On 25/1/1441H (corresponding to 24 September 2019), the Board of Directors of the General Authority for Competition (the "Authority") issued the anticipated implementing regulations (the "New Implementing Regulation") to the new Competition Law issued by Royal Decree no. M/75 dated 29/6/1440H (corresponding to 6 March 2019 (the "New Law"). The New Law and the New Implementing Regulations became effective on 25/1/1441H (corresponding to 24 September 2019). The New Law and New Implementing Regulations introduced a number of incremental reforms to the former Competition Law adopted by Royal Decree No. (M/25) dated 4/5/1425H (corresponding to 22 June 2004) as amended by the Royal Decree no. M/24 dated 11/4/1435H (corresponding to 12 February 2014) (the “Previous Law”) and its Implementing Regulations (the "Previous Implementing Regulations").
The most significant changes introduced include the following:
Jurisdiction and Scope
- The New Law explicitly provides that it applies to entities
operating in Saudi Arabia (whether or not validly licensed) but
also to practices taking place abroad, if such practices
produce anti-competitive effects in Saudi Arabia.
- The concept of entities subject to the New Law under the New
Implementing Regulations is very broad and encompasses
any institutions, companies or groups engaged in an economic
activity regardless of their legal form, nationality and
ownership. The concept of "economic activities" is defined
broadly to include any commercial, agriculture, industrial
service and professional activity.
- The New Implementing Regulations also include in the
concept of entities subject to the New Law individuals
engaged in economic activities (which suggests that individual
end-customers may not be exempt from the scope of
application of the New Law) and electronic platforms and
applications (despite their absence of legal personality so
presumably the New Law and the New Implementing
Regulations will simply apply to the entities owning and/or
operating such websites or digital applications).
- With respect to practices taking place outside Saudi Arabia,
the New Implementing Regulations vest the Authority with the
power to (i) review behaviors and practices having a potential
or existing impact on competition in Saudi Arabia; and (ii) take
the necessary measures and procedures, or request the
foreign competent authorities to take or implement the same.
- While the Previous Law provided for a broad exemption to
public corporations and state-owned entities, the New Law
and New Implementing Regulations limit such exemption to
public institutions and to wholly state-owned companies solely
authorized under a Royal Order, a Royal Decree, a Council of
Ministers resolution, or a High Order to provide commodities
or services in any given specific field of activity. In this case,
the exemption is only granted to such public institutions or
wholly state-owned companies with respect to the field of
activity for which it has exclusivity.
- The New Law and the New Implementing Regulation apply to
entities participating with exempted owned-state companies in
activities violating the New Law.
- The New Implementing Regulations also include a supremacy clause giving the Authority jurisdiction to apply the New Law and the New Implementing Regulations to entities operating in a field of activity that is regulated by another governmental body (e.g. pharmaceutical and information technology sectors). The New Implementing Regulations vest the Authority with inherent jurisdiction in case of conflict or overlap of competences with those of other governmental bodies arising from the implementation of the provisions of the New Law.
- Article 4 of the New Law sets as a general rule that the prices of commodities and services must be determined in accordance with market rules and the principles of free competition. The New Implementing Regulations reinforce this rule of free market by stating that entities in Saudi shall be free to price commodities and services in accordance with market rules, free competition principles, and supply and demand factor. However, these provisions exclude situations where prices are regulated by the State (i.e. if they are determined by virtue of a Council of Ministers' resolution or by virtue of regulations to that effect). The New Implementing Regulations also clarify that entities may not conclude agreements, or abuse their dominant position, in violation of New Law and the Implementing Regulations even where prices are set by a Council of Ministers resolution or other laws.
- Article 5 of the New Law and Article 8 of the New Implementing
Regulations prohibit anti-competitive practices and
agreements, which have as their object or effect the restriction
of competition. Article 5 of the New Law includes an illustrative
list of eight anti-competitive practices and agreements
including price fixing, restricting freedom of flow of
commodities and services to the market, preventing any entity Client Alert November 2019
from exercising its right to enter or move out of the market,
division or allocation of the markets and bid rigging. The New
Law introduces new restrictive practices, such as price
recommendation and fixing the size, weight or quantities for
the production of commodities or the performance of services.
