SAUDI ARABIA Law and Practice Contributed by: Alex Saleh, Asad Ahmad, Khaled al-Khashab and Shahad Al-Humaidani, GLA & Company
and may take place by way of indirect sales (eg, sales by way of a distributor). The GAC will also look at whether the actual or potential effect on competition is substantial. This requires that the effect takes place within a market in Saudi Arabia. The GAC considers that this test will generally mean that jurisdiction is established where the actual or potential effect of the conduct on a market inside Saudi Arabia is more than trivial. In addition, the GAC will look at whether the potential effects on a market are reasonably foreseeable. In general, this will mean that the effect of the foreign conduct (including an eco - nomic concentration) can be reasonably fore - seen and is more than merely speculative. In general, the GAC will consider it to be suf - ficient to establish a nexus if one or more of the foreign undertakings has sales in Saudi Arabia. However, sales in Saudi Arabia are not neces - sary to establish a sufficient nexus with a market in Saudi Arabia. 2.9 Market Share Jurisdictional Threshold The GAC will consider market shares and market concentration in the context of the other relevant factors it may consider in order to conclude if a market concentration will take place. The GAC typically measures market concentration using market shares, market concentration ratios and the Herfindahl-Hirschman Index (HHI). The HHI is calculated by adding the sum of the squares of the post-merger market share of the merged firm and each rival firm in the relevant market, there - by giving greater weight to the market shares of the larger firms. The HHI therefore requires the market shares, or estimates of them, for all the participants in the relevant market.
The GAC will generally use the following HHI thresholds to undertake a preliminary assess - ment of the potential competition effects of an economic concentration. • The GAC is unlikely to identify horizontal competition concerns in an economic con - centration in a market with a post-concentra - tion HHI below 1,000. This economic concen - tration does not generally require extensive further analysis. • The GAC is unlikely to identify horizontal competition concerns in an economic con - centration 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 compe - tition analysis are present. 2.10 Joint Ventures The KSA Competition Law uses the principle of economic concentration to assess merger control issues. A joint venture will constitute an economic concentration when “the joint venture forms an autonomous economic undertaking or performs the economic functions of an autono - mous economic undertaking, on a lasting basis”. This will be considered a ”full-function joint venture”. The GAC will decide whether a joint venture will be considered a “full-function joint venture” on a case-by-case basis. Attributes of a ”full-function joint venture” include the following. • The joint venture must operate in a market and perform the functions normally carried out by a commercial undertaking operating in that market. • The joint venture must ordinarily have a man - agement team dedicated to its day-to-day operations and access to sufficient resources,
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