MIDDLE EAST: FAIR PLAY, SAUDI ARABIA

New merger thresholds, increased enforcement and more regulator-led awareness campaigns have given rise to flourishing and competitive markets in the Middle East’s largest economy, but some regulatory and procedural concerns still remain.

In November, the Saudi Arabian General Authority for Competition (GAC) made a number of changes to its merger control filing thresholds, in an attempt to bring its transaction notification regime in line with international best practices.

Now, six months since the notifications were announced, the region’s top antitrust lawyers say that the notifications have been well received by the industry, creating a simpler notification process, more awareness among local businesses, and a stronger focus on antitrust compliance.

While the GAC first introduced merger control thresholds linked to the parties’ turnovers in 2019, the market almost unanimously found the thresholds to be too low, often ensnaring mergers that had no connection to the Saudi market or those that lacked any potential effect on competition in the country. Initially, a filing was required if the total combined turnover of the participating entities exceeded 100 million Saudi riyals ($26.6 million).

Heeding these calls, in November 2023, the GAC, for the first time, introduced a local nexus requirement and a target turnover requirement that raised the bar for a deal to be notifiable under Saudi’s competition law. Under the new thresholds, a filing is required only if all the following cumulative conditions are met: (a) the total combined annual turnover of the parties exceeds 200 million Saudi riyals (parties turnover), (b) the total annual turnover of the target entities exceeds 40 million Saudi riyals (target turnover), and (c) the total annual turnover of the parties in Saudi Arabia exceeds 40 million Saudi riyals (local nexus requirement).

This increased the number of filings in the region, but calls were made to rethink the threshold limits to bring it more in line with general standards across the globe that would allow for smoother dealmaking in the kingdom.

WELL RECEIVED

Antitrust lawyers who work in the region welcome this inclusion of a target turnover and local nexus requirement, saying it reduces the number of unnecessary filings and allows the GAC to focus its resources on mergers that are likely to have a potential anticompetitive effect in the Kingdom.

“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,” says Christopher Webb, antitrust and M&A partner at Middle East giant Al-Tamimi & Company.

Tamer Nagy, an antitrust partner in White & Case’s Cairo and Washington, DC offices who advises on merger control in the Middle East, says in practice, he is already seeing a reduction in the number of transactions that trigger the merger notification requirements, unless they have at least some nexus to 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.”

–Christopher Webb, Al-Tamimi & Company.