- The New Law no longer requires that such anti-competitive
practices or arrangements take place between actual or
potential competitors but instead provides that all practices,
including agreements or contracts "among entities", are
prohibited if their objective or impact constitutes a violation of
competition. The New Law does not distinguish between
horizontal and vertical relationships. Hence, presumably all
practices that are considered restrictive under the New Law
will be prohibited regardless whether the relevant parties are
actual competitors, potential competitors or engaged in a
- Article 8 of the New Implementing Regulations provides that the following anti-competitive behaviors are deemed to be per se violations: (i) raising, lowering or fixing the prices of commodities, terms of sale and purchase and the like, (ii) depriving, wholly or partially, an entity or a group of entities from commodities available in the market, (iii) dividing markets for discrimination in the sale or purchase of commodities, or allocating the same based on any criteria including geography, distribution centers, types of clients and seasons or periods of time, and (iv) complicity or collusion in tenders or bids in government and non-government auctions, tenders and procurement, in any form whatsoever. Interestingly, Article 8 of the New Implementing Regulations (unlike for Article 5 of the New Law) limits per se violations to anti-competitive practices taking place among "competing or potentially competing entities". Hence, presumably, none of the restrictive practices set out in Article 5 of the New Law shall be deemed a per se violation if they occur in the context of a vertical relationship.
Unilateral Behavior / Dominance
- The New Law provides a general definition of dominance as a
situation where an entity or a group of entities is controlling
and/or is able to influence a certain percentage of the market
in which it exercises its activity. The New Implementing
Regulations are more specific and define dominance by
reference to the two following alternative criteria: (i) a market
share in the relevant market amounting to 40% or more or (ii)
the ability to influence the Relevant Market, including
controlling prices, production or offering. Both criteria must be
assessed either individually or in the context of a group of
companies acting in concert. The New Law and the New
Implementing Regulations do not set a timeline to establish
dominance (whereas the Previous Law required that its criteriaClient Alert November 2019
for dominance should be met for at least a period of 12
- Under Article 6 of the New Law, dominant entities are
prohibited from abusing their dominant position to violate, limit
or prevent competition. This Article includes a list of seven
prohibited practices for dominant entities which may not -for
example- sell below cost to force competitors out of the market
or expose them to substantial losses or to prevent the entry of
a new entity on the market, or refuse to deal with other
companies without a valid justification. Dominant entities may
also not compel an entity to refrain from dealing with another
entity (a new restrictive practice expressly introduced by the
New Law) and which applies to exclusivity and non-compete
obligations introduced by dominant entities.
- Article 10 of the New Implementing Regulations provides that the following two practices are to be considered as per se violations for dominant entities: (i) restricting an entity from dealing with another entity (which amounts to imposing an exclusivity obligation) and (ii) making a sale of a commodity conditional upon assuming an obligation, or accepting a commodity, which by nature, or according to commercial use, is not related to the initial commodity subject of the contract or deal (which amounts to bundling).
- Under the New Law, any entity intending to participate in an
economic concentration must notify the Authority prior to
completing the transaction where the total annual value of
sales of the participating entities exceeds one hundred million
Saudi Riyals (SAR 100,000,000) during the last complete
fiscal year. There is no indication in the New Law or the New
Implementing Regulations as to whether this is a worldwide
threshold or a domestic threshold. Absent any such express
indication, this amount should be interpreted as referring to
combined worldwide turnover.
- The New Implementing Regulations define the concept of
"economic concentration" as "action involving the complete or
partial transfer of ownership of assets, rights, shares, stocks
or obligations of an entity to another entity through merger,
purchase, acquisition or the grouping of two or more
departments under joint management, or otherwise by any
other means resulting in control over an entity or more,
including influence on its decisions, formation of
administration body, or voting mechanism."
