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On 5 March 2019, the Council of Ministries approved a new Competition Law (the New Law) which was issued by Royal Decree No. (M/75) dated 6 March 2019 and was published in the Official Gazette on 29 March 2019. It will come into force 180 days following its publication date (i.e. towards the end of September 2019).
The New Law will introduce a number of incremental reforms to the former Competition Law adopted by Royal Decree No. (M/25) dated 6 June 2004 as amended on 2 February 2014 (the Previous Law) and its Implementing Regulations (the Implementing Regulations). The most significant changes introduced include the following:
Jurisdiction and Scope
- The New Law expressly applies to entities operating in Saudi Arabia but also to practices taking place abroad, if such practices produce anti-competitive effects in Saudi Arabia.
- While the Previous Law provided for a broad exemption to public corporations and wholly-owned state companies, the New Law limits such exemption to public corporations or wholly-owned state companies solely authorized by the government to provide commodities or services in any given specific field of activity.
Market Prices
Article 4 of the New Law sets as a general rule that the prices of commodities and services must be determined in accordance with market rules and the principles of free competition. However, the article excludes situations where prices are regulated by the State (i.e. if they are determined by virtue of a Council of Ministers’ resolution or by virtue of regulations to that effect).’
Anti-Competitive Practices
- In line with the Previous Law, Article 5 of the New Law prohibits anti-competitive practices and agreements, which have as their object or effect the restriction of competition. It includes an illustrative list of eight anti-competitive practices and agreements including price fixing, restricting freedom of flow of commodities and services to the market, preventing any entity from exercising its right to enter or move out of the market, division or allocation of the markets, and bid rigging. The New Law introduces new restrictive practices, such as price recommendation and fixing the size, weight or quantities for the production of commodities or the performance of services.
- The New Law no longer requires that such anti-competitive practices or arrangements take place between actual or potential competitors, but instead provides that all practices, including agreements or contracts “among entities”, are prohibited if their objective or impact constitutes a violation of competition. The New Law does not seem to distinguish between horizontal and vertical relationships. Hence, presumably all practices that are considered restrictive under the New Law will be prohibited regardless whether the relevant parties are actual competitors, potential competitors or engaged in a vertical relationship.
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For further details on the New Competition Law and its practical impact on your operations in Saudi Arabia, please do not hesitate to contact any of our Saudi Competition team members.
