Kuwaiti Competition Protection Agency’s Issues First Penalties

The Kuwaiti Competition Protection Authority (CPA) imposes penalties for violations of the Law 72/2020 on the Protection of Competition (Competition Law), which came into force at the end of June 2021. A first fine was imposed end of 2022 against an unnamed manufacturer of reenforced steel for failure to cooperate with the CPA in their investigation. End of March 2023 substantial fines were imposed in second case against supermarkets found to have abused their market dominant position.

In late 2022, the CPA initiated an investigation into business practices of companies working in the steel sector. The investigation does not appear to have been prompted by a specific incident but rather in a more general afford to verify whether these companies complied with the Kuwaiti competition regime. In their investigation the CPA  considered all stages of production and distribution of reenforced steel in Kuwait. The CPA ultimately concluded its investigation without finding any anticompetitive practices. However, it found a thus far unnamed steel company violated article 34 Competition Law, which requires parties to comply with requests issued by the CPA in an investigation. The company failed to comply with a request by CPA for documents and information relevant to their investigation. After the company failed to respond to the CPA’s request within one month after the deadline to do so laps, the CPA’s Disciplinary Committee resolved to fine the company in the amount of 1 percent of the company’s annual turnover, which amounted to KWD 250,000 (approx. USD 806,000). The decision was announced on 7 November 2022.

In second case, the CPA imposed fines against 14 supermarkets for abuse of dominance in violation of article 8 Competition Law. The CPA found that the supermarkets had unlawfully abused their dominant positions in the Kuwaiti market to force their egg suppliers to either provide them with extra additional quantities of  eggs free of charge, by threatening the suppliers to cease doing business with them otherwise. The CPA found that by doing so the supermarkets used their dominant market position to unlawfully distort competition in the egg market in Kuwait. Their behaviour had negative impacts on small and medium-size competitors who had to procure eggs at normal market prices and potentially restricted competitors from entering the market. Their findings lead the CPA to issue fines in the amount of 5 percent of their annual revenue against 12 and in the amount of 1 percent of their annual revenue against the remaining 2 supermarkets. In total the CPA issued fines in the amount of KWT 8.8 million (approx. USD 28.8 million) per their decision of  30 March 2023. To date, it is unclear whether the companies appealed the CPA’s decisions and whether a reconciliation process was initiated.

Both cases raise issues companies doing business in Kuwait should consider. The fine imposed in connection with the CPA’s investigation into the steel industry may appear comparatively low on the face of it. However, considering that it was not imposed to address anticompetitive practice but rather only failure to comply with RFI issued by the CPA in an investigation is concerning. Furthermore, the fact that in the second case, the CPA imposed fines in the amount of 5 percent of the companies’ annual revenue—thus, half of the maximum allowed under the law of 10 percent of annual revenue—shows the CPA’s willingness to impose substantial fines. Furthermore, while it appeared that the CPA chose to calculate the fines on domestic revenue, officers of the CPA clarified that this should not be taken as a confirmation of the CPA assessing all fines on domestic revenue. When pressed for clarification CPA officers stated that the companies fined only had Kuwaiti turnover. Hence, while the fines were calculated on domestic revenues only, these in fact where the worldwide revenues of the companies. Further clarification on how fines are calculated would be provided in pending guidelines. CPA officers stated that these guidelines would be issued ‘soon’ Still, guidelines were (unofficially) announced in mid 2022. As of now it still is unclear whether fines will be calculated on worldwide or Kuwaiti revenue.

This is particularly relevant in the context of the Kuwaiti merger control regime, that is applied extremely extensively. Notification of under the Kuwaiti merger control regime may be required in transactions that involve only one party with comparatively minor revenue in Kuwait—the notification threshold is KWD 500,000 (approx. USD 1.6 million) annually—with no effective local nexus corrective. Thus, transactions that have no effect on competition in Kuwait under any measure may require notification under the Kuwaiti merger control regime. We expect that the Kuwaiti authorities would primarily focus their enforcement afford on transactions that pose competition concerns in Kuwait. Yet, even transactions entirely irrelevant to Kuwait from a competition perspective could potentially face substantial fines only because one of the parties involved has (minor) revenue in Kuwait.