- In the absence of any de minimis or exceptions to the
definitions above, the acquisition of any shares or assets, the
formation of any joint-venture companies, any merger or any
other restructuring, whether these transactions take place in
the Kingdom or abroad, are now subject to a merger control
filing requirement if (i) the parties involved in such transactions
have a combined worldwide annual turnover in excess one
hundred million Saudi Riyals (SAR 100,000,000) and (ii) such
transactions result in a change of control in favor of the
purchaser, the joint-venture partner or the merging entity, as
the case may be.
- The only exception set out in the New Implementing
Regulations with respect to merger control is where the
acquiring entity is an exempted owned-state company. In this
case, it is not required to apply for a merger control clearance.
- The obligation to notify the Authority lies with all entities
participating in the proposed transaction.
- The Authority now has up to (i) 30 calendar days to review the
application and the supporting documents and to confirm
whether the application is complete and then (ii) 90 calendar
days to review the proposed transaction.
- The New Implementing Regulations grant broad powers to the
Authority to supervise economic concentrations. The Authority
may now request information, documents and data, inquire
and visit premises of the parties or entities that may be
affected by the proposed transactions (e.g. suppliers,
competitors), whether or not such entities submitted a notice.
The Authority may also ask the public to provide feedback on
any economic concentration.
- The Authority may investigate and assess non-reported
economic concentrations, request the termination of a
reported economic concentration which has been completed
before the issuance of the Authority's approval.
- The Authority may issue three types of decisions in relation to the reporting of an economic concentration: (i) an approval; (ii) a conditional approval; or (iii) a rejection. If the Authority fails to notify its decision to approve or reject the transaction within the 90-day period mentioned above, the parties may complete the transaction.
- The New Law includes a specific provision allowing
companies to request from the Authority exemptions with
respect to anti-competitive practices (whether anti-competitive
practices and agreements under Article 5 or unilateral
behaviors under Article 6) and merger control.
- The New Law and the New Implementing Regulations do not
set a timeline for the review of exemption applications. Instead,
the New Implementing Regulations provide that the Authority
shall determine the assessment period on a case-by-case
basis, starting from the date the application is made.
- The Board of Directors of the Authority (the "Board") may
grant an exemption if it considers that the practice for which
an exemption is requested will improve the performance of the
market and/or improve the performance of entities in terms of
products, technological advancement, and creative innovation.
An exemption may only be granted if the benefits of the
restriction outweigh the harm to competition.
- Pursuant to the New Implementing Regulation, the Authority may either approve, grant a conditional approval, or reject an application for exemption. The approval of an exemption is not permanent and may be revoked or extended in the future. An exemption may be withdrawn: (i) if the applicant breaches its obligations or commitments determined in the exemption decision, (ii) if the reason for the exemption is fulfilled, (iii) there has been a change in the market conditions and the level of competition, or (iv) the negative impact of the exempted practice on competition outweighs its positive effects. The Authority may extend the exemption period before its expiry on its own initiative or at the written request of the applicant.
Investigations and Dawn Raids
- The New Law and the New Implementing Regulations
introduce new provisions on investigations and dawn raids by
the Authority. The Board (or the Authority's Chairman or
Governor in case of emergency, subject however to the
approval of the Board at the first meeting following such
decision) has the authority to initiate inquiries, investigations,
research, collection of evidence regarding practices in
violation of the New Law.
- The New Law grants broad powers to officials of the Authority
designated by the Board to access premises within working
hours, review books and documents, and take copies thereof.
Such officials will have the capacity of judicial investigation
officers and will be entitled to support competition cases by all
means, including on the basis of soft statements generated by
computers, telephone recordings, facsimile transmissions,
and e-mails. The officials of the Authority may also investigate
and question shareholders, managers and employees.
Designated officials may seek the assistance of the competent
authorities, including security authorities, when discharging
- Entities must provide the Authority with any requested data, information, documents, or exhibits to conduct market studies, evidence-gathering, and investigation. They shall not withhold information from designated officials, provide misleading information, conceal or destroy documents or exhibits necessary for the investigation for confidentiality reasons or otherwise. Any person violating the provisions relating to investigations and dawn raids may be subject to a fine not exceeding 5% of the total annual value of sales (turnover), or not exceeding five million Saudi Riyals (SAR 5,000,000) if it is impossible to estimate the turnover.
