The business landscape in Saudi Arabia has been invigorated through a series of regulatory adjustments aimed at fostering a more dynamic and competitive market environment. Notably, the recent modifications to merger control filing thresholds reflect a concerted effort by the General Authority for Competition (GAC) to align with global best practices.
Half a year following the announcement, the consensus among prominent antitrust attorneys is one of approval. The simplified notification process, heightened consciousness within the local business community, and reinforced dedication to antitrust compliance are among the significant outcomes.
Originally, any merger where the combined entity’s turnover surpassed 100 million Saudi riyals necessitated a filing. However, this low threshold was criticized for capturing mergers irrelevant to the Saudi market or those unlikely to impact competition within it.
In response, the GAC introduced a revised framework in November 2023. The updated criteria now stipulate that a merger filing is mandatory only when certain cumulative conditions are met: a combined turnover of the parties exceeding 200 million Saudi riyals, the target entity’s turnover surpassing 40 million Saudi riyals, and a local turnover within Saudi Arabia itself also exceeding 40 million Saudi riyals.
Although this resulted in an uptick in filings, industry voices are advocating for a realignment of these thresholds with international norms to facilitate smoother transactions in the Kingdom.
Legal experts in the antitrust sphere have welcomed the changes, particularly the establishment of a minimum target revenue and local nexus requirement, as these amendments streamline the process and focus GAC’s resources on mergers with potential anticompetitive effects in Saudi Arabia.
The new thresholds have been well received, especially the introduction of a minimum target revenue threshold, albeit on a worldwide basis. This is a step in the right direction towards minimising the number of filings that do not give rise to competition concerns in Saudi Arabia.
During the first quarter of the year, 93 transactions were reported to the GAC, marking an increase from the previous year’s 83 for the same time frame. However, this number may reflect a general uptick in transactions rather than the new threshold’s impact alone.
Nonetheless, legal professionals are calling for further refinements, such as the implementation of a local target revenue threshold, to filter out transactions with no significant ties to the Saudi market.
The GAC has also undergone a transformation, establishing itself as a prominent competition authority within the MENA region. It has been proactive in merger control and antitrust enforcement, having reviewed 313 transactions and issued conditional approvals for the first time in 2023, alongside blocking a couple of transactions.
Despite these advances, there remains room for improvement in the GAC’s operations. Legal experts suggest that procedural transparency and due process, akin to those in more mature jurisdictions, are needed. For instance, formal communication channels during investigations could enhance fairness and clarity in the process.
Issues such as the lack of detailed reasoning in decisions and the need for more prompt merger approval times are also areas where the GAC could align more closely with international standards, thus balancing competition goals with the Kingdom’s broader economic policies.