Fair and healthy competition is a fundamental cornerstone of any market.
The Omani market is no different. As such, the Oman Competition Protection and Monopoly Prevention Law (Royal Decree No. 67/2014, as amended by Royal Decree No. 22/2018) (Competition Law) prohibits anti-competitive practices such as price-fixing, limiting production quantities, restricting trade and any other practices that risk the distortion or manipulation of fair competition in Oman. Its enforcement is largely regulated by the Competition Protection and Monopoly Prevention Centre, a body established under Royal Decree No. 2/2018 and supervised by the Ministry of Commerce, Industry and Investment Promotion (MOCIIP) to prevent abusive market practices.
Further, Ministerial Decision 18/2021 recently introduced the executive regulations (Regulations) for the Competition Law, which came into force on 25 January 2021, with the aim of providing clarity to the existing legal framework.
Ultimately, you must understand the market in which entities operate to ascertain whether there have been any breaches of the Competition Law. This is achieved by examining two composite market elements: the relevant products and the geographical scope. Those that enjoy market dominance must exercise particular caution and seek prior written approval from the MOCIIP for certain transactions. The Regulations detail precisely how to do this, and provide procedures for applying for exemptions and raising complaints.
'Economic concentration' refers to the partial or total transfer of the ownership of assets, shares, interests or benefits from one person to another, or the merging of two or more entities, which establishes market 'dominance'.
'Dominance' refers to a situation where a person or persons exercise control over the concerned market by acquiring over thirty-five percent (35%) of the volume of such market. It also refers to situations where a person or persons can affect the prices or volume of products offered. Market dominance is not itself a breach of the Competition Law. It only becomes problematic if businesses with market dominance engage in anti-competitive practices that eliminate or restrict other market players. Whilst the MOCIIP may approve transactions that create market dominance, it will not approve actions resulting in the acquisition of over fifty percent (50%) of the concerned market, as this is perceived as constituting excessive market dominance that unfairly restricts competition.
- Economic Concentration Requests
Article 11 of the Competition Law requires those proposing share acquisitions, asset sale/purchase transactions, or other contractual arrangements that result in economic concentration to give the MOCIIP prior written notice by submitting an 'economic concentration request'. Although the Competition Law and Regulations are silent on which party should submit a request, the assumption thus far has been that the burden rests with the potential acquirer (Applicant).
Pursuant to Articles 7 and 8 of the Regulations, the Applicant should apply to the MOCIIP, including the information and supplemental documentation set out in these Articles. All accompanying documents must be submitted in Arabic, or with a duly authenticated Arabic translation. Applicants are required to analyse the relevant products and the geographical area of the market that they operate in. Articles 2 and 3 of the Regulations outline the criteria for such analysis.
Additionally, Applicants are required to estimate their market shares following the proposed transaction to determine whether it would create dominance. Article 5 of the Regulations provides that Applicants should consider, amongst other factors: (a) the actual or possible competitiveness in the concerned market; and (b) the effect of production volume on the supply and demand of the product in the concerned market. The MOCIIP has ninety (90) days to decide on the request. Tacit approval is given where the period lapses with no determination. The MOCIIP has three options. It may: (a) approve the request; (b) approve the request subject to the fulfilment of specific terms; or (c) reject the request entirely, providing reasoning for its rejection.
When determining whether to grant a request, the MOCIIP will consider the factors set out in Article 10 of the Regulations, which include, amongst other factors: (a) the information provided regarding the effect of the economic concentration on competitors; (b) any obstacles preventing competitor access to the concerned market; and (c) the possible effect of the economic concentration on the pricing of products in the concerned market. If the MOCIIP grants the request subject to the Applicant's fulfilment of specified terms, it may reconsider its approval within sixty (60) days of granting it if it considers the Applicant is not fulfilling such terms.
Furthermore, pursuant to Article 15, if, after monitoring the Applicant's fulfilment of specific terms and conditions, it is not satisfied, the MOCIIP may cancel the approval. If it does this, it must notify the Applicant, and provide a copy to the authorities.
If the MOCIIP rejects an economic concentration request, the Applicant has sixty (60) days to appeal (provided that the ninety (90) day period has lapsed). The MOCIIP then has a further thirty (30) days to decide on the appeal. Again, if no determination is provided by the end of this period, tacit approval is given.
Article 5 of the Competition Law enables the MOCIIP to a grant temporary exemption for a specified period from any agreement, procedure or business that benefits consumers. Chapter 6 of the Regulations outlines the process to apply for such exemption: namely, that the relevant party should submit an exemption request in accordance with Article 30 of the Regulations.
The MOCIIP has ninety (90) days to issue a report containing its decision, after ensuring any exemption granted would benefit the consumer. It may, pursuant to Article 33 of the Regulations: (a) approve the request; (b) approve the request subject to specific terms; (c) ask the relevant party to reconsider its request; or (d) reject the request and provide reasons for doing so. Any exemption request granted may, following expiry of its initial term, be renewed in the same way at least sixty (60) days before the end of the initial period. The MOCIIP may cancel any exemption request previously granted if it considers its issuance was based on inaccurate or fraudulent information.
- Grievances and Penalties
The Applicant may file a grievance with the MOCIIP in accordance with Articles 17 and 18 of the Regulations if it is dissatisfied with the outcome of the economic concentration request. It has sixty (60) days to do so, commencing from the date it was informed of the rejection. The MOCIIP has thirty (30) days to respond. If this period lapses without a response, the grievance request is deemed accepted. In any event, the MOCIIP must inform the Applicant of the outcome within seven (7) days of making its decision on the grievance request. If the initial outcome is reversed, the fees paid shall be refunded.
If the Regulations are breached, offending entities must pay an administrative fine of five thousand (OMR 5,000) Omani Riyals. Repeat offenders face a doubled fine of ten thousand (OMR 10,000) Omani Riyals. Sustained breaches will result in a maximum daily fine of five hundred (OMR 500) Omani Riyals, and a maximum aggregate fine of ten thousand (OMR 10,000) Omani Riyals.
To date, there has been limited enforcement of the provisions of the Competition Law vis-à-vis anti-competitive practices. However, the introduction of the Regulations is likely to change this approach and in our view the Competition Law may become a more central consideration for anyone looking to do business in Oman. If you have any queries or concerns about compliance with the Competition Law and Regulations, please get in touch.
- Further Information
The Addleshaw Goddard Muscat office comprises some of the best known and respected corporate, commercial, finance, employment and disputes lawyers in Oman. Our experienced team, with its Arabic and English bilingual capability, combines the standards of a top international law firm with a keen awareness of, and sensitivity to, local law and practices.