Last March, the Kingdom of Saudi Arabia introduced a new Competition Act, which effectively replaces the previous Act dating back to June 2004. The publication of the implementing regulations is still awaited. These will surely shed more light on the amended Saudi competition rules, however key amendments in the Act provide some insight into the new take on competition rules in Saudi Arabia.
We previously wrote an article explaining the situation prior to the amendments. Let's look into the significant changes in the new Act...
Competition rules become applicable to public institutions and state-owned companies under certain conditions
Previously, public institutions and state-owned companies were exempted from the Competition Act. The new Act narrows the exemption conditions and only exempts public institutions and state-owned companies solely authorized by the government to supply products and services in a certain field.
New infringements are recognized amongst anti-competitive agreements
The new Act expands on the anti-competitive agreements between actual or potential competitors and makes reference to agreements among entities. Accordingly, restrictive horizontal as well as vertical agreements are also considered anti-competitive agreements under the new Act. Moreover, it gives more examples of anti-competitive agreements (i.e. including price recommendation, quantity fixing etc).
Moreover, the new Act stipulates that prices in the market must be determined based on the competitive environment – the only intrusion may be made by the state.
Definition of "domination" expands and changes to "dominant position"
The past Act referred to the term "domination" and it meant having a market share with ability to influence the price in the market. The new Act uses the term "dominant position" and refers to overall ability to influence the market – dropping reference to price. Within this scope, the new Act leaves further explanations for determining domination/dominant position (i.e. market structure, barriers to entry) to the implementing regulations. Within this scope, the new Act provides some examples for abuse of dominant position.
Merger control rules change with adoption of a new term as well as adoption of turnover thresholds for notification assessment
The new Act introduces the term "economic concentration" and the definition includes full or partial transfer of ownership of assets, rights, stocks, shares or obligations of an entity to another entity into its definition alongside mergers (combination of two or more entities under joint management).
Moreover, the new Act drops market share threshold for notification assessment and adopts a turnover threshold, making it easier for companies to make an assessment prior to closing –the turnover threshold will be defined in the implementing regulations.
With the new Act, the merger control assessment by the authority is also clarified. For example, it is noted that a reasoned decision will only be available for rejected or conditionally approved transactions. Moreover, the review durations of the authority are also extended. Accordingly, if the authority stays silent for 90 days as of the notification of the transaction, the transaction is regarded as cleared.
Consumer welfare becomes important
Alongside maintenance of competitiveness in the market, the new Act also seeks to protect consumers' welfare through maintenance of a competitive environment. Along these lines, the new Act also introduces an exemption regime.
Greater responsibility with greater authority
The authority is granted greater authority − in the event of an overlap or a conflict regarding the competencies of other governmental bodies, the new Act stipulates that the authority's jurisdiction will prevail. Having said that, the authority is given additional responsibilities and duties.
And enhanced enforcement and sanction regime applicable to infringing firms
The new Act introduces the formation of a specialized committee in charge of reviewing alleged breaches. It brings significant updates to the existing applicable sanctions regime and more importantly, when compared to the previous one, the new Act stipulates new fines for individual violations
A forward looking Act promising alignment with well-established global antitrust principles
Overall, the amended Act shows greater similarities to the system in the EU and Turkey. The language, definition of certain terms and application of main rules are drawn nearer to the practices in the EU and Turkey.
Moreover, the Act stands out as a "forward looking" one as it stipulates that electronic data, computer data, phone records, alongside fax, emails and other known documents may be used in competition inspections.
Let's wait and see how the implementing regulations evolve!
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