Merger Control Developments in Saudi Arabia since 2023
Competition Focus
Christopher WebbPartner,Corporate Commercial
Omar Al HumaidPartner,Corporate Structuring
There have been a number of significant developments in Saudi Arabian merger control law and practice since the beginning of 2023.
The General Authority of Competition, (“GAC”) revised its threshold for notifying economic concentrations twice in 2023. On 29 March 2023, the GAC raised the financial threshold from SAR 100 million total worldwide annual revenues of the parties to the economic concentration to SAR 200 million total worldwide annual revenues of the parties to the economic concentration, in circumstances where there was a Saudi Arabian nexus to the economic concentration.
This change was made to address concerns that too many low value economic concentrations were being caught by the former threshold. However, the change did little to address concerns that many economic concentrations made notifiable by the parties’ combined revenues exceeding the worldwide threshold often had very low Saudi Arabian or target revenues, or both.
To address these concerns, and following an announcement of a decision of the board of the GAC on 1 November 2023, the Competition Law and its Implementing Regulations now require notification to the GAC of economic concentrations in which:
There is a sufficient nexus between the transaction and Saudi Arabia;
there is a change of control, having regard to the criteria set out in the GAC’s Merger Control Guidelines; and
each of the following revenue thresholds are exceeded:
the total worldwide annual revenues of the parties to the economic concentration (on a group basis) exceeding 200 million Saudi Riyals (USD 53,333,333);
the total worldwide annual revenues of the target exceeding 40 million Saudi Riyals (USD 10,666,667); and
the total annual revenues in Saudi Arabia of all parties to the economic concentration (on a group basis) exceeding 40 million Saudi Riyals (USD 10,666,667).
An obligation to notify the formation of a jointly controlled full function joint venture, will exist when there is a Saudi Arabian nexus and the first and the third revenue thresholds above are exceeded. The second threshold is to be disregarded.
In assessing whether the financial thresholds above are exceeded, the GAC’s guidance is that the revenue figures from the most recent set of audited accounts are to be used.
While a step in the right direction, the new thresholds are still capturing economic concentrations in which target has a very low Saudi Arabian revenue. It is to be hoped that a future revision to the financial thresholds will address this by introducing a minimum Saudi Arabian revenue threshold for target alone.
The GAC released version 4 of its Merger Control Guidelines in November 2023.
The GAC reduced the maximum filing fee payable for an economic concentration from SAR 400,000 to 250,000, following an announcement on 7 June 2023. The filing fee is, as before, calculated as 0.02% of the combined worldwide revenues of the parties up to the capped maximum.
In November 2023 the GAC announced that automobile distributorships are to be notified to it in circumstances where the Saudi Arabian distributor already has at least one other agency.
The GAC did not block any economic concentration in 2023, or to date in 2024. The proposed acquisition of a controlling interest in Best Gas Carrier Company by National Gas and Industrialization Company, blocked in 2022, remains the only economic concentration rejected on competition grounds. The proposed acquisition of The Chefz by Delivery Hero had been blocked on procedural grounds (i.e. refusal to provide requested information) in 2021.
There were three conditional clearances in 2023.
In Tadawul Advanced Solutions Company (“Wamid”) / Direct Financial Network Company (“Direct FN”), Wamid, a subsidiary of Saudi Tadawul Group Holding Company (which also owns Saudi Arabia’s stock exchange), proposed to acquire Direct FN. Commitments obtained included maintaining fairness in pricing and other commercial provisions in respect of goods and services to be provided by Wamid to Direct FN, non-preferential pricing of Tadawul data supplied to Direct FN and sharing copies of agreements between the parties with the GAC. The GAC will monitor the commitments for three years.
In AlAlarabia Contracting Services for Technical Contracting (”AlArabia”)/ Faden Advertising Agency (“Faden”), AlArabia, a dominant firm in the outdoor advertising signage sector, proposed to acquire Faden, a competitor. A subsidiary, Wave Media Company, was required by the GAC to be placed in a regulated fund.
There was another conditional clearance issued in respect of Jahez International Company for Information Systems Technology’s proposed acquisition of The Chefz, however the transaction never completed.
These bring the total number of conditional clearances to four, with the first being Uber’s acquisition of Careem, which was notified under the pre-September 2019 Competition Law but cleared conditionally under the current 2019 Competition Law. Conditional clearances were not possible under the pre-September 2019 Competition Law.
The GAC stepped up enforcement efforts in 2023 with a number of investigations of cases of suspected failure to file. Also the first two prosecutions under the 2019 Competition Law for failure to file a notifiable transaction came to a decision before the Competition Tribunal. In one, Panda Retail Co.(“Panda”), operator of Hyperpanda supermarkets, and Doorstep for Telecommunications and IT (“Doorstep”)were fines SAR 400,000 each for failure to notify Panda’s acquisition of Doorstep. The fine was low due to mitigating circumstances, including (it is understood) the acquisition taking place during the pandemic. In the other prosecution Al Tamimi represented the defendant and secured an acquittal.
For further information,please contact Christopher Webb and Omar Al Humaid.
Published in April 2024
