Recap on Bahrain’s Competition Law
Financial Services Focus
Sohaila Abdul RahmanSenior Counsel,Corporate Commercial
Taimur TufailAssociate,Corporate Commercial
Disclaimer: This Article expresses the opinions of the author and should not be viewed as a substitute for tailored legal advice
In 2018, the Kingdom of Bahrain enacted Law No. 31 of 2018 concerning the Promotion and Protection of Competition (“Competition Law”), which aims to foster a balanced marketplace, promoting accessibility for new market entrants while safeguarding the interests of consumers. The Competition Law broadly covers market concentration, anti-competitive practices and abuse of dominant position scenarios. Whilst the Competition Law envisages establishing of a standalone authority (“Competition Authority”) to oversee competition related matters, till date, the Consumer Protection Directorate (“CPD”) of the Ministry of Industry & Commerce continues to perform these functions.
The Competition Law applies to all entities (whether incorporated in Bahrain or not) with respect to their economic activities in Bahrain. The key determining factor with reference to its applicability is whether the business activities would have any affect on the competition in Bahrain.
However, the law specifically exempts the following from its application: (a) arrangements approved by international agreements applicable in Bahrain; (b) projects owned or controlled by the Government; and (c) arrangement necessary for use, exploitation, transfer, assignment or license of intellectual property rights, provided these arrangements do not unreasonably hinder competition.
The Competition Law in general was enacted to prohibit economic concentrations by addressing and regulating “economic concentrations” in Bahrain, defined broadly as a change of control as a result of the following situations:
The merger of two or more previously independent undertakings (in whole or in parts).
The acquisition by one or more undertakings, providing direct or indirect control, over the whole or parts of one or more other undertakings.
The creation of a joint venture.
More specifically Article 11 of the Competition Law mandates that prior approval of the Competition Authority is sought and obtained for economic concentrations which come within the scope of transactions requiring approval. However, the Competition Law does not specify any thresholds regarding what would result in a ‘economic concentration’ to which this requirement applies. Instead, it anticipates the issuance of a decision to establish these thresholds, which has yet to be issued. Based on our experience and discussions with the CPD, it is useful to note that the authority would most likely take inspiration from the thresholds which are in place for abuse of dominant position (discussed below). It is however worth noting that these thresholds are for guidance purposes only and strictly speaking not applicable to market concentration transaction.
The Competition Law further prohibits arrangements with the effect of hindering competition in Bahrain. These arrangements include those such as limiting or controlling production, development or investment, sources of supply, knowingly spreading false information about products and prices, affecting competitors by way of fabricating sudden abundance of products, refusal to purchase, sell or supply from an entity or fixing selling prices. Any such arrangement which falls under the prohibition will be null and void under the Competition Law.
The Competition Authority has the power to grant exemptions in certain circumstances, such as where the arrangement would improve production or distribution of products, allows consumers to also benefit, or on grounds of public policy. It is at the same time important to note that these exemptions are not available as of right and would remain subject to the authority’s discretion.
The Competition Law defines dominant position as a scenario where an entity (either solely or with other entities) is able to control or influence the relevant product market.
The Competition Law defines dominant position as a scenario where an entity (either solely or with other entities) is able to control or influence the relevant product market. There is a presumption in favour of having dominant position where an entity has a market share in excess of 40% in the relevant product market and where there is more than one (1) entity, a market share in excess of 60% would constitute as holding a dominant position.
Any entity which has a dominant position is prohibited from abusing the dominant position, which includes actions such as imposing selling or purchase prices or any other conditions, limiting production to the detriment of consumers, applying different conditions with respect to prices, quality or other terms in agreements entered into with parties of similar standing.
The gap in the legislation is the absence of detailed provisions regarding the determination of dominant dominance. The Competition Law does not clearly define the parameters, criteria, or methodologies for assessing market dominance, nor does it specify who is responsible for making such determinations. This lack of guidance creates uncertainty for businesses seeking to understand their compliance obligations and evaluate their market position.
The issue of dominant position remains untested in practice, raising concerns about how the Competition Law will be applied in scenarios involving potential anti-competitive behaviour or abuse of dominance. Without a clear framework, enforcement and interpretation may be inconsistent, potentially undermining the objectives of the Competition Law to ensure fair competition and protect market integrity. Addressing this legislative gap will be critical to fostering a transparent and predictable competitive environment in Bahrain.
The Competition Law also provides with certain consequences in case an entity is in non-compliance with the provisions of the law. The punishment provided include imprisonment of up-to one (1) year, and a fine of up-to Bahraini Dinars fifty thousand, depending on the specific nature of the violation, which would depend on the specific factual matrix.
While the Competition Law provides a comprehensive framework addressing various aspects of antitrust regulations, it remains relatively untested due to its recent introduction and the lack of guiding decisions. Consequently, ambiguities persist in its interpretation and application, leading to uncertainty among entities seeking to ensure compliance.
It is advisable to engage with the CPD to clarify their position on any specific transactions. This is typically facilitated through informal discussions conducted by legal counsel on a no-name basis. In certain situations, particularly for entities operating in regulated sectors such as financial institutions, the entities themselves may engage directly with the CPD.
These discussions are instrumental in understanding how the authorities interpret and apply the Competition Law and the specific approaches they may adopt in practice. They provide valuable insights into how the authorities addresses unclear provisions and guides entities on the appropriate course of action to ensure compliance. This collaborative approach helps navigate uncertainties and fosters a clearer understanding of the Competition Law’s practical implementation.
For further information,please contact Sohaila Abdul Rahman and Taimur Tufail.
Published in March 2025
