Does Your Merger Need GAC Approval? Saudi Arabia's Competition Law Thresholds Explained
Mergers and acquisitions in Saudi Arabia often raise competition concerns, and the General Authority for Competition (GAC) has a statutory duty to assess whether a transaction could lessen competition. Companies that cross the relevant turnover or market‑share thresholds must submit a formal notification before completing the deal. Failure to comply can result in fines, unwinding orders, or other enforcement actions that disrupt business plans. This guide explains the key thresholds, the two‑stage review process, and practical steps to embed merger control into your closing schedule.
When is a merger subject to GAC notification?
The GAC applies a dual‑threshold test based on combined turnover and market share. If the worldwide turnover of the merging parties exceeds a high level and at least one party’s Saudi turnover passes a lower level, the transaction is automatically within scope. Alternatively, even when turnover thresholds are not met, a merger that would create a dominant position in a relevant market may still be examined. The exact monetary figures are updated periodically, so parties should check the latest GAC notice for current amounts. Market‑share tests typically consider whether the combined entity would hold a share that could influence competition in any product or service line. Early assessment with legal counsel helps determine whether the thresholds are likely to be triggered.
Understanding Phase 1 review
Once a notification is filed, the GAC conducts an initial assessment known as Phase 1. During this stage the authority reviews the submitted information to decide if a detailed investigation is required. The standard timeline for Phase 1 is around 30 days, although extensions may be granted if the parties need more time to provide clarifications. If the GAC concludes that the transaction does not raise serious competition concerns, it issues a clearance that allows the parties to proceed without further delay. A Phase 1 clearance is often used as a prerequisite for signing definitive agreements and arranging financing.
What triggers a Phase 2 investigation
The GAC moves to Phase 2 when the initial analysis reveals possible competition problems that need deeper examination. Triggers include high combined market shares, evidence of potential price‑raising power, or concerns about barriers to entry. In Phase 2 the authority may request additional data, conduct market surveys, and interview third‑party customers or competitors. The extended review period can last up to 90 days, with the possibility of further extensions for complex cases. A Phase 2 decision may result in conditions, divestitures, or a refusal, all of which have material implications for the transaction timeline.
Integrating merger control into your transaction timeline
Practically, the safest approach is to start the GAC notification process as soon as the parties have reached a definitive agreement on key terms. Early filing allows the anticipated 30‑day Phase 1 window to run in parallel with other closing conditions such as regulatory approvals or shareholder votes. Many deal documents now contain a “subject to merger clearance” clause that makes the closing contingent on receiving a GAC decision. By aligning the notification deadline with the intended closing date, parties can avoid last‑minute delays and negotiate contingency plans if a Phase 2 investigation becomes likely.
Effective preparation of the notification package reduces the risk of extensions and ensures confidentiality. The filing must include detailed information on the businesses, relevant markets, and any efficiencies the merger is expected to generate. Parties should work closely with their legal and economic advisors to draft a clear narrative that addresses potential competition concerns. Maintaining a secure data‑room and limiting access to sensitive commercial information helps protect trade secrets during the GAC’s review.
Risk mitigation strategies such as pre‑emptive divestitures, licensing arrangements, or behavioral commitments can be incorporated into the merger agreement to address possible Phase 2 conditions. These tools provide the GAC with remedies that preserve the core deal while protecting competition. Discussing these options early enables the parties to structure the transaction in a way that is more likely to receive a swift clearance, thereby preserving value for shareholders and stakeholders.
If you are planning a merger or acquisition in Saudi Arabia, understanding the GAC’s thresholds, review stages, and timing considerations is essential to avoid costly delays. Contact Northman Sterling Legal to discuss how to navigate the merger control process and protect your transaction’s timeline.
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