Saudi Arabia Update: COMMITTEE FOR ADJUDICATION OF VIOLATIONS OF THE LAW (CAVL) IN PROSECUTING COMPETITION LAW VIOLATIONS

The Competition Law of the Kingdom of Saudi Arabia (KSA) seeks to create a legal and transparent framework to enhance market efficiency. It comprises regulations for boosting and protecting fair competition and preventing monopolistic practices that compromise the business environment and consumer interests.

The law promotes varied prices for high-quality products and supports investments and innovations geared to economic growth. This article focuses on how the Committee for Adjudication of Competition Law Violations handles competition disputes.

WHO DOES THE COMPETITION LAW AFFECT?

The regulations of the Competition Law of Saudi Arabia apply to all entities within the Kingdom. They also affect any foreign practices that adversely affect competition in the KSA. The law excludes government-owned companies and public establishments with exclusive rights to provide commodities or services in a particular field.

PROVISIONS OF THE COMPETITION LAW

Entities must observe free competition principles and market rules when setting prices for goods and services. This condition doesn’t apply when the Council of Ministers or an applicable law influences prices.

Here are some key provisions of the KSA Competition Law.

PREJUDICE ON COMPETITION

Any explicit or implicit practices that deliberately or otherwise prejudice competition are unlawful. They can be contracts and agreements between entities. Among the prohibited conduct includes:

• Proposing and determining prejudiced prices, service fees, and terms of sale or purchase
• Partisan determination of commodity sizes and weights, production quantities, and quality of services
• Restricting the availability of goods and services in specific markets through unjustified stockpiling, storing, or refusing to sell
• Any behavior that excludes or bars an entity from entering into a market
• Colluding in bids and offers in government auctions and tenders to advantage an entity
• Discriminating against some markets or segregating them by regions, customer type, distribution centers, and seasons
• Preventing an entity from accessing products or services available in a market
• Limiting or freezing the development, manufacturing, marketing, and distribution of commodities

EXPLOITATION BY DOMINANT ENTITIES

The Competition Law also seeks to prevent dominant business entities from exploiting their position to limit competition in the market. Some of the prohibited practices include:

• Selling commodities and services at lower prices than the production cost to force competitors out or prevent new entities from entering the market
• Imposing unfair prices or terms of product or service resale
• Controlling the quantities of products in the market to create a false shortage or oversupply and influence prices
• Discrimination in pricing, service fees, and terms of sale amongst entities under similar contracts
• Declining to deal with an entity for no valid reason to block its entry into a market
• Requiring a business entity to desist from dealing with another one

ECONOMIC CONCENTRATION TRANSACTIONS

Entities seeking to engage in economic concentration must notify the General Authority for Competition (GAC) at least 90 days before completing the transaction. This provision applies to entities with annual sales above the amount set by the Competition Law.

The regulations determine the procedure for filing economic concentration notifications, the required documents, and content. The GAC can demand copies of the documents, records, files, and data of the parties participating in an economic concentration.

Through its Board of Directors, GAC responds to economic concentration notifications with an approval, conditional approval, or refusal. It must give reasons for conditional approvals and rejections.

An entity cannot proceed with an economic concentration process without written approval from the GAC. It can only do so if it submits a notification to the GAC and 90 days elapse before the Board responds.

COMPETITION LAW VIOLATION DISPUTES

Any person who suffers damage because of acts committed contrary to the competition Law can petition the court for compensation. The GAC Board assesses the complaint and decides whether to approve inquiry, search, and evidence gathering processes to support the investigation. The GAC’s Governor or the Chairman of the Board can issue quick approval in urgent situations.

INVESTIGATION AND PROSECUTION PROCESS

The GAC Board delegates a team that steers the interrogation, investigation, and prosecution of Competition Law violations. The officers have a judicial recording capacity. They can enter an entity’s premises or offices during business hours and access their books.

They can also produce copies of documents and sign a report about the incident alongside the entity’s employee. The officer can use all the evidence they can get regarding competition-related violations. These include telephone recordings, computer-generated data, electronic mail, and facsimile correspondence.

An entity cannot stop an investigator or law enforcement officer from investigating a suspected violation of the Competition Law. Similarly, it cannot provide misleading information or withhold, conceal, or destroy documents that would benefit the investigation.

When necessary, the GAC may invite competent authorities like law enforcement agencies to enable their officers to carry out their mandate.

FINES AND PENALTIES FOR VIOLATING THE COMPETITION LAW

Anyone violating any of the KSA Consumer Law provisions or regulations is liable to a fine of not more than 2 million riyals.

A person or entity is liable to a fine of at most 10 percent of their total annual sales related to the violation if they:

• Prejudice competition deliberately or inadvertently (Article 5)
• Exploit their dominance in the market to avoid competition (Article 6)
• Engage in economic concentration transactions unlawfully (Articles 7 & 11)

If estimating the annual sales is infeasible, the violator is subject to a fine not exceeding 10 million riyals. At its discretion, the Committee can impose a fine of up to three times the gains an entity accrued by violating the Competition Law.

OBSTRUCTING OR MEDDLING WITH INVESTIGATIONS

An entity guilty of preventing GAC investigators or law enforcement officers from gathering evidence about a violation of the Competition Law (Article 16) pays a fine not exceeding five percent of its annual sales. If determining the total annual sales is not possible, the GAC slaps the business with a fine not exceeding 5 million riyals.

OTHER REMEDIAL MEASURES TO VIOLATIONS

The GAC Board may require an entity to make some changes within a specified period to correct the violation. It can ask the violator to dispose of some assets, property rights, or shares.

Another option is requiring the violator to pay a maximum of 10,000 riyals daily until they rectify the violation. The Board can also close the entity temporarily if the violation persists after 90 days of notifying the business.

By Meteb Alghashayan, Hammad & Al-Mehdar, Saudi Arabia, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact saudiarabia@transatlanticlaw.com

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