SAUDI ARABIA: An Introduction to Competition/Antitrust

Introduction

In recent years, the Kingdom of Saudi Arabia (KSA) has made significant strides in reforming its economic and legal landscape to foster a more competitive market environment. Saudi Arabia’s Vision 2030 initiative has been a driving force behind these changes, aiming to diversify the economy. As part of this transformation, the KSA government has introduced various measures to enhance competition and regulate antitrust practices, thereby creating a dynamic and robust legal framework for businesses operating within the country. Specifically, the current Competition Law (the “Competition Law”) was introduced on 6 March 2019 and came into effect, together with its implementing regulations, on 24 September 2019.

The General Authority for Competition (GAC) is the regulator in charge of the implementation of the Competition Law, the protection and promotion of fair competition, and combatting monopolistic practices affecting competition.

Current Economic Conditions

Economic conditions in Saudi Arabia are currently influenced by a combination of factors, including fluctuating oil prices, global economic uncertainties and the ongoing efforts to diversify the economy. The Vision 2030 initiative has been instrumental in attracting foreign investments and encouraging the growth of non-oil sectors such as tourism, entertainment and technology. These developments have had a profound impact on the legal profession, particularly in the antitrust and competition (A&C) space.

Companies in Saudi Arabia are becoming increasingly aware of the complexities of this rapidly evolving legal landscape. There has recently been a surge in demand for A&C advice/services, driven by the need to ensure compliance with new regulations and to address potentially anti-competitive behaviours (eg, price-fixing, retail price maintenance and abuse of dominance).

General Enforcement Trends

The A&C practice area in KSA is characterised by several emerging trends and developments. Two of the most notable of these are (i) the increasing focus on merger control and (ii) greater scrutiny of potentially anti-competitive practices or abuse of dominance (ie, enforcement of the Competition Law).

Merger Control

The GAC has been increasingly active on the merger control front over the past few years. Historically, the vast majority of the decisions issued by the GAC in relation to merger control applications have been unconditional clearances. Below is an overview of the merger control applications received and reviewed by the GAC since 2019 (pursuant to the GAC’s annual reports published for the years 2019–23).

There have been two rejections: one in 2021 and the other in 2022. The main reasons for the rejections include:

• the increased likelihood of co-ordinated effects among competitors as a result of the removal of this competitive restraint (ie, the acquirer having fewer competitors leading to tacit co-ordination collusion); and
• possible hindering/barring of entry to new competitors.

There have been five conditional approvals, where remedies generally tend to be behavioural in nature (eg, commitment not to increase prices over a certain period of time or refraining from imposing exclusivity conditions) rather than structural (such as an obligation to divest a business line).

There have been 770 unconditional approvals, which include all types of transactions (eg, M&A, formation of joint-ventures and transfers of businesses/assets). These involve (i) foreign-to-foreign, (ii) foreign-to-local and (iii) local-to-local companies. The table below (extracted from the GAC’s 2023 annual report) below breaks down the number of unconditional approvals issued by the GAC per year.

Competition Law Enforcement

The GAC has been increasingly active on the enforcement front over the past few years as well. The GAC has noticeably increased its presence “in the field”, as evidenced by the significant increase in the number of investigations and dawn raids conducted in recent years.

The table below (extracted from the GAC’s 2023 annual report) illustrates the increase in the number of enforcements initiatives taken by the GAC.

The GAC carried out a staggering 548 dawn raids in 2023, meaning an average of 2.2 dawn raids every business day. The GAC investigated 442 entities and ultimately indicted 186 of them.

Below is a table breaking down the types of anti-competitive practices identified by the GAC, according to the GAC’s 2023 annual report.

Price fixing is currently one of the main areas of focus of the GAC and is being examined both at the horizontal level (ie, price fixing arrangements or practices between actual or potential competitors) but also at a vertical level (ie, resale price maintenance between market players operating at different levels of the supply chain).

New Guidelines

In response to the evolving market dynamics, the GAC publishes, from time to time, draft guidelines for public consultation. Recent guidance has included the following.

An updated version of their merger review guidelines (MRG)

This contemplates the introduction of significant updates to the current merger control regime, including:

• an update of the current merger filing thresholds introduced in November 2023;
• clarification of the concept of control; and
• the introduction of categories of transactions that no longer require notification.

New guidelines on dealing with vertical and horizontal agreements

Theseprovide a framework for assessing agreements that may affect competition. They also address various restrictions, such as exclusive trade marks, resale price maintenance, and tying products, and provide insights into mitigating their impact on competition while ensuring consumer benefits.

New guidelines to enhance competition in the food delivery platform sector

Theseset out regulations and procedures to prevent anti-competitive practices and seek to improve market efficiency, foster innovation, and ensure consumer welfare by establishing competitive standards and reducing barriers to entry for small and medium-sized enterprises (SMEs) in the sector.

Challenges and Solutions

One of the primary challenges companies face in the A&C space in the KSA is that the GAC’s decisions are not publicly available: only high-level summaries of certain cases are included in its annual reports, with no factual background or legal reasoning behind its decisions. Considering the GAC’s broad discretion in interpreting competition law concepts, this context creates some uncertainties over how the GAC may interpret certain practices or assess certain transactions.

One of the ways businesses may mitigate this A&C risk is to raise awareness of local teams regarding the existence of A&C regulations in the KSA and of the enforcement actions taken by the GAC. Further, it is recommended to invest in robust compliance programmes and seek legal advice to navigate the complexities of the regulatory environment and the GAC’s practices. Finally, companies should generally rely on best international practices, while always taking into account local specificities and regulations.

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The A&C practice area in KSA has been undergoing significant transformation over the past few years, driven by the country’s ambitious Vision 2030 initiative and the goal of becoming a sophisticated and competitive jurisdiction. The drastic increase in the GAC’s enforcement actions makes it essential that companies adhere to the Competition Law and the GAC’s requirements.