The Saudi General Authority for Competition( GAC) Released its Merger Control Report for Q1/2024

On 21 April 2024, the General Authority for Competition (GAC) released their first-quarter report for 2024 concerning their merger control activities. The report indicates that GAC approved 48 transactions unconditionally, issued 32 certificates of non-notification obligation, and is currently evaluating 13 pending requests. However, the report did not include any information on violation proceedings, sanctions imposed, or settlements in connection with gun jumping and failure to make notifications.

According to the report the number of transactions submitted for merger review decreased year on year during the first quarter of 2024 compared to the first quarter of 2023 by 8 requests. This trend is somewhat surprising considering the new notification thresholds introduced by the GAC in early November 2023 clarified when notification for merger control review is required. While the under the new thresholds foreign-to-foreign transactions will still be subject to a local effects test, this local effects test is deemed met, where the parties to the transaction have a combined, annual Saudi turnover exceeding SAR 40 million (approx. USD 10.7 million). Under the old thresholds when the local nexus test was met, was more ambiguous. A transaction was considered to have a local effect in Saudi Arabia, if at least one party had a more than trivial turnover in Saudi Arabia. This left some room for argumentation of whether a transaction met the local nexus test. With the introduction of a hard threshold for what would meet the local nexus test, the GAC largely abolished this ambiguity. Hence, we would have expected the number of notifications to go up. Still, the decrease in notification may be due to other factors such as slow down in M&A activity.

The report did not delve into the specific factors considered by the authority in evaluating transactions. However, it did present statistical data on the types of transactions under review. According to GAC, acquisitions constituted the majority with 71 percent all submissions made during the first quarter, followed by joint ventures with 21 percent. Distributorship and agency registrations made up 6 percent, with the remaining 2 percent being made up by mergers. The report went on to disclose that horizontal transaction amounted to 50 percent of all filings, 29 percent were conglomerates, and vertical transactions made up the smallest share with 21 percent.

The sector from which the largest share of filings was made, was the industrial sector with 17 filings. The information and communication sector and the wholesale and retail trade sectors followed closely with 7 filings each. Divided by geographical scope foreign-to-foreign transactions were more frequently notified. 62 percent of filings were foreign-to-foreign transactions. Only 38 percent concerned domestic transactions.

While the report offers valuable statistical data on the types of transactions and sectors with the highest number of filings, it lacks detailed information on the rationale behind the authority's decisions. GAC did not disclose the reasoning for any of its decisions, merely mentioning the number of unconditional decisions and non-objection certificates issued. Furthermore, the GAC again refrained from providing any information on violations, sanctions imposed, and settlement.