The New Jordanian Merger Control Regime. One Year In.

In July 2022, the Jordanian government announced new amendments to the Jordanian Competition Law, Law 33/2004 (Competition Law). Most notably these included the introduction of turnover based notification thresholds in addition to the existing market share based notification thresholds for as well as explicitly including foreign-to-foreign transactions as caught by the Jordanian merger control regime. In March 2023, the Jordanian Parliament approved and adopted these amendments and passed the Competition Law. Subsequently—in August 2023—the Council of Ministers issued Decision 43223/2023 (Decision 43223/2023), which included defined the new turnover based notification thresholds.

Prior to the amendments the Jordanian merger control regime was largely dormant. However, with the introduction of the new turnover based thresholds we have seen a stark increase in merger control activity in the Kingdom, including review of foreign-to-foreign transactions. Still, some matters still remain unresolved. Furthermore, the requirement that clearance decisions need to be approved by the board of the Competition Directorate at the Jordanian Ministry for Industry, Commerce and Trade, which meets only three times a year, continuous to pose issues. This brief provides an overview of the recent amendments as well as first experiences gained during the first 12 months of the amended law being in force.

Notification Obligation

Notification of an economic concentration is mandatory, where the transaction (1) leads to a change of control over the target, and (2) meets the statutory notification thresholds as defined in Decision 43223/2023 (article 9(a) and (b) Competition Law).

While the Competition Law includes language that suggest there should be local nexus test, the authority does not apply a local nexus test in practice. In their view, the fact that the notification thresholds are met (see below) suffices to establish local effect. No further local impact assessment will be conducted when assessing whether a filing obligation exists.

Since the amendment of the Competition Law, the Jordanian merger control regime explicitly catches foreign-to-foreign transactions. Local assets or subsidiaries are not required to trigger a filing obligation. Thus, where non-Jordanian parties meet the notification thresholds through exports to Jordan only and have no subsidiaries or assets in Jordan, a filing may still be required.

Change of Control

Neither the Competition Law nor Decision 43223/2023 provide a comprehensive definition of what constitutes change of control within the meaning of the Jordanian merger control regime. The law simply states that the ability to influence material decisions of an undertaking constitutes control. From the Competition Directorate's practice and guidance received in discussions with them so far, we understand that change of control does not require acquisition of sole control. Acquisition of joint control or change from joint to sole control suffices to trigger a filing obligation. Furthermore, control does not necessarily require a majority stake in an undertaking. Minority shareholders may be deemed to have control over an undertaking, if certain rights granted to them in addition to their minority stake allow them to influence strategic decisions of the undertaking. In practice the Competition Directorate considered rights to appoint and remove or veto the appointment or removal of general managers or directors, rights to determine or veto business plans or budgets, or rights concerning changes of business activities of the undertaking to establish control by minority shareholders.

Notification Thresholds

Prior to the amendments introduced in 2023, notification was only required where the relevant parties to the transaction had a combined market share of at least 40 percent in the relevant market in Jordan. As of August 2023—when the new turnover based thresholds were introduced—the newly introduced turnover thresholds apply in addition to the market share threshold. Now notification is required, where one of the following thresholds is met:

• the collective market share of the parties relevant to the transaction in the relevant market in Jordan is at least 40 percent;
• the annual, Jordanian turnover of one party to the transaction is at least JOD 2 million (approx. USD 2.8 million); or
• the annual, Jordanian turnover of all parties relevant to the transaction collectively is at least JOD 7 million (approx. USD 9.8 million).

The authority continues to take the position that the market share threshold can be met by one party—e.g. the acquirer—alone. Hence, no increment of market share is required for a filing obligation to arise under the market share notification threshold. Similarly, either turnover threshold can be met without target turnover in Jordan. The acquirer or one joint venture party alone can meet the single party turnover threshold. Any two parties—not necessarily including the target—can meet the multiple parties’ turnover threshold. Seller's market share or turnover will not be considered, unless the seller remains invested in the target post-closing. The turnover thresholds are not linked to the relevant market. Any turnover in Jordan—regardless of whether such turnover is related to the relevant market—will suffice to meet the thresholds. Finally, an overlap between the parties—whether in Jordan or globally—is not required to trigger a filing obligation.

