Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
Currently, transactions resulting in an economic concentration must be notified to the Authority at least 60 days prior to their effective date (although in practice the Authority has up to 90 days to approve or deny approval for a filing).
Any violation of the provisions of the Current Law, which would include a failure to file, can be subject to a fine of up to 10 per cent of sales, not exceeding 10 million Saudi riyals, to be multiplied in the case of recurrence. The fines that may be imposed under the Current Law are without prejudice to any other penalties that may be applicable under any other laws.
The Authority may also take one or more of the following actions where a violation of the Current Law has been established:
- order the infringing establishment to cease the infringement immediately;
- require the infringing establishment to dispose of assets, shares or proprietary rights, or to undertake any other action to remove the effects of the infringement (this provision is drafted widely and, arguably, could be interpreted by the Authority as giving it the power to order the unwinding of the transaction);
- compel the infringing company to pay a daily fine of not less than 1,000 Saudi riyals and not exceeding 10,000 Saudi riyals until the infringement has ceased;
- order the infringing establishment to return (to the government) all gains made from the violation; and
- if the violation continues following imposition of a fine and order to end violation, order a temporary cessation of operations for a period of up to one month or permanently withdraw governmental licences (such as foreign investment, industrial or sector specific licences) required to operate.
The Law also establishes a right of action before the competent courts for natural or legal persons who suffer harm as a result of a violation of the Law.
To date, although there are no public records of the Authority imposing a fine for failure to file, the Authority is known to be investigating an alleged violation in this respect - including seeking to make full use of the above available sanctions.
Going forward, the time frame for notification prior to completion of an economic concentration transaction has been set at 90 days upon entry into force of the New Competition Law. The same penalties for failure to notify the Authority are maintained in the New Competition Law, with the addition of a further option for the Authority to replace the previously mentioned penalties by imposing a fine not exceeding three times the profits made by a violating entity. However, under the New Competition Law, the Authority no longer has the authority to permanently withdraw a government licence.
Which parties are responsible for filing and are filing fees required?
Currently, notification must be made by the entity that will be acquiring or increasing its economic concentration.
In the case of an acquisition involving a single acquirer, the acquirer alone must notify, while in the case of a merger that creates a new undertaking, or an acquisition by one or more parties, both (or all) parties will have an obligation to notify.
A filing fee of 1,000 Saudi riyals is required.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
Economic concentrations must not be implemented before one of the following has occurred:
- the notifying party has received approval in writing from the Authority;
- 60 days have expired since notification, without the notifying party having been informed by the Authority in writing that the concentration is under review or has been blocked; or
- 90 days have expired since notification, without the notifying party having received written approval or rejection of the concentration from the Authority.
Neither the Current Law nor the Current Regulations provide for any exceptions to the suspension obligation.
The New Competition Law increases the waiting period for notification by the Authority to 90 days.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
There are a number of possible sanctions for violations of the provisions of the Current Law, which would include closing before clearance. The possible sanctions are outlined in question 9.
As mentioned above, the penalties under the Current Law and the Current Regulations are applied (at least in theory) to parties that close a transaction before clearance is obtained from the Authority or where time periods imposed by the Law or the Authority are not observed.
While there has been no published decision to date where the Authority has imposed any sanction for failing to notify, the Authority has been known to investigate possible failures to notify.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
The Current Law and the Current Regulations do not distinguish between a merger involving local or foreign entities. As noted in question 12, to date, there have been no examples of fines being imposed, and the instances where the Authority is investigating possible failures to notify are in relation to transactions involving Saudi entities. However, while there is no practical guidance available as to whether the Authority would apply sanctions in foreign-to-foreign transactions, this possibility cannot be excluded where the filing thresholds are met and the transaction has effects in Saudi Arabia.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
The Current Law and the Current Regulations do not distinguish between a merger involving local or foreign entities. A transaction that is notifiable should therefore not be closed prior to one of the events listed in question 11 occurring. Alternatively, the relevant business entity in Saudi Arabia could be subject to a different set of documentation that has as a condition precedent the obtaining of the Authority’s clearance.
In theory, hold-separate arrangements may be a solution; however, such arrangements have not yet been tested with the Authority.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
The Merger and Acquisition Regulations issued by the Saudi Capital Markets Authority (the M&A Regulations) require that, where a public offer for shares would, if completed, be subject to the Law, the offeree company and the offeror must, inter alia, notify the Authority pursuant to the applicable provisions of the Law.
The M&A Regulations further provide that an offer that is subject to the Law must contain a condition that the offer will lapse if the Authority notifies the offeror or the offeree company in writing that it objects to the deal or has placed it under study and review as specified in the Law.
The M&A Regulations apply to publicly listed companies in Saudi Arabia and contain additional merger control provisions that apply to such transactions.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
The filing must be made using the forms published by the Authority. A separate form must be completed for each merging entity.
The notification must include, for example, information on the relevant markets, the value of the notifying party’s (or parties’) sales in those markets, positive effects of the concentration on the market, and competitive dynamics in the market. Supporting documentation, namely the transaction agreement and the constitutional documents and financial statements of the notifying and target entities, must also be provided. The notification forms, as well as all supporting documentation, must be submitted in Arabic.
The Current Law and the Current Regulations do not contemplate derogations from the amount of information to be provided.
Going forward, however, the New Regulations will specify the procedures to be followed for notification of economic concentration, including the content, information and documents required under the New Competition Law regime.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
Upon notification, the Authority will verify whether all the necessary information has been provided. If the notification is complete, the Authority will notify the relevant party (or parties) and the time frame shall run from the date of the Authority’s notice. If not, the relevant party or parties shall be informed of the missing information that must be provided.
Once a complete notification has been received, the Authority has 60 days within which to review the transaction and notify the notifying party (or parties) of its decision. The Authority may extend this period by 30 days, provided that the notifying parties are informed of the extension prior to the expiry of the 60-day period (see question 11).
The length of time to obtain a decision from the Authority is determined on a case-by-case basis. The Authority has rendered decisions in as few as seven days and as long as 60 days.
The New Competition Law extends the time period within which the Authority will review and notify the notifying party to 90 days. The New Regulations will specify further details on the mechanism of review and notification by the Authority’s decision.
What is the statutory timetable for clearance? Can it be speeded up?
The Authority may request additional information during the investigation. Such requests must be in writing and must specify the required documents or information. The parties must provide the documents or information within 15 days of the Authority’s request.
The Law and Regulations give the Authority wide discretion in terms of what additional information (if any) it may request.