Only for the second time since the implementation of the Saudi Competition Law (Royal Decree No (M75) of 1440H) (the “Competition Law”),  The Saudi General Authority for Competition (“GAC”) has fined two companies for their conclusion of an economic concentration in Saudi Arabia without notifying the GAC in a violation purely related to the Saudi merger control regime. The economic concentration in question involves the acquisition by Panda Retail Company (“Panda”) of Atabat Al-Bab Telecom and Information Technology Company (“Doorstep”), a concentration with minimal public information (the “Transaction”).

The GAC, in a piece of media circulated by Talal Al Hogail, head of the GAC’s M&A Department, stated that it undertook investigative efforts upon a decision by of the GAC Board of Directors, revealing that the parties to the transaction have indeed engaged in a notifiable economic concentration, and concluded its implementation without notifying the GAC, in violation of article 7 of the Competition Law. Article 7 stipulates that “Entities seeking to join an economic concentration transaction must notify the Authority at least 90 days prior to the completion of such transaction if the total value of the entities’ annual sales exceeds the amount determined by the Regulations.”

An economic concentration is defined under article 1 of the Competition Law 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.” This definition encompasses concentrations such as the one contemplated under the Transaction.

Upon concluding that the Parties are indeed in violation of the Competition Law, the GAC has sanctioned each party with a financial fine of SAR 400,000. This sanction is in line with the penalties prescribed under article 19 of the Competition law for failure to notify an economic concentration. Article 19 allows the GAC to implement fines not exceeding 10% of the total value of the annual sales subject of the violation, or a fine not exceeding 10 million riyals if it is not feasible to estimate the annual sales or, at the GAC’s discretion, a fine not exceeding three times the gains that the violator accrues from the commission of the violation (i.e. the Transaction).

We note that in line with the KSA Competition Regime (the Competition Law, it’s regulations, and the relevant GAC Bord of Directors’ decisions), an economic concentration must meet the financial thresholds to trigger an application submission, these thresholds are as follows:

• the ‘entities’ taking part in the concentration achieve annual global sales exceeding SAR 200,000,000 (two hundred million Saudi Arabian Riyals);
• annual sales of the target entity exceeding SAR 40,000,000 (forty million Saudi Arabia Riyals); and
• the combined total sales realised locally (in the territory of the Kingdom of Saudi Arabia) by the parties to the economic concertation within the Financial Threshold must exceed SAR 40,000,000 (forty million Saudi Arabia Riyals).

This is the first fine imposed by the GAC on an economic concentration for a pure violation of the merger control regime. On 9 October 2020 and 16 October 2020, the GAC fined two companies with SAR 10,000,000 each for violations of the Saudi merger control regime coupled with other Competition Law violations of creating a cartel for fixed market share control. We believe that this decision will set a practical consideration for assessment of GAC merger control filings in the near future.

With our exceptional Anti-trust and Competition practice, which has been leading the way in the region, and our great relationships with the regulators, GLA provides top tier legal services by properly assessing transactions under the competition regimes and successfully navigating the client through an economic concentration filing with ease. 

Authors: Asad Ahmad, Head of Antitrust and Competition Practice, Khaled Al Khashab, Associate.

Please contact Alex Saleh, Managing Partner (alex.saleh@glaco.com) and Asad Ahmad, Head of Antitrust and Competition Practice (asad.ahmad@glaco.com) if you have any questions