entities participating in an economic concentration exceeds SAR 100 million, they may be required to make a pre-merger filing at least 90 days before completing the transaction. One can approach the GAC before making a full filing to request guidance whether the filing is necessary for a given transaction.

Exemptions

Entities may file an application to the GAC’s board to be exempted from the anti-competitive practice prohibitions under Article 5, the prohibitions of acts perceived as abuses of dominant positions under Article 6, and the economic concentration notification requirements under Article 7. The granting of these applications is dependent upon the recommendation of a technical committee formed by the GAC’s Board of Directors for this purpose. In granting an exemption the Committee will consider:

1. whether an exemption would improve the performance of the market;
2. whether an exemption would improve the product quality, technological development and/or innovativeness of enterprises; and
3. whether the benefit to consumers would outweigh the effects of the limitation of freedom of competition.