- The Previous Law provided that fines not exceeding 10% of
the total annual value of sales (turnover), or ten million Saudi
Riyals (SAR 10,000,000) if it is impossible to estimate the
turnover, could be imposed on violators.
- Under the New Law, any company/person violating the
provisions of Articles 5 (general anti-competitive practices), 6
(anti-competitive practices for dominant entities), 7 and 11
(merger control requirements) may be subject to a fine not
exceeding 10% of the total annual value of sales (turnover)
that are the subject matter of the violation, or not exceeding
ten million Saudi Riyals (SAR 10,000,000) if it is impossible to
estimate the turnover.
- In addition, the Committee for the Resolution of Violations of
the Law may, at its discretion, alternatively resort to imposing
a fine not exceeding three times the proceeds realized by the
violator as a result of the violation.
- In case of recurrence, the Committee for the Resolution of
Violations of the Law may multiply the fine imposed for the first
- The New Law also introduces a new 'catch all' fine applicable
to anyone violating any other provisions of the New Law or its
New Implementing Regulations in an amount not to exceed
two million Saudi Riyals (SAR 2,000,000).
- In addition to the other remedies also available to the Authority
under the Previous Law (e.g. requiring the violator to dispose
of some of its assets, imposing a daily fine not exceeding ten
thousand Saudi Riyals (SAR 10,000) until the violation is
remedied), the New Law authorizes the Authority to close
down the violating entity for a period not exceeding 30 days if
such violator fails to remedy the violation within 90 days from
the date it is notified of the violation.
- The New Implementing Regulations also provide that (without
prejudice to any penalty provided for in the New Law or any
other law, an entity that offers any gifts, donations,
endowments, wills, grants, and financial aids to the Authority
or its employees during the performance of its assigned works,
in order to influence any action that would prejudice theClient Alert November 2019
fairness and integrity of the inspection or investigation, shall
be subject to a fine not exceeding SAR 2,000,000, in
accordance with Article 20 of the Law.
- As a general rule, penalties are cumulative. The imposition of a penalty does not preclude the Authority from imposing additional fines or taking additional measures or proceedings in respect of other violations of the New Law.
- The New Law and the New Implementing Regulations
introduce rules regarding leniency and settlement.
- The New Implementing Regulations provide that leniency may
be requested only by one applicant (i.e. the first entity to apply
for leniency) which must proactively provide evidence relating
to its partners violating the New Law.
- The New Implementing Regulations clarify that an application
for leniency or settlement may be requested before or after a
decision to investigate and collect evidences has been issued,
but not after a decision has been taken to institute criminal
proceedings against the alleged violator.
- If the Board decides to approve an application for leniency or
settlement, no proceedings shall be instituted before the
Committee for the Resolution of Violations of the Law against
the entity which was granted leniency or settlement. The
Board may however take other measures in accordance with
the provisions of the New Law and the New Implementing
Regulations. If an entity accepts a settlement, it shall pay the
settlement amount determined by the Board, as well as any
compensation amount to the affected parties as may be
determined by the Board.
- The Authority must notify the applicant of the Board's decision on a leniency or settlement application within a period not exceeding 120 days from the date of the submission of the complete request.
Committee for the Resolution of Violations of the Law
- Under the New Law and the New Implementing Regulations,
the Board shall constitute a Committee for the Resolution of
Violations of the Law (the "Committee") composed of five
Board members. The Committee shall be competent to settle
all cases arising under the New Law or the New Implementing
Regulations (save for violations committed by officials of the
Authority or Board members e.g. breach of their confidentiality
obligations or of the conflict of interests rules).
- Hearings held by the Committee are public, unless the
Committee decides otherwise. Proceedings and pleading are
- The Committee's decisions are considered final if the parties do not appeal before the competent court within thirty days from the date of notification of the Committee's decision.
For further details on the New Competition Law and its practical impact on your operations in Saudi Arabia, please do not hesitate to contact our Saudi Competition team.* Content prepared by Legal Advisors in association with Baker & McKenzie Limited.