General Authority for Competition | Reporting Threshold

The Board of the Kingdom of Saudi Arabia's General Authority for Competition (GAC) approved a decision on March 15, 2023, to raise the minimum annual sales threshold for which an economic concentration is notifiable from SAR 100 million (USD 26.6 million) to SAR 200 million (USD 53.3 million).

GAC noted that the decision was based on its yearly evaluation, which took into account worldwide best practices as well as criteria linked to the national economy and market competitiveness. Furthermore, GAC stated that the modification will simplify procedures and reduce financial constraints, particularly for SMEs.

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

Entities wanting to participate in a "economic concentration" must inform GAC at least 90 days before the transaction's conclusion if:

1. The overall globe-wide turnover of the companies involved in the economic concentration transaction exceeds SAR 200 million (no minimum local turnover criteria);
2. The transaction is related to the Saudi market; and
3. As an outcome of the transaction, there is an acquisition or transfer of control.

Moreover, it should be highlighted that Mergers and acquisitions (M&A), takeovers, joint ventures (JVs), and any other transaction that fulfills the aforementioned criteria are likely to fall under the purview of the KSA Competition Law. Noting that the GAC charges a fee for reviewing economic concentration applications which is calculated at 0.02% of the total annual sales value of the companies involved, up to a maximum of SAR 400,000. However, in December 2022, the GAC released a public consultation suggesting a reduction in the maximum payment cap to SAR 250,000. It is expected that this modification will be implemented later this year.

Moreover, it's important to mention that if there's a violation of the KSA Competition Law, which includes not informing the GAC about an economic merger, the GAC has the authority to impose one or more of the penalties listed below:

1. A penalty for violating the KSA Competition Law, which includes abusive market dominance, competition arrangements, and economic mergers, can result in a fine of up to 10% of the total annual sales or SAR 10 million if sales can't be assessed. Alternatively, the GAC's Settlement Committee has the option to impose a fine that's no more than three times the offender's profits. If the offender commits the offense repeatedly, the fine may be doubled; and
2. A violation of specific provisions of the KSA Competition Law that involve preventing investigators or officers from carrying out their duties may result in a fine of up to 5% of the total annual sales or SAR 5 million if sales can't be assessed. If the offender repeats the offense, the fine may be doubled, and/or
3. For other violations of the KSA Competition Law, a penalty of no more than SAR 2 million may be imposed.

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