Saudi Arabia Merger Control Update: Threshold for economic concentration reporting increased

On 15 March 2023, the Board of the Kingdom of Saudi Arabia’s (KSA) General Authority for Competition (GAC) approved a decision to raise the threshold of the minimum annual sales requirement on which an economic concentration is notifiable from SAR 100 million (circa USD 26 million) to SAR 200 million (circa USD 52 million).

GAC explained that the decision came based on its annual review having considered international best practices and aspects relating to the variables of the national economy and the level of market competitiveness. In addition, GAC declared that the amendment would facilitate procedures and ease financial burdens, particularly on SMEs.

The KSA Competition Law defines an economic concentration as any act that results in the total or partial transfer of ownership of assets, rights, equity, shares, or obligations of an entity to another, or the joining of two or more administrations in a joint administration or any other form that leads to the control of an entity or entities including influencing its decision, the organisation of its administrative structure, or its voting system.

Entities seeking to participate in an “economic concentration” are required to notify GAC at least 90 days before completion of the transaction if:

• the combined global turnover of the entities party to the economic concentration transaction exceeds SAR 200 million (there is no minimum local turnover threshold);
• the transaction has nexus to a Saudi market; and 
• there is an acquisition or change in control as a result of the transaction. 

Transactions such as mergers and acquisitions (M&A), takeovers, joint ventures (JVs), and any other transaction that meets the above conditions are likely to be caught by the KSA Competition Law.

One of the key elements of Saudi Vision 2030 is to make KSA an attractive market for both investment and undertaking business. It is hoped that by increasing the threshold of the combined global turnover which is one of the triggers for notifying the GAC of an economic concentration, this will increase the attractiveness of the Saudi market by way of easing the restrictions of smaller transactions in KSA. 

Failing to comply with the KSA Competition Law

It should be noted that in the event of any breach of the KSA Competition Law, including for failure to notify the GAC of an economic concentration, the GAC may apply any or all of the following penalties:

• a fine not exceeding an amount equal to 10 per cent of the total annual sales, or, where it is not possible to assess the relevant sales, a fine not exceeding SAR 10 million for breaches of the KSA Competition Law which concerns abuse of dominant position, competition arrangements and economic concentrations. The Settlement Committee of GAC may, at its discretion, elect instead to impose a fine not exceeding three times the profit generated by the offending party. The quantum of fine may be doubled in the case of repeat offences;
• a fine not exceeding an amount equal to 5 per cent of total annual sales, or, where it is not possible to assess the relevant sales, a fine not exceeding SAR 5 million for violations of certain provisions of the KSA Competition Law concerning preventing investigators or officers from performing their duties. The quantum of fine may be doubled in the case of repeat offences; and/or
• a fine not exceeding SAR 2 million, in respect of other breaches of the KSA Competition Law.

Further amendments expected 

The fee payable to GAC for examining economic concentration applications is equal to 0.02 per cent of the total annual sales value of the parties to the economic concentration up to a maximum payment of SAR 400,000. In December 2022, GAC issued a public consultation proposing to reduce the cap on the total application fee payable from SAR 400,000 to SAR 250,000. We anticipate this change will come into force later this year.

Clyde & Co’s corporate team in Riyadh has assisted a number of international and local clients on KSA Competition Law matters, including filing economic concentration applications to GAC. 

If you would like further information on any of the matters referred to in this article, please contact us.