Procedure

While there is no statutory pre-notification phase, the Competition Directorate in practice conducts pre-notification assessment. This initial review typically takes between 10 and 20 business days and is aimed to determine whether the filing is complete, or whether the authority considers additional documents or information as relevant for their review. After the Competition Directorate confirmed that the filing is complete, they will confirm completeness and declare the statutory review period to have commenced.

The statutory review period is 100 days with no option for the authority to extend it. However, the authority may stop the clock where they deem necessary. Neither the Competition Law does not specify whether these are calendar or business days. To date the authority has not clarified this issue either. Finally, the Competition Law does not address the effect of the review period lapsing without the authority issuing a decision on the transaction. To date we are not aware of a case in which the review period has lapsed without the authority issuing a decision. Also, the Competition Directorate has not provided guidance on whether a transaction would be deemed cleared or not if the review period lapses without decision.

Following receipt of a notification the authority will publish an announcement of the notification, including a very high-level summary of the transaction notified. The publication is typically limited to identifying the parties as well as a description of the transaction. It does not address competition issues or any material assessment of the transaction. The publication triggers a 15-business days’ waiting period during which concerned third parties may raise objections or concerns.

All clearance decisions must be approved by the board of the Competition Directorate. This board approval may cause significant delay. The board meets only three times a year—so far, the meetings have been held at the end of each third. Hence, if the case team would submit their report on a transaction for approval to the board shortly after the last board meeting was held, there could be a substantial delay purely due to the parties having to wait for the next board meeting to be convened. Ad hoc meetings may be convened in urgent cases. However, the Competition Directorate has to date never convened such an ad hoc meeting and has not provided official guidance on what would cause them to do so. However, based on prior experience with the authority and unofficial guidance received we understand that an ad hoc board meeting would only be convened, if the Jordanian state has a specific interest in the transaction. Preferences or concerns of the parties do not appear relevant. Also, neither the law nor the authority’s practice suggest that special consideration would be given to transactions concerning targets in financial distress—unless there is a specific interest of Jordan in addressing the financial difficulties of the target.

Enforcement and Penalties 

The recent amendments increased the penalties for failure to notify and gun jumping—among which the Competition Law does not distinguish. Prior to the amendments fine of between 1 and 5 percent of total annual revenue of the violating parties could be imposed. The law did not specify, and the authority never clarified whether there in fact was a minimum fine of 1 percent and whether the fines were calculated based on Jordanian or worldwide turnover. No fine for failure to notify/gun-jumping was ever imposed under the old regime. With the recent amendments fines were increased to 2 to 10 percent of annual revenue. The Competition Law still does not state whether these fines would be calculated based on domestic or worldwide turnover and whether there is in fact a 2 percent minimum fine or whether there is the possibility. The Competition Directorate has to date not provided guidance on this matter either.

While the authority has not imposed any fines or other sanctions to date, they established a dedicate investigation department within the Competition Directorate. Also the Competition Directorate has shown increased interest in cooperation with other competition authorities in the region. In March 2023 the Competition Directorate for the first time took an active part in the Arab Competition Network during their third annual meeting held in Riyadh. Since than the Competition Directorate held bilateral meetings with several authorities in the MENA-Region including the Egyptian Competition Authority, and the Saudi General Authority for Competition Authority.

Way Forward

The introduction of turnover based notification thresholds has substantially expanded the scope of the Jordanian merger control regime. Furthermore, the amendments introducing language that explicitly extends the application of the Jordanian regime to foreign-to-foreign transaction now clarify that foreign-to-foreign transactions are caught. Furthermore, the increased penalties and the Competition Directorate increasing their investigative capabilities suggest that the authority is seeking to more consequently enforce the regime. Hence, businesses with sales in Jordan, even if they incur Jordanian revenue through exports to Jordan only, need to consider the Jordanian merger control regime when contemplating acquisitions, joint ventures, or mergers.