SAUDI ARABIA Law and Practice Contributed by: Alex Saleh, Asad Ahmad, Khaled al-Khashab and Shahad Al-Humaidani, GLA & Company
ecom and Information Technology Company, according to the GAC. The GAC, in media circulated by the head of the GAC’s M&A Department, Talal Al Hogail stated that it undertook investigative efforts following a decision of the GAC board of directors. They revealed that the parties to the transaction had indeed engaged in a notifiable economic con - centration and concluded its implementation without notifying the GAC, in violation of Article 7 of the KSA Competition Law. Upon concluding that the parties were indeed in violation of the KSA Competition Law, the GAC sanctioned each party with a financial fine of SAR400,000. This sanction is in line with the penalties prescribed under Article 19 of the KSA Competition Law for failure to notify an economic concentration. 2.3 Types of Transactions The KSA Competition Law uses the economic concentration principle to identify merger con - trol issues. Economic concentration is defined as any action that results in a total or partial transfer of ownership of assets, rights, equity, stocks, shares or liabilities of a firm to another by way of merger, acquisition, takeover or the joining of two or more managements in a joint management or in any other form that leads to the control of an entity, including influencing its decision, the organisation of its administrative structure or its voting system. This definition captures asset and share purchases, joint ven - tures, mergers and takeovers. In terms of exceptions, the Guidelines: • confirm that if a transaction does not lead to a change of control over the target entity, no GAC filing will be required; and • public institutions and state-owned com - panies, if they are solely authorised by the
government to supply goods or services in a particular field will not have to make a filing. 2.4 Definition of “Control” While before the issuance of the Guidelines it remained unclear how the GAC would analyse the elements of control, the Guidelines now clarify this by defining control as “the ability to exercise decisive influence over the strategic or operational decisions of the target entity”. This includes the appointment of senior management and approval of budgets, business plans and major investments. It is now clear that transactions that do not result in a change of control (eg, acquisition of minority interests with no veto rights over strategic deci - sions or internal restructuring within the same corporate group) are within the scope of the KSA Competition Law and notice to the GAC is not required. 2.5 Jurisdictional Thresholds Article 7 of the KSA Competition Law states that the entities involved in the economic concentra - tion must notify the concentration to the GAC if the value of the total annual sales of the entities seeking to participate in the economic concen - tration exceeds the amount determined by the Executive Regulations. Article 12 (1) of the Executive Regulations speci - fies that the economic concentration must be notified to the GAC if the total annual sales value of all entities intending to participate in the eco - nomic concentration exceeds SAR200 million. This requirement was established in line with the GAC’s approved decision dated 23/08/1444H corresponding to 15 March 2023 G, which increased the threshold from SAR100 million to SAR200 million.
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