29 ASIAN LEGAL BUSINESS – JUNE 2024 WWW.LEGALBUSINESSONLINE.COM it reduces the number of unnecessary filings and allows the GAC to focus its resources on mergers that are likely to have a potential anticompetitive effect in the Kingdom. “The new thresholds have been well received, especially the introduction of a minimum target revenue threshold, albeit on a worldwide basis. This is a step in the right direction towards minimising the number of filings that do not give rise to competition concerns in Saudi Arabia,” says Christopher Webb, antitrust and M&A partner at Middle East giant Al-Tamimi & Company. Tamer Nagy, an antitrust partner in White & Case’s Cairo and Washington, DC offices who advises on merger control in the Middle East, says in practice, he is already seeing a reduction in the number of transactions that trigger the merger notification requirements, unless they have at least some nexus to Saudi Arabia. In the first quarter of this year, 93 transactions were notified with the GAC, as compared to 83 in the same quarter last year, indicating an increase in the number of filings. “Although the new thresholds should result in less filings, there may be more transactions in 2024 generally, which would keep the numbers high,” Nagy explains. This is a step forward, but lawyers say they’d like to see more change, especially in terms of the introduction of a local target revenue threshold. First, says Paul Lugard, an antitrust partner at Baker Botts’, who handles competition clearances in the Middle East, while the new thresholds are a good starting point, they remain too low and exclude notifications for only a small number of transactions with no or limited nexus with Saudi markets. Thresholds may also need to be increased to reflect the growing number and size of transactions involving the region. Second, the requirements, as they stand, require a merger to be notified to the GAC where the acquirer meets turnover thresholds in Saudi, even where the target company has no connection to the Kingdom. Both Webb and Nagy say this requirement needs to be modified to narrow down deal notifications to only those where the target company has some direct nexus or turnover in Saudi Arabia. “It is to be hoped in that regard that the next iteration of the threshold will include a local (i.e. Saudi) target revenue threshold,” Webb says. REVAMPED GAC These changes come alongside a newlook GAC, which is growing in stature as the leading competition authority in the Middle East and North Africa region. The last few years have seen an increase in the GAC’s activity, both in terms of merger control and antitrust enforcement cases. A White & Case report has found that the GAC reviewed a total of 313 transactions in 2023, which was on par with the spike in the number of filings for the past three years. The GAC issued unconditional approvals for 172 of these transactions and, for the first time, issued conditional approvals for three of the transactions, which included both structural and behavioural remedies. It is worth noting that the GAC has also blocked two transactions so far. The remaining 83 filings were dismissed as non-notifiable. On the enforcement front as well, there has been a proactive rise in the number of investigations and raids, particularly in certain sectors like cement, life sciences and automobiles. Experts agree that this is likely to increase even further in 2024. Lugard says he has experienced an increase in professionalism, confidence, and sophistication in the GAC’s approach to competition enforcement and regulation in the last few years. “The GAC has been investing in personnel and know-how, engaging more external consultants, market experts and international competition practitioners in an attempt to build world-class antitrust infrastructure in the country,” Lugard adds. ROOM FOR IMPROVEMENT While the GAC continues to grow, lawyers say there are still aspects of the GAC’s administration that require to be revamped to align with international standards, particularly on the enforcement side. First, there is a need to align due process considerations and procedural guarantees with more mature jurisdictions. Lugard says that the procedures tend to be a little obscure, and there is a lack of a formal communication channel for ongoing investigations with the GAC. “In Europe and the U.S., there are guarantees that will allow notifying parties to learn about competitive concerns, access the authority’s file, interact with the agency and have an opportunity to react to potential issues arising from an investigation, which are not fully available in Saudi Arabia,” Lugard explains. While in practice, the GAC does ask questions and raise concerns with parties involved, it is not a formal guarantee, Lugard clarifies. A lawyer, on conditions of anonymity, gives the example of a pharma company that was under investigation for predatory pricing. The company had argued that the price was fixed by a government body and was not below cost price, and hence could not be predatory pricing. Despite this, the company was not given a meaningful chance to explain its case or object to concerns and a decision against it was passed. The lawyer says the company was not given a formal path of defence. Other concerns that lawyers raised include improvement to substantial analysis of cases, including building a series of consistent tests to review necessary conditions for antitrust violations, increased obligation to publish reasoned orders instead of summary decisions and more certainty from the GAC in the balancing of competition goals with the increasing influence of industrial and macroeconomic policy of the country. Nagy at White & Case also points to the need for quicker merger approval timelines, currently at 90 days, and a change to a a two-tiered system, where deals with little effect on competition are passed through on a faster timeline while others which may have potential issues can be held back for the full 90-day period. MIDDLE EAST
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