SAUDI ARABIA Law and Practice Contributed by: Alex Saleh, Asad Ahmad, Omar Halbouni and Shahad Al-Humaidani, GLA & Company
di Arabia. Article 3 of the Implementing Regulations also provides that the GAC may assess the actual or potential effect of the conduct outside Saudi Arabia on a market inside the Kingdom. Nexus Test The GAC will require economic concentrations that take place outside Saudi Arabia to be notified when there is a sufficient nexus between the economic con - centration and a market inside Saudi Arabia. Under the KSA Competition Law and the Implementing Regulations, this nexus is established when foreign conduct (including economic concentrations among foreign undertakings) may affect a market in Saudi Arabia. The GAC will consider that there is sufficient influence on a market in Saudi Arabia where the potential result is direct, substantial and reasonably foreseeable. The economic concentrations among foreign under - takings are subject to Article 7 of the KSA Competi - tion Law and must generally be notified if the other relevant notification criteria are also met. The GAC will generally not consider that there is suffi - cient impact on the Saudi Arabian market if the foreign conduct (including economic concentrations) does not meet these criteria. For clarity, a direct effect is not limited to direct sales and may occur through indirect sales (eg, sales through a distributor). The GAC will also look at whether the actual or poten - tial effect on competition is substantial. This requires that the effect takes place within a market in Saudi Arabia. The GAC considers that this test generally means that jurisdiction is established where the actual or potential effect of the conduct on a market within Saudi Arabia is more than trivial. In addition, the GAC will look at whether the poten - tial effects on a market are reasonably foreseeable. In general, this will mean that the effect of the for - eign conduct (including an economic concentration) can be reasonably foreseen and is more than merely speculative.
In general, the GAC will consider it sufficient to estab - lish a nexus if one or more of the foreign undertakings have sales in Saudi Arabia. However, sales in Saudi Arabia are not necessary to establish a sufficient nex - us with the Saudi market. 2.9 Market Share Jurisdictional Threshold The GAC will consider market shares and market concentration, along with other relevant factors, to determine whether market concentration will occur. The GAC typically measures market concentration using market shares, market concentration ratios and the Herfindahl-Hirschman Index (HHI). The HHI is cal - culated by summing the squares of the post-merger market shares of the merged firm and each rival firm in the relevant market, thereby giving greater weight to the market shares of the larger firms. The HHI, there - fore, requires market shares or estimates thereof, for all participants in the relevant market. The GAC will generally use the following HHI thresh - olds to undertake a preliminary assessment of the potential competition effects of an economic con - centration. • The GAC is unlikely to identify horizontal competi - tion concerns in an economic concentration in a market with a post-concentration HHI below 1,000. This economic concentration does not generally require extensive further analysis. • The GAC is unlikely to identify horizontal competi - tion concerns in an economic concentration with a post-concentration HHI between 1,000 and 2,000 and an HHI delta below 250 or an economic concentration with a post-concentration HHI above 2,000 and an HHI delta below 150, except where special circumstances that require additional com - petition analysis are present. 2.10 Joint Ventures The KSA Competition Law uses the principle of eco - nomic concentration to assess merger control issues. A joint venture will constitute an economic concen - tration when “the joint venture forms an autonomous economic undertaking or performs the economic functions of an autonomous economic undertaking, on a lasting basis”. This will be considered a “full- function joint venture”. The GAC will decide whether
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