- Competition Law Guide: Prohibited Practices and Economic Concentration

The Competition Law in Saudi Arabia aims to promote a fair investment environment that stimulates innovation and protects consumer and establishment rights. In this article, we discuss the first axis of the Law: Prohibitions and Economic Concentration.

First: Prohibited Practices between Competitors

The Law prohibits any agreements or contracts between competing establishments (whether written or oral) aimed at violating competition, most notably:

1. Price Fixing: Agreement to raise, lower, or fix prices of goods or services.
2. Market Sharing: Agreement to divide markets by geographic regions, customers, or seasons.
3. Tender Collusion: Coordination between applicants in government or private tenders to manipulate prices or award (such as submitting cover bids).
4. Freezing Production: Agreement to reduce offered quantities to control price.

Second: Abuse of Dominant Position

The Law does not prevent the existence of a strong establishment in the market, but prohibits exploiting this power to harm competitors.

When is an establishment in a "Dominant Position"?

An establishment (or group) is considered dominant if:

• Its market share reaches 40% or more.
• Or it possesses the ability to influence prevailing prices in the market (even if its share is lower).

Forms of Prohibited Abuse:

• Selling below cost to drive out competitors (Predatory Pricing).
• Creating artificial shortage in goods to raise prices.
• Imposing arbitrary conditions or refusing dealing without justification.

Third: Economic Concentration (M&A)

The Law requires establishments wishing to merge or acquire to report to the General Authority for Competition and obtain its prior approval.

Reporting Conditions:

• Financial Threshold: If the total annual sales of all parties exceed 200 Million Riyals.
• Deadline: Must report at least 90 days before completing the deal.

Evaluation Process and Decision:

The Authority studies the request within 90 days, considering the deal's impact on competition, consumer interest, and freedom of entry for new competitors. The decision takes one of these forms:

1. Full Approval.
2. Conditional Approval: (e.g., selling some assets to ensure no monopoly).
3. Rejection: If the harm to competition outweighs economic benefits.

Important Note: If the 90-day period passes without a decision from the Authority, this is considered implicit approval of the deal.

Conclusion: Establishments must review their commercial policies to ensure non-involvement in restrictive agreements, and adhere to disclosure requirements when entering major merger deals to avoid strict penalties discussed in the next article.