The Saudi Competition Authority has announced significant amendments to its merger guidelines, These changes are designed to refine the regulatory framework governing economic concentrations in the Kingdom. The revised guidelines aim to enhance transparency, provide clearer definitions, and introduce specific exemptions to boost the manufacturing sector, By doing so, the Authority seeks to create a more competitive and attractive business environment, stimulate innovation, and support sustainable economic growth in Saudi Arabia.

 Notification Thresholds in Saudi Amendments To Merger

One criticism of the Saudi merger control rules has been that only the acquirer’s revenue could meet the notification threshold and The GAC has now partly addressed this issue in their proposed changes to the merger guidelines, but Currently, notification of an acquisition is required if all of the following thresholds are met:

• The combined annual worldwide turnover of the parties involved in the transaction is at least SAR 200 million (approximately USD 53 million).
• The combined annual Saudi turnover of the parties involved is at least SAR 40 million (approximately USD 10.7 million).
• The target company’s annual worldwide turnover is at least SAR 40 million (approximately USD 10.7 million).

joint ventures and mergers

For joint ventures and mergers, the minimum target turnover requirement does not apply, Also for foreign-to-foreign transactions, the Saudi turnover requirement does not serve as a threshold, Instead, foreign-to-foreign transactions require notification if they potentially impact competition in Saudi Arabia.

Any transaction where the parties meet the local turnover requirement is deemed to have a local effect. Therefore, foreign-to-foreign transactions may require notification even if the parties have less than SAR 40 million in turnover in Saudi Arabia, provided the transaction has a local effect for other reasons, If the parties’ combined Saudi turnover is at least SAR 40 million, a filing is always required, with no additional local effects analysis needed.

The proposed amendments to the guidelines now state that in the case of an acquisition, notification is only required if the target has some turnover in Saudi Arabia, However, the amendments do not specify how much turnover the target must generate in Saudi Arabia to trigger the filing obligation, It is clear that the target will not need to meet the SAR 40 million Saudi turnover threshold alone, Therefore, under the amended thresholds, an acquisition will require notification if:

• The combined annual worldwide turnover of the parties to the transaction is at least SAR 200 million (approximately USD 53 million).
• The combined annual Saudi turnover of the parties to the transaction is at least SAR 40 million (approximately USD 10.7 million), provided that the target has at least some Saudi turnover.
• The target’s annual worldwide turnover is at least SAR 40 million (approximately USD 10.7 million).

Change in notification threshold for mergers and joint ventures

The notification threshold for mergers and joint ventures will also be changed, These transactions may still need to be reported, even if the target or joint venture has no turnover in Saudi Arabia, Under the new thresholds, mergers and joint ventures require notification if:

• The notification threshold for mergers and joint ventures will also be amended, also These transactions may still be notifiable even if the target or the joint venture has no turnover in Saudi Arabia, Under the new thresholds, mergers and joint ventures require notification if:

• The combined annual worldwide turnover of the parties to the transaction is at least SAR 200 million (approximately USD 53 million).
• The combined annual Saudi turnover of the parties to the transaction is at least SAR 40 million (approximately USD 10.7 million), regardless of whether the target or joint venture has turnover in Saudi Arabia.
• At least two parties to the transaction (not necessarily including the target or joint venture) have an annual worldwide turnover of at least SAR 40 million (approximately USD 10.7 million) each.

Purpose of the Integration Guidelines

• Increase transparency and provide clear guidelines to create a competitive business environment that attracts investments, offers high-quality products at various prices, and promotes innovation and development to support economic growth.
• Help stakeholders—including companies, government agencies, legal professionals, legal advisors, and the general public—understand the rules of competition when evaluating economic concentration deals.

what is Role of merger Guidelines

These guidelines outline how the Authority will enforce the rules on economic concentrations and its general approach to control and enforcement as per the Law and Regulations, but The instructions in this manual do not replace the rules and regulations. Therefore, it is advised to read these guidelines alongside the official rules and regulation.

Who Does the Law Apply To?

