Landmark Saudi Competition Law Ruling: Key Legal Insights and Implications for Global Investors
Competition Focus
Mohammed NegmPartner,Dispute Resolution
A recent Administrative Court of Appeal ruling in the Makkah Region has set a critical precedent for how Saudi Competition Law is applied and interpreted. The case revolved around alleged anti-competitive practices, sparking considerable interest among businesses, legal professionals, and potential investors both in the GCC and worldwide. This article explores the case background, the court’s legal analysis, and the practical implications for any entity seeking competition law compliance in Saudi Arabia.
Chronology of Events and Legal Milestones
Three years ago, not long after the new Competition Law (the “Law”) took effect under Royal Decree No. (M/75) dated 29/6/1440 AH (corresponding to March 6, 2019), the competent authority ("the Authority") received reports of possible collusion and price-fixing involving two waste collection and recycling companies.
These suspicions raised the possibility of violating Article 5 of the Law, which expressly forbids certain types of agreements—such as price fixing or market division—if their objective or consequence is to restrict free competition.
To substantiate these claims, the Authority relied on preliminary evidence, including emails and internal documents allegedly exchanged between an entity referred to as the "appellant company" and another company operating in the same sector. According to the Authority, these communications revealed an explicit or implicit understanding of applying a uniform price ceiling.
On that basis, the file was transferred to the relevant Committee for Adjudication of Competition Law Violations ("the Committee"), which—under its statutory powers—imposed a substantial monetary penalty on the appellant, relying on Article 19 of the new Competition Law.
Challenging the Committee's decision, the appellant company turned to the administrative courts.
The Administrative Court of First Instance initially upheld the Committee's ruling, reasoning that the evidence indicated an intent to restrict competition. However, the appellant company brought its case before the Administrative Court of Appeal in the Makkah Region. After examining the case file and both parties' arguments, the appellate court diverged from the lower court's conclusion and chose to overturn the penalty.
Early vigilance and prompt internal investigations are crucial. If a government body detects potential anti-competitive practices, companies should be prepared to address both factual and legal concerns immediately.
Transition Between Royal Decree (M/25) and (M/75)
Older Law: Enacted under Royal Decree No. (M/25) dated 4/5/1425 AH (June 22, 2004), later amended by Royal Decree No. (M/24) dated 11/4/1435 AH(February 12, 2014 . It targeted anti-competitive agreements but had different procedural guidelines.
New Competition Law: Royal Decree No. (M/75) dated 29/6/1440 AH (March 6, 2019) expanded definitions of what constitutes an illegal price-fixing scheme and provided updated penalties.
Appellant’s Argument: The alleged violations took place—or largely began—before the new law came into effect, necessitating the application of the older statute.
Authority’s Counterpoint: The collusion spanned both timelines, so Saudi Competition Law under the new decree should apply. Both laws prohibit the same core misconduct of fixing prices or dividing markets.
Timing matters. Whenever conduct straddles different statutory periods, determining the applicable law can hinge on whether the alleged violation continued after the newer legislation’s effective date.
Key Evidence and Court’s Analysis
Price Ceiling Accusation: The Authority claimed that internal emails and documents proved a deliberate plan to set purchase prices for recyclable materials across a broader market.
Appellant’s Defense: The communications allegedly addressed a bilateral arrangement for specific waste volumes between two firms, not a scheme to monopolize the entire sector.
Judicial Lens: The Court of Appeal emphasized that mere parallel conduct or an uptick in profits isn’t necessarily indicative of market-wide collusion. Real-world factors—like export bans raising domestic supply—could affect pricing naturally.
Distinguishing between a contractual business agreement and a collusive practice is pivotal. If a company only negotiates prices for specific transactions, it may not amount to a prohibited agreement under Saudi law.
Rationale Behind the Judgment
Insufficient Proof of Market-Wide Conspiracy: While the Authority’s evidence showed communication between the parties, it did not conclusively establish a broader scheme that harmed competition or fixed prices across the market.
Proportionality of the Penalty: The Committee originally invoked Article 19 of the new law, permitting fines up to 10% of annual sales or ten million riyals. However, it failed to clarify how it arrived at the maximum penalty—particularly why it penalized one entity more harshly than others involved.
No Clear Violation Under Either Law: Whether assessed under the old or the new statute, the conduct did not meet the clear threshold of “intent or effect” required to support a finding of price fixing.
Courts demand a clear articulation of the factual and legal basis for any imposed penalty. Vague or unsupported sanctions risk being overturned on appeal.
This landmark Administrative Court of Appeal ruling clarifies that partial communications do not necessarily prove a broader collusive scheme, distinguishing legitimate negotiations from illegal anti-competitive practices.
Best Practices to Avoid Collusion Allegations
Maintain Transparent Documentation: Clearly separate routine commercial negotiations from any broader, market-wide discussions.
Compliance Training: Educate your teams on Saudi competition regulations, focusing on how to identify and avoid anti-competitive practices.
Monitor Regulatory Changes: Stay current on updates to GCC competition law enforcement and adapt business strategies accordingly.
Seek Legal Counsel: For foreign investors unfamiliar with Saudi legal compliance, consider consulting specialized attorneys before finalizing agreements.
Establish Internal Auditing for communications.
Consult Experts on local market laws.
Document All Pricing Decisions to ensure transparency.
This landmark Saudi Competition Law ruling underscores the importance of robust competition compliance. While the judgment clarifies that sporadic emails or negotiations are not sufficient proof of a market-wide conspiracy, it also confirms that regulatory bodies will vigorously investigate any arrangement potentially harming free competition. Moreover, penalties must be proportionate and anchored by solid legal justification.
As Saudi Arabia strives to foster a competitive, investor-friendly environment, businesses—local and international—should embrace best practices that prevent anti-competitive behavior. By maintaining proper documentation, adhering to clear contractual boundaries, and seeking timely legal advice, companies can navigate the Kingdom’s competition regulations effectively.
For further information,please contact Mohammed Negm.
Published in February 2025
