Saudi Arabia’s competition authority fines companies for failure to file merger control notification
7 min read
The General Authority for Competition imposed significant fines against two companies for failing to submit a merger control filing for an economic concentration that meets the notification thresholds. The fines come on the heels of a busy year that saw changes to the merger control rules and more scrutiny for notified transactions, suggesting continued increase in enforcement efforts from the regulator.
On 25 February 2024, the Saudi Arabia General Authority for Competition ("GAC") announced that it issued fines totaling SAR 800,000 (approximately US$ 213,000) against two companies for failure to notify the GAC of a transaction.1 The transaction relates to an acquisition by Panda Retail Company, one of the leading retail chain businesses in Saudi Arabia and the Middle East, of Atabet Elbab for Telecommunications and IT, which provides delivery services in Saudi Arabia through electronic platforms.2
Under Article 7 of the Saudi Arabia Competition Law, issued in 2019 by virtue of Royal Decree M/75 of 29/06/1440H ("Saudi Competition Law"), parties intending to participate in a transaction are required to submit a merger control filing to the GAC and obtain clearance prior to closing if: (i) the transaction constitutes an "economic concentration";3 and (ii) the parties' annual turnover during the last fiscal year exceeds the notification thresholds.4 Failure to file a notifiable transaction can lead to a fine up to 10% of the total value of the annual sales subject of the violation, or a fine not exceeding SAR 10 million (approximately US$ 2.66 million).
In the Panda/ Atabet Elbab transaction, the GAC conducted an investigation and concluded that the parties violated their obligation under Article 7. As a result, the GAC imposed a fine of SAR 400,000 (approximately US$ 106,000) against each of the transaction parties.
The last fine announced by the GAC for failure to notify an economic concentration was in 2020. In the 2020 case, the GAC imposed fines in the amount of SAR 20 million (US$ 5.3 million) on PepsiCo Services LLC and a Saudi bottling plant for failure to file,5 which was later reduced on appeal to SAR 5 million (US$ 1.3 million) each.6 It is worth noting that the companies in that case were subject to an investigation for other antitrust violations when the GAC decided to also impose a fine for failure to file. The Panda/Atabet Elbab decision, however, is the first where the GAC imposed a fine only for failure to file.
The Panda/Atabet Elbab decision also provides an important reminder that the GAC considers both the purchaser and the target entity responsible for filing. This is consistent with the GAC Merger Review Guidelines, which provides that the notification obligation falls on the "parties intending to participate in the Economic Concentration," which are, among other things, the entities that form part of the newly concentrated entity after the economic concentration transaction has been completed.7 As such, the GAC found that both Panda and Atabet Elbab were equally responsible for the violation, having fined them both the same amount.
Increasingly Active GAC, More Enforcement Efforts
As highlighted in the White & Case Global Antitrust Merger StatPak, the GAC had a busy year of merger control activity. In 2023, the GAC reviewed a total of 313 transactions, which was on par with the spike in the number of filings for the past three years. The GAC issued unconditional approvals for 172 of these transactions and, for the first time, issued conditional approvals for three of the transactions, which included both structural and behavioral remedies.8 It is worth noting that the GAC has also blocked two transactions (in 2021 and 2022).9
The GAC has also been actively working on changes to its rules and guidelines. Most recently, the GAC adopted amendments to the notification thresholds that introduced a local nexus requirement for the first time. For more details, see our alert: "Saudi Arabia: New Thresholds for Merger Filings, and New Conditional Approvals."
The GAC's enforcement efforts outside of merger control have also been on the rise. For example, a recent investigation in the cement sector led to significant fines against 14 companies, totaling SAR 140 million (approximately US$ 37.3 million) with each company required to pay SAR 10 million (approximately US$ 2.66 million).10 Another GAC sector study in the automotive sector led to an investigation and criminal proceedings against 43 car agents and distributors.11 The GAC is also currently investigating a number of other sectors, including Information Technology and Healthcare.12
The GAC's active enforcement will likely increase in 2024, particularly as the GAC undertakes further collaborations with other competition authorities in the region, including through the Arab Competition Network ("ACN").13 During the ACN's latest annual conference, held in Riyadh during March 3-4, the GAC was elected to lead the ACN for a two-year term, succeeding the Egyptian Competition Authority which has led the ACN since 2022.
Conclusion
Since the Saudi Competition Law came into force in 2019, the GAC has been steadily refining its merger control regime and playing an increasingly active role in enforcement efforts. Imposing new fines for failure to file a merger control notification, in addition to the other GAC activities last year, are significant developments that highlight the increasing enforcement. Parties intending to enter a transaction that could potentially trigger a merger control filing in Saudi Arabia should carefully consider their obligations and verify any filing requirements with their antitrust counsel.
1 See GAC Press Release, "GAC announces penalties imposed on two companies for failure to notify an economic concentration" (February 2024).
2 The target entity was also identified in some press reports as Doorstep for Telecommunications and IT.
3 "Economic Concentration" is defined as "any activity that results in the total or partial transfer of ownership of assets, rights, stocks, shares, or obligations of an entity to another, or in the combining of two or more managements into one joint management, in accordance with the Regulations." (Saudi Competition Law, Article 1).
4 See Saudi Competition Law, Article 7; see also Implementing Regulations, Article 12; see also page 10 of the GAC Merger Review Guidelines (under the current notification thresholds, a filing is required if: (i) the total combined annual turnover of the parties exceeds SAR 200 million (US$ 53.3 million); (ii) the total annual turnover of the target entities exceeds SAR 40 million (US$ 10.6 million); and (iii) the total annual turnover of the parties in Saudi Arabia exceeds SAR 40 million (US$ 10.6 million)).
5 See GAC Press Release, "Publication of the ruling relating to the violation of the competition law by Al Jomaih"; and GAC Press Release, "Publication of the ruling relating to the violation of the competition law by Pepsico Services LLC" (October 2020).
6 See GAC Press Release, "GAC announces penalties imposed on a company operating in the field of filling and selling soft drinks" (October 2020).
7 See GAC Merger Review Guidelines, Section 6, page 35; Section 7, page 44.
8 The remaining filings were dismissed by the GAC because these transactions were not required to be notified. See, White & Case Global Antitrust Merger StatPak; and GAC's 2023 Economic Concentration Statistics report (noting the GAC issued 128 "no filing required" certificates in 2023).
9 See GAC Press Release, "GAC announces rejection of the economic concentration between GASCO and Best Gas Carrier Company" (June 2022); White and Case Client Alert: Saudi Arabia's General Authority for Competition blocks vertical merger in the gas sector for the first time | White & Case LLP (whitecase.com) (July 2022); see also "GAC announces rejection of the economic concentration between Delivery Hero and the Chefz" (December 2021).
10 See GAC Press Release, "GAC Announces Penalties against a Number of Establishments operating in the Cement Sector for colluding to increase the prices of cement" (April 2023).
11 See GAC Press Release, "GAC conducts in-depth investigations in the Automotive Sector" (August 2023); GAC Press Release, "GAC Board Convenes the 83rd Meeting to Issue a Number of Resolutions" (September 2023).
12 See GAC Press Release, "GAC Board Convenes the 83rd Meeting to Issue a Number of Resolutions" (September 2023).
13 The Arab Competition Network is an organization that brings together the competition authorities of the region to promote cooperation, share experiences, and enhance competition policy and enforcement.
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