Competition
Saudi Arabia’s Competition Law came into effect in January 2005, and was amended by subsequent implementing regulations in 2014. The Competition Law, which is enforced by the Competition Council, applies to any company doing business in Saudi Arabia. It does not apply to public (government) corporations or fully-owned state enterprises.
The broad aim of the Competition Law is to protect and encourage fair competition and combat monopolistic practices that affect competition. It seeks to achieve this by:
prohibiting agreements and arrangements between firms if their objective or effect is to restrict commerce or competition;
restricting the ability of a firm to acquire a dominant position in the market; and
making abuses of dominant market position by a firm illegal.
The Competition Law prohibits practices, agreements or contracts (whether written or oral, express or implied) among current or potential competitors, where the objective or effect of such practices, agreements or contracts, is the restriction or prevention of competition. The Competition Council has some discretion in enforcing the law, when it concludes that such practices & agreements improve efficiency and provide benefits to consumers that outweigh the anti-competitive effect.
The abuse of a dominant market position in the Saudi market is prohibited. A ‘dominant position’ refers to entities that have a market share of at least 40% of total sales in the relevant market in a 12 month period, or that are in a position to influence the prevailing price in the market at any time.
Broadly speaking, ‘abuse’ would involve practices in the nature of the following, that restrict competition:
price control;
restricting the free flow of goods and services;
barriers to entering and leaving markets;
forcing out competitors;
partitioning markets;
customer discrimination;
compelling or agreeing with a client to refrain from dealing with a competing entity; and
making the sale of a commodity, or offer of a service, contingent on the purchase of another commodity or service.
The Competition Law also addresses conduct, such as the acquisition of ownership or management control that results in a dominant position in the market. An entity planning to achieve economic concentration that will result in control of 40% of a commodity’s total supply in the market is required to make an initial electronic application, and then (if determined by the Competition Council as necessary) a subsequent written application to the Competition Council providing prescribed information including a report detailing the likely consequences of the proposed economic concentration (in particular, its positive effect on the market). The entity can proceed with the transaction if the Competition Council confirms its approval – or does not decline approval within 60 days of the entity’s application.
The Competition Council may initiate investigations into possible breaches of the Competition Law either at its own discretion, or by acting on the complaint of an aggrieved party. If it concludes that a breach has occurred, the Competition Council may order that the prohibited conduct cease, issue fines, and take other action to remove the effects of the violation and penalize the perpetrator. Anyone suffering harm caused by conduct prohibited under the Competition Law may apply to the court for compensation.
