Saudi Arabia’s General Authority for Competition increases its merger control notification thresholds
5 min read
UPDATE: On 7 June 2023, Saudi Arabia's General Authority for Competition ("GAC") announced a reduction to the cap on merger control filing fees from a maximum of SAR 400,000 (USD ~106k) to SAR 250,000 (USD ~66K) (available here). In the article below, published on 5 April 2023, we noted that the GAC conducted public consultations on the proposed reduction of the filing fees but had not issued a formal decision to enact it yet. Per the GAC's announcement last week, the reduction has now gone into effect, and we have already seen GAC invoices applying the new reduced cap amount.
On 29 March 2023, Saudi Arabia's antitrust regulator increased the minimum turnover threshold for merger control filings from 100 million to 200 million Saudi Riyals, which should reduce the number of unnecessary notifications.
Saudi Arabia's General Authority for Competition ("GAC") explained that it has decided to increase the notification threshold based on its annual review of its policies, which takes into account "international best practices, aspects relating to the variables of the national economy, and the level of market competitiveness."1 In addition, the GAC noted that the decision would "facilitate procedures and alleviate financial burdens especially on small and medium-sized companies."2
Saudi Arabia's Competition Law, which came into effect in 2019, requires parties to notify the GAC and obtain its clearance before completing a transaction if:
(i) The transaction constitutes an "Economic Concentration," which includes the transfer of any shares, assets, or rights from one entity to another that results in a change of control over the target entity, or the establishment of joint control over a full-function joint venture;3
(ii) The parties' combined worldwide annual turnover exceeds the threshold amount identified in the Implementing Regulations, which was originally set at SAR 100 million (USD 26.6 million),4 but the recent amendment will increase that amount to SAR 200 million (USD 53.2 million);5 and
(iii) The transaction can have an effect in Saudi Arabia, which is presumed by the GAC if any of the parties has any amount of sales, assets, or future business plans in Saudi Arabia.6
Given that any one party's turnover can trigger the threshold by itself (i.e. a "single-trigger" jurisdiction), the threshold was frequently triggered by many transactions around the world that have limited or no actual effect in Saudi Arabia. As a result, the number of filings to the GAC has been steadily increasing since the adoption of the merger control regime in 2019. For instance, the White & Case Global Antitrust Merger StatPak ("WAMS") has identified an increase in the number of GAC filings by 14% in 2022 compared to 2021.7
The GAC has also been increasingly active in enforcement efforts, including by sending letters to some parties inquiring why they did not file certain transaction that GAC staff has identified in press reports. The GAC also announced it has launched several investigations into transactions that failed to file. Moreover, the GAC has already blocked two transactions since the adoption of the new merger control regime,8 and issued fines for other violations of Competition Law. For example, the GAC has recently issued a substantial fine of SAR 13 million (USD 3.4 million) against a company for withholding information and not granting access to its documents in the context of a GAC investigation.9 Additionally, on 3 April 2023, press reports indicate that the GAC has issued fines of SAR 1.96 million (USD 522,485) and SAR 150,000 (USD 40,000) against another two companies for allegedly entering into an anticompetitive agreement limiting horizontal competition.10
Earlier this year, the GAC conducted public consultations regarding two changes to its policies and procedures: increasing the turnover threshold amount (as described above) and reducing the maximum filing fee from SAR 400,000 (USD 106,518) to SAR 250,000 (USD 66,573).11 However, the GAC has not issued a formal decision yet regarding the filing fees – its announcement on 29 March 2023 was limited only to the increased threshold.
Conclusion
The increase in the notification threshold is a welcome development that should reduce the number of merger control filings in Saudi Arabia. Nevertheless, the lack of a strong local nexus test means many foreign-to-foreign transactions will continue to trigger filing requirements even when there is no actual effect in Saudi Arabia.
1 See GAC Press Release, "The General Authority for competition announces raising the minimum threshold for reporting an economic concentration" (7/9/1444H) (29 March 2023) ("GAC Press Release").
2 Id.
3 See Saudi Arabia Competition Law, issued by Royal Decree No. (M/75), (6 March 2019) (the "Competition Law"), Articles 1, 7; the GAC Implementing Regulations, issued by Resolution No. (337), (25 September 2019) (the "Implementing Regulations"), Article 1; GAC Merger Review Guidelines, Sections 3 and 5.
4 Competition Law, Article 7; Implementing Regulations, Article 12.
5 See GAC Press Release.
6 See GAC Merger Review Guidelines, Section 4.
7 See the White & Cases Global Antitrust Merger StatPak database of global merger filings in 94 jurisdictions.
8 See our previous client alerts: Key Developments in Saudi Arabia Merger Control: First Rejection, Review Guidelines, and New Tools | White & Case LLP (whitecase.com) (December 2021); and 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).
9 See GAC Press Release, "GAC announces penalty on a company for withholding information and preventing judicial officers from performing their mandated functions" (08/08/1444H) (28 February 2023).
10 See Saudi Press Agency, "GAC issues penalty against Aerial Imaging Saudi Arabia and Al Mohadad for space engineering consulting for violations to the Competition Law" (3 April 2023).
11 See the Government of Saudi Arabia's Online Public Consultation Platform (Istitlaa), "Amending paragraph (1) of article twelve of the Implementing Regulations to the Competition Law" and "Amending the filing fee to examine requests for economic concentrations" (21 December 2022 – 4 January 2023).
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