15 Oct 2019
SAUDI ARABIA: New Competition Law Takes Effect on 25 September
The General Authority of Competition (GAC), the government agency tasked with oversight of the Kingdom of Saudi Arabia’s new competition law (Royal Decree No. (M/75) of 1440H), has issued the Implementing Regulations of the new law which take effect from 25 September 2019. The Implementing Regulations, which were released earlier for public consultation, cover all individuals and entities that provide services or undertake business activities in the kingdom, including foreign-invested companies. Specifically, all those undertaking commercial, agricultural, and industrial activities are covered by the new law; and only public authorities or wholly-owned state institutions are exempt.
The new competition law replaces the competition law issued by Royal Decree in 2004, and sets out as its general guiding principle that the prices of commodities and services must be determined in accordance with market forces and the principles of free competition. The law covers all activities, including all agreements and/or contracts between establishments - either made in writing or verbal, explicit or implicit - which are aimed at, or may have the effect of prejudicing competition.
The key changes brought about by the updated law and implementing regulations include extending the scope to cover practices occurring outside of Saudi Arabia which have an anti-competitive effect within the kingdom (a practice also found in other jurisdictions). The definition of state-related players exempt from the law is also more carefully defined; and the GAC has been given explicit priority jurisdiction with regard to overlapping or conflicting competencies of other governmental bodies which may arise when the new law is applied. Types of conduct which are prohibited under the new law have also been further clarified.
There are also significant changes to the old law with regard to merger control procedures. The applicable test to determine whether an ‘economic concentration’ will need to be notified to the GAC will change from a “market share threshold” test to “turnover” test under the new law. Qualifying economic concentrations must now be notified 90 days prior to completion, whereas the limit was only 60 days previously.
With regard to penalties for breaches under the new law, it retains the sanctions of a fine not exceeding 10% of total annual sales of turnover, or not exceeding SAR10 million (US$2.67 million), for offences in relation to anti-competitive agreements, and abuse of dominance or merger control. Doubling the applicable sanctions in the case of recidivism (repeating the offence within three years of the previous decision being published), also remains. However, at the discretion of the GAC, an establishment may also be fined up to three times the gains earned as a result of a breach of the new law.