The General Authority for Competition’s draft Amended Merger Review Guidelines: Implementation Expected in 2025
Competition Focus
On 1 July 2024, the General Authority for Competition (“GAC”) released a consultation draft for new, amended Merger Review Guidelines (“Guidelines”). Implementation has been expected in the second half of 2024, but did not occur,
Law Update: Issue 374 – Competition Focus
Christopher WebbPartner,Corporate Commercial
On 1 July 2024, the General Authority for Competition (“GAC”) released a consultation draft for new, amended Merger Review Guidelines (“Guidelines”). Implementation has been expected in the second half of 2024, but did not occur, and now is expected in 2025. This article sets out the key changes that are expected when the new, amended Guidelines are issued, based on the text of the consultation draft as well as confirmation of key points that must be borne in mind in any merger review notification.
Thresholds for NotificationSince 1 November 2023, the GAC has required notification of an economic concentration in circumstances where:
there is 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 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) exceed 200 million Saudi Arabian Riyals (USD 53,333,333);
the total worldwide annual revenues of the target exceed 40 million Saudi Arabian Riyals (USD 10,666,667); and
the total annual revenues in Saudi Arabia of all parties to the economic concentration (on a group basis) exceed 40 million Saudi Arabian Riyals (USD 10,666,667).
An obligation to notify the formation of a jointly controlled full function joint venture exists when there is a Saudi Arabian nexus and the first and third revenue thresholds are exceeded. The second threshold is to be disregarded.
The draft Guidelines address one of the criticisms of the thresholds set out above, namely that a filing obligation can arise in circumstances where target has no revenue in Saudi Arabia (i.e. the Saudi Arabian revenue threshold is met by acquirer alone). Despite the GAC recognizing that this state of affairs is undesirable, it has required as recently as January 2025 a filing for a transaction in which target had no sales in Saudi Arabia whatsoever. Under the new Guidelines, however, a filing in such circumstances will not be required.
Currently there is no clearly defined period of validity of a clearance decision, meaning that the commencement of implementation of completion of the economic concentration cleared by the decision could be delayed for a lengthy period.
The draft Guidelines further refine the concept of “control” by making a distinction between “negative control” (i.e. the ability to block certain decisions) and “positive control” (i.e. the ability to impose certain decisions). For there to be a “change of control” for the purpose of triggering a notification obligation, there must be an acquisition of control in which:
a party without control acquires negative or positive control; or
a party with negative control acquires positive control.
It should be noted, however, that standard veto rights of a minority shareholder (e.g. over a decision to liquidate or alter a company’s capital) will not necessarily be deemed to be negative control.
Further to the above, the draft Guidelines make clear that passive investment funds (i.e. which do not seek to manage the enterprises in which they invest, but which rather seek to maximise the value of their portfolios by buying and selling shares) will trigger no filing obligation when acquiring a holding in a company, although this exception may cease to apply in circumstances where a controlling shareholding is acquired in a portfolio company and the fund already has a controlling shareholding in portfolio companies competing with that company.
Also exempted from a filing obligation will be formations of joint ventures by a foreign party and a non-competitor Saudi partner, which joint venture aims to develop new products or markets.
Currently there is no clearly defined period of validity of a clearance decision, meaning that the commencement of implementation of completion of the economic concentration cleared by the decision could be delayed for a lengthy period. The draft Guidelines provide that clearance decisions (including decisions for a conditional clearance) will be valid for one (1) year, with the commencement of implementation of completion of the cleared economic concentration having to occur within that period.
The changes to the existing merger review regime set out in the draft Guidelines are most welcome, but it remains to be seen how they will be implemented in practice and the effect that they will have on reducing the number of filings that raise no competition concerns. In particular, it is to be hoped that the amendment relating to the non-notifiability of economic concentrations in which target has low revenues in Saudi Arabia will be applied with a sensible minimum target Saudi revenue, rather than with a strict requirement that target have no revenues whatsoever. The GAC has required a filing under the current Guidelines in circumstances where target had revenues of as little as USD 25,000 in Saudi Arabia – i.e. considerably less than the filing fee that had to be paid. It will be to the benefit of all concerned, including the busy reviewers at the GAC, if such matters with a minimal nexus with Saudi Arabia were not required to be notified.
For further information,please contact Christopher Webb.
Published in February 2025
