Saudi Arabia competition authority blocks its first transaction under the Kingdom's 2019 Competition Law.
The Saudi Arabian General Authority for Competition ("GAC") announced this week that its board had blocked Delivery Hero's proposed acquisition of The Chefz, a Saudi food delivery app. Germany-based Delivery Hero operates several food delivery apps in Saudi Arabia that compete with The Chefz, plus others that operate in adjacent countries. This marks the first time that GAC has blocked a proposed transaction, suggesting the beginning of greater merger enforcement in the Kingdom.
Saudi Arabia issued a new competition law and implementing regulations in 2019, the latter of which established a low filing threshold based on whether the parties to the transaction generate combined global revenues of SAR 100 million (~$26 million). Earlier this year, GAC released Merger Review Guidelines that outline how GAC conducts merger reviews and the remedies GAC may accept as part of a conditional approval. Prior to the Delivery Hero deal with Chefz, GAC had not blocked any transactions and had required remedies in just one transaction, Uber's $3.1 billion acquisition of regional ride sharing app Careem. In the Uber/Careem transaction, GAC imposed eight specific behavioral remedies (not a divestiture), including price caps and restriction on Uber's use of surge pricing for three years.
The Saudi Arabian Competition Law requires GAC to substantiate its rejection or remedy decision; as of the time of this Alert, GAC has not publicly released its decision in Delivery Hero/Chefz. GAC's public statement noted that the parties had failed to provide data sufficient for GAC to evaluate remedies, indicating that GAC may have been open to a conditional approval subject to one or more remedies to protect consumer interests and welfare. No details have been released about what remedies GAC considered.
We expect a forthcoming written decision from GAC, but all signs point to greater merger scrutiny in Saudi Arabia. As the Saudi antitrust agency grows in capacity and continues to develop, we expect it to focus foremost on transactions that involve competing technology or consumer-facing businesses that have a significant presence in the Kingdom. GAC's actions in the Uber/Careem and Delivery Hero/Chefz transactions highlight how parties with significant positions in Saudi Arabia should make an early evaluation of how GAC will respond to their proposed deal and consider what remedies GAC may require.