The Competition Law, including the rules on economic concentrations, applies to any business engaged in economic activity, regardless of its legal form or financing, and The term “undertaking” in these guidelines refers to these economic entities, as defined in Article 1 of the Competition Law, This term is broader than “company,” as it includes not only companies but all other forms of entities involved in economic activity.

The Implementing Regulations specify that the Competition Law applies to:

• All establishments and companies engaged in economic activity, regardless of their legal forms, nationalities, types of economic activity, and licensing requirements or status.
• All individuals engaged in economic activity, regardless of their licensing requirements or status.
• All forms of entities and groupings engaged in economic activity.
• All electronic platforms and software applications, regardless of their licensing requirements or status.

In essence, the Competition Law has a very broad application. It applies to all businesses involved in economic activity, regardless of their legal structure or whether they need or have a license.

How to change control?

The current guidelines have a basic definition of control and The proposed amendments provide more clarity. The updated guidelines define control as the ability to either block (negative control) or impose (positive control) decisions related to the strategic and commercial matters of a business, A change of control occurs when:

• A person or entity that previously had no control over a business gains either negative or positive control.
• A person or entity that had negative control over a business gains positive control.

Acquiring joint control is also considered a change of control under Saudi merger regulations.

The amended guidelines explain that veto rights of minority shareholders over decisions related to changes in a business’s articles of association, its liquidation, or changes to its share capital typically do not count as control, However, veto rights over business strategy, business plans, budgets, and the appointment of senior management are generally considered control, Whether veto rights over investment decisions count as control depends on their extent. Limited rights over minor investment decisions usually do not count as control rights.

What are the notifiable Acquisition Terms

Additionally, the proposed amendments clarify that if investment funds use control rights solely to maintain the value of their investment, this may not be considered a change of control. Therefore, acquisitions by investment funds are not notifiable if the following conditions are met:

• The acquisition is solely for making a financial investment in the target, with no intention to directly or indirectly intervene in the management of the business, and the acquirer does not influence the business’s market behavior.
• Minority shareholder rights are used only to preserve the value of the investment.
• The goal of the investment is explicitly defined before the acquisition, and the intention not to influence the business’s management is clearly demonstrated.
• The investment fund does not hold controlling interests in any business competing with the target.

What are the exemptions?

The proposed amendments introduce a new exemption for joint ventures that benefit the Saudi manufacturing secto, and Joint ventures set up in Saudi Arabia with foreign participation are exempt from the merger control rules if:

• They will produce products in Saudi Arabia that are either not currently made in the country or are only distributed in limited areas due to technical reasons related to the product’s nature.
• There is no overlap between the activities of the joint venture and those of its parent companies.

Validity of Clearance Decisions

Currently, the guidelines do not specify how long clearance decisions remain valid, also The proposed amendments state that clearance decisions will only be valid for one year, but  If the parties do not complete the transaction within one year from the date of the clearance decision, they must submit a new application to the GAC.

The Competition Law and Implementing Regulations

You must notify the GAC of an economic concentration if the transaction meets the criteria in Article 7 of the Competition Law, which states:

Businesses involved in an economic concentration must inform the GAC at least 90 days before completing the transaction if their combined annual sales exceed the amount specified by the Regulations.

Article 1 of the Competition Law “Economic Concentration” definition

Any act that results in the total or partial transfer of ownership of assets, rights, equity, shares, or obligations from one business to another, or the merging of two or more managements into a joint administration, according to the rules set by the Regulations.

The Implementing Regulations expand on this definition:

Economic Concentration is any action that leads to the total or partial transfer of ownership of assets, rights, equity, stocks, shares, or liabilities from one business to another through merger, acquisition, takeover, or the merging of two or more managements into a joint management, and This includes any form of control over a business, such as influencing its decisions, organizational structure, or voting system.

The Saudi Competition Authority’s proposed amendments to the merger guidelines represent a significant step towards enhancing the regulatory framework for economic concentrations in the Kingdom. 

By increasing transparency, refining control definitions, and introducing exemptions to benefit the manufacturing sector, these changes aim to create a more competitive business environment. The amendments also set clearer criteria for when notifications are required, providing better guidance for stakeholders, As these guidelines come into effect, they are expected to support economic growth, attract investments, and foster innovation in Saudi Arabia’s dynamic market.