Saudi Arabia’s economy is witnessing an active movement in concentration transactions: merger, acquisition, and JV projects, as the applications submitted before General Authority for Competition increased in 2020 compared to 2019 more than 150%. Such activity required a legal duty to spread awareness of the events of being subject to the competition law by the Commercial companies and entities, which this mat highlights.
The importance of the competition law is indisputable in light of any growth market. It is also considered as a persistent need and necessity for its remain and continuously, where the monopolistic or unfear competition practices could produce an unhealthy economy that negatively affects the clients, consumers, growth entities, or the entry of an entity into the market.
Starting from this point, the concentration transactions that establish a legal person with a larger part of the market, through merge, acquisition, JVs, or any other form that produced control over an entity or more, should report the General Authority for Competition (the “Authority”) to obtain its approval (90) days prior to the concentration transaction completion, where the conditions and situations stipulated in the law applies. In accord to the article (7) of the competition law issued by the royal decree No. (M/75) dated 29 Jumada Althani 1440, and its executive regulation issued by the board resolution No. (337) dated 25 Moharram 1440, the parties of the concentration transaction must report to the Authority if the total value of all parties’ (the merging parties, or the acquiring and the acquired entity for instance) annual sales exceeds one million SAR, whether it is collected inside or outside Saudi Arabia. And even in the event of impossibility to estimate the total value of the annual sales, the parties should contact the Authority and respond to the criteria it applies for such cases. The Authority has published guidance of reporting the concentration transaction procedures, that elaborate the entities subjected to annual sales criteria, define the annual sales scope, the accounting period to calculate annual sales, and whether the party of the concentration transaction is a subsidiary to collective companies or not a company. please click here to review the guidance.
Further from the above mentioned accurate conditions, on the other hand, the parties of the concentration transaction could apply for exemption from applying article (7) aforementioned, by submitting a request that will be referred to a technical committee to make a decision, when one of the conditions stipulated in article (26) of the executive regulation applies, which is: (the board – based on the technical committee’s recommendation- approved the entity’s request to an exemption from (5,6,7) articles of the law’s provisions in the event of the following: 1- if the concentration transaction will lead to improving the markets and entities in quality, diversity, technology development, creative sufficiency and etc. ) 2- if the concentration transaction will achieve advantages to the consumer exceed the effects of competition liberty limitation. 3- if the concentration transaction will not grant the beneficial entities advantages to exclude other competitors in good or more from the market. The board shall consider other influence circumstances compared to the prospective positive results from the exemption). Also, it is worth noting that the exemption resolution is restricted to a certain period of time, and the Authority has the authority to get it back and not extend it in the event of the article (26)’s conditions no more apply or changing of the market’s circumstances.
At the end of this brief article, it is worth saying that the quality of the required submitted documents before the Authority in order to obtain its approval, is a huge impact factor for such approval. As for the concentration transaction requests, and after performing the legal procedures, investigations, verification, and obtaining public views, the board of the Authority will issue its resolution of approval, or rejection, or conditional approval as – for an example – when the Authority approved the acquisition between Uber and Kareem companies, the Authority published the (8) restrictions that should be followed for the sake of verification of the approval and to avoid law’s violations.