Saudi Arabia Merger Control Update: An increased threshold for GAC filings

I. General Authority for Competition (GAC) decision dated 28 March 2023

On March 28, 2023, the Saudi General Authority for Competition (GAC) approved a decision to raise the minimum turnover threshold for merger control filings from SAR 100 million to SAR 200 million. In a press release dated 29 March 2023, The GAC noted that “This decision comes based on the annual review conducted by the authority and takes into account the best international practices, and aspects related to the variables of the national economy and the level of market competitiveness, in addition to facilitating procedures and easing financial burdens, especially on small and medium-sized companies”.

The decision resulted in the amendment of article 12 of Regulation No. 337 dated 25/1/1441H (24 September 2019), which now reads as follows:

“Firms or their legal representatives intending to engage in an economic concentration transaction are required to report the transaction to the GAC and provide the necessary information at least ninety (90) days before its completion if the total annual sales value of all participating firms exceeds SAR 200,000,000.“

According to Article 1 of the Saudi implementation regulation of the competition law, an “economic concentration” is defined as “any action that involves the total or partial transfer of ownership of assets, rights, equity, stocks, shares, or liabilities of a firm to another through merger, acquisition, takeover, joint management, or any other form that results in the control of a firm(s), including influencing its decision-making process, administrative structure, or voting system”.

These rules are applicable to all entities within the Kingdom as well as to practices occurring outside the Kingdom that have a detrimental impact on fair competition within the Kingdom.

In other words, the concerned parties should notify GAC and obtain its clearance before closing a transaction if:

The transaction constitutes an Economic concentration
The parties combined turnover worldwide exceeds 200 Million SAR; and
The transaction may have an effect in Saudi Arabia, for instance when a party has certain business plans, assets or sales in Saudi Arabia
Non-compliance with these rules may result in the GAC imposing penalties as stipulated by the law.

II. Implications of the GAC decision

According to article 9 of the Saudi competition law: “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”.

Initially, the threshold was set at 100 million SAR. However, through the GAC decision on March 28, 2023, the threshold was increased to 200 million SAR. This decision aligns with the goals of Saudi Vision 2030, aiming to attract foreign investments by streamlining the authorization process and reducing paperwork.

Increasing the threshold helps reduce filings and investigation efforts. Indeed, given that one party’s total annual sales can reach the threshold by itself, GAC filing has been steadily increasing over the past years and was often triggered by transactions having little effect in Saudi Arabia. Also, the GAC has been increasingly involved in enforcement and investigation efforts into transactions that failed to file.

Consequently, entities will now find it easier to engage in economic concentration transactions, as they are only required to notify the GAC if their total annual sales exceed 200 million SAR, this decision also creates a more attractive environment for merger and acquisition transactions. With fewer transactions requiring notification to the GAC, companies can pursue acquisitions and mergers more easily, resulting in increased transaction activity and overall market attractiveness.

Finally, it is worth noting that the Board of the GAC can grant exemptions from the notification requirement to entities involved in transactions above the threshold based on recommendations from a dedicated technical committee, provided the transaction improves market performance or enhances the entity’s performance while ensuring consumer benefits outweigh potential adverse effects on competition