An overview on the applied sanctions under merger control regulations in Kuwait
Competition Focus
Rana HegaziSenior Associate,Corporate Commercial
Kuwait's economic landscape has been undergoing significant transformation, marked by increased participation from both local and international businesses across various sectors. In response to this growth and to ensure fair competition, Kuwait has been actively refining its regulatory frameworks, particularly in the realm of merger control. The Kuwait Competition Protection Authority (CPA) has been actively enforcing the Competition Law No. 72 of 2020 and its Executive Regulations issued by Law No. 14 of 2021 (the “Law”), which regulates merger control and prohibits anti-competitive practices in Kuwait. The CPA has the power to impose hefty fines and even unwind transactions that violate the Competition Law, as well as to conduct investigations and inquiries independently or in collaboration with other regional authorities.
In this article, we highlight some of the key aspects of the CPA's enforcement regime and its implications on businesses.
Article 34 of the Law states that the Disciplinary Board of the CPA may impose the following financial penalties for the relevant violations as follows:
No more than ten percent (10%) of the total revenues earned by the relevant person during the previous fiscal year in the event the persons involved in a vertical and/or horizontal relationship enter into any agreements or carry out any concerted practices that may restrict, lessen or prevent competition.
Failure to submit an application for concentration transaction would entail a penalty of no more than (10%) of the total revenues earned by the parties to the concentration during the previous fiscal year.
No more than ten percent (10%) of the total revenues earned by the parties to the concentration during the previous fiscal year if the application for concentration contains misleading or incorrect information.
No more than one percent (1%) of the total revenues earned by the relevant person during the previous fiscal year; whoever hinders or prevents the authorized employees from detecting the violations referred to in the provisions of the present Law, from carrying out their duties, or from having access to the books, documents, explanations and any other data and papers.
No more than one percent (1%) of the total revenues earned by the relevant person during the previous fiscal year; whoever refrains from implementing any obligation imposed thereon by CPA to implement the provisions of the present Law, if one-month elapses following the date of official notification.
No more than one percent (1%) of the total revenues earned by the relevant person during the previous fiscal year; whoever provides CPA with misleading or incorrect information.
One pertinent question in the application of penalties pertains to whether total revenues are calculated on a local or global basis. While the Law does not explicitly specify this, recent practice and declarations from the CPA confirm that fines will be calculated based on global revenues. This approach reflects the CPA's efforts to highlight the importance of complying with merger control regulations to avoid financial repercussions.
The fine dictated in case of failure to file was reflected in the decisions issued by the Disciplinary Board, by which the CPA assumed impact of the Kuwaiti competition market due to the revenues generated from Kuwait by the parties involved in the unfiled transaction, and imposed fines between 5% and 7% of the relevant annual revenue.
It is noteworthy that several decisions issued by the Disciplinary Board mentioned that their decisions may not be appealed. However, according to Kuwait laws and constitution, all the administrative decisions can be subject to appeal. Given that the right to appeal of administrative decisions aims to ensure fairness, transparency, and the protection of individuals' and entities' rights against arbitrary or unlawful administrative actions, we believe that in case of judicial dispute, such deletion of appeal right under the decisions issued by the Disciplinary Board will be deemed unconstitutional.
Nothing prevents the CPA from unwinding a transaction. CPA officials confirmed verbally on several occasions that they have the power to unwind transactions that has been filed but has been implemented without obtaining its clearance, as this is considered a violation of the Competition Law.
According to Kuwait law, all the administrative decisions can be subject to appeal. In fact, the individuals or entities affected by an administrative decision issued by the CPA or any other administrative authority in Kuwait may appeal the decision if they believe it violates their legal rights or is based on incorrect information or improper procedures. The appeal of administrative decisions in Kuwait follows established legal procedures aimed at ensuring fairness, transparency, and the protection of individuals' and entities' rights against arbitrary or unlawful administrative actions.
It is worth mentioning that the Law and CPA’s practice has indicated that a decision of the Disciplinary Board cannot be subject to an appeal. Currently, we are aware of a claim filed before the Constitutional Court to determine the constitutionality of the said provision.
The CPA has the authority to independently initiate research, investigations, evidence collection, and inquiries per the provisions of the Competition Law.
Also, several Arab countries started collaborating between different competition authorities to detect violations in the region. Furthermore, in March 2022, the Arab Competition Network (“ACN”) was launched in Cairo to coordinate collaboration efforts among the competition authorities of 17 Arab Countries including KSA, Kuwait, UAE and Lebanon. Since then, the ACN has begun organizing multilateral workshops, trainings, and meetings for its member competition authorities to main fair competition in the market.
In conclusion, the recent practice and application of the Law by CPA underscore the State's steadfast commitment to nurturing fair competition and upholding market integrity. By rigorously enforcing regulations and disciplinary measures, the authorities aim to create a level playing field for businesses operating within Kuwait's jurisdiction. This proactive approach not only safeguards the interests of consumers and investors but also strengthens confidence in the country's economic landscape.
It is imperative for businesses operating in Kuwait to remain vigilant and responsive to these evolving regulatory dynamics. Staying informed about recent developments and complying with statutory requirements are paramount to mitigating risks and maintaining legal compliance. Failure to adhere to established regulations could expose businesses to potential penalties, legal disputes, and reputational damage. Therefore, proactively integrating compliance mechanisms into business operations is essential to navigate the regulatory landscape effectively.
In essence, by aligning with regulatory standards and embracing transparent business practices, companies can not only mitigate legal risks but also position themselves competitively in Kuwait's dynamic marketplace. Adherence to regulatory frameworks not only fosters trust and credibility but also contributes to the sustainable growth and prosperity of businesses within Kuwait.
For further information,please contact Rana Hegazi.
Published in April 2024
