The first Saudi Arabian competition legislation was passed as the Competition Regulation, Royal Decree No. M/25 of 4th Jumada Awal 1425 Hejra corresponding to 22nd June 2004 Gregorian, which entered into force on 5th January 2005. Royal Order A/92 of 6th Ramadan 1425 Hejra corresponding to 20th October 2005 Gregorian established the Competition Protection Council, which operates under the umbrella of the Ministry of Commerce and Industry. By its Resolution No. 13/2006 of 25th Dhul Qada 1427 Hejra corresponding to 16th December 2006 Gregorian the Competition Protection Council issued the Implementing Rules of the Competition Regulation. The Implementing Rules envisage that the Council will promulgate further and more detailed rules concerning exemptions, dominance, mergers, law enforcement and procedures. These rules were issued in the form of Regulatory Guidelines under the Council’s Resolution No. 25/2008 of 9th Ramadan 1429 Hejra corresponding to 9th September 2008 Gregorian. The Guidelines do not themselves have the force of law, but offer a good insight into how issues regulated in the legislation are likely to be applied by the Council.
The essential purpose of the Regulation is to protect and encourage fair competition, and to combat monopolistic practices affecting lawful competition. The Regulation applies to all business entities operating in the Saudi market, with the exception of public establishments and companies wholly owned by the State. The Implementing Rules further provide that the legislation applies to any activities taking place outside the Kingdom resulting in effects prejudicial to lawful competition within the Kingdom. Accordingly, a non-Saudi entity with no presence in Saudi Arabia can fall foul of Saudi competition law by engaging in a practice outside of Saudi Arabia, if that practice has an effect in the Kingdom contrary to the competition legislation.
Broadly speaking, there are three major areas of law to be considered under the substantive competition legislation:
01. conduct that no business may engage in;
02. additional restrictions on businesses in a dominant position; and
03. restrictions on economic concentration.
The generally prohibited practices include anything which is done with the intention of restricting trade or to disturb competition. Particularly singled out, and always illegal, are price fixing, obstructing competitors from entering the market, colluding in tenders or bidding, and selling below the cost price to squeeze out competitors.The additional restrictions on dominant businesses apply where the market share of a business entity or group of business entities reaches at least 40% of the total value of the sales throughout a period of 12 months and/or whereby a a business entity or group of business entities are able to influence the prevailing price in the market. Accordingly, even an entity with a market share below 40% can still be dominant if it is in a position to influence prevailing prices. A merger or acquisition which may result in an entity becoming dominant must be cleared by the Competition Protection Council. Broadly speaking, the distinction between the rules governing dominant position and those governing economic concentration is that (a) if an entity is already in a dominant position, it must not abuse such position, and (b) if it wants to achieve a dominant position by getting a 40% market share by acquisition or merger, it has to seek consent before doing so.
*This Saudi Arabian Law Overview is not intended to be legal advice, and cannot be relied on as a substitute for legal advice. We make no representation that the contents of this Saudi Arabian Law Overview are or will remain accurate or current.
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