The Saudi Competition Law (Royal Decree No. (M/75) of 1440H, as amended) (the “Competition Law”) and its Implementing Regulations (the “Regulations”) have been in force for a substantive period, establishing a comprehensive legal framework (the “Competition Regime”). The General Authority for Competition (“GAC”) maintains an active and vigilant oversight of Saudi markets. Nevertheless, experience indicates that market participants often remain underprepared in navigating the full scope of the Regime’s prohibitions.
Drawing from recent engagements, we observe that the most common compliance pitfalls are recurring themes: commercial arrangements, often well-intentioned, that inadvertently constitute resale price maintenance; output controls disguised as demand forecasting; and territorial management practices that cross into market partitioning. This article expands on our previous analysis of the GAC’s investigatory powers by detailing these persistent risks, elucidating the GAC’s enforcement perspective, and offering practical guidance to help businesses avoid regulatory exposure.
Fixing Resale Price – The Conflation of Recommendation and Control
The most consistent compliance risk arises from interference in the pricing autonomy of downstream customers. While rarely explicit, this practice commonly manifests through the circulation of recommended sale prices (“RSPs”). The critical issue emerges when RSPs are implemented with an expectation of adherence, reinforced through mechanisms such as: (i) conditioning commercial funding, stock compensation, or key account alignment on price compliance; or (ii) linking promotional support, rebates, or loyalty payments to a retailer’s maintenance of a specific shelf price.
The GAC views such practices as violations of Article 5, Paragraph 1 of the Competition Law, which prohibits fixing or suggesting prices or other sale conditions. The GAC’s analysis is effects-based. Consequently, if internal guidance operates as a de facto directive, or if commercial benefits are withheld for price non-compliance, the GAC will likely characterize the conduct as illicit price-fixing.
It is a safe conclusion that “non-binding RSPs” do not constitute a safe harbour where the commercial reality demonstrates a contrary effect. The key takeaway under article 5.1. is to ensure price guidance remains genuinely optional and to decouple all trade expenditure from adherence to a specific shelf price.
Output Controls – A High-Risk Endeavour
A similarly significant risk area involves the control of product or service quantities. This rarely appears as an overt directive to limit sales, but rather as periodic supply caps or gates applied to customers, channels, or regions. These are often framed as demand-planning exercises but function as hard stops once thresholds are met. A more complex variation involves pre-price-increase supply throttling to prevent “overstocking,” sometimes coupled with threats of clawbacks if a distributor exceeds an allotted cap.
In legal terms, articles 5.2, 5.3, and 5.7 of the Competition Law prohibit practices that determine production quantities, limit the flow of goods, or restrict distribution. The GAC will look beyond commercial justifications to assess whether supply is being restricted for an anti-competitive purpose. Therefore, enforcing purchase ceilings, particularly in anticipation of pricing actions, is inherently risky.
To manage commercial volatility, companies should utilize neutral tools related to credit, logistics, and service levels, tied to objective risk factors—not volume ceilings linked to commercial timing.
Territorial Management Sliding into Market Partitioning
In regionally structured supply chains, efforts to prevent cross-border “leakage” from neighbouring jurisdictions can swiftly devolve into prohibited market allocation. A company concerned that distributors in a higher-priced jurisdiction are sourcing products from a lower-priced neighbouring market may be tempted to implement restrictive measures.
In this context, side letters or policies that penalize exports into neighbouring markets, delisting specific SKUs, or engineering portfolio differences primarily to render parallel imports less profitable—absent legitimate regulatory or consumer protection reasons—may be construed as anti-competitive territorial protection.
Article 5.6 of the Competition Law contains a broad prohibition on allocating markets by geography, customer type, or sales channel. Furthermore, article 5.3 expressly targets restrictions on the free movement of goods. The Competition Regime adheres to the established distinction between active and passive sales: while a supplier may, in certain vertical contexts, restrict a distributor from activelytargeting sales in another distributor’s exclusive territory, it cannot prohibit passivesales—that is, responding to unsolicited orders from customers in that territory. This principle is clarified in the new GAC Guidelines on Dealing with Vertical and Horizontal Relationships, issued in July 2025.
The Rebate Trap
Rebates and trade expenditure are not inherently unlawful, and the Competition Law does not prohibit discounting. Liability arises when these commercial levers are structured to achieve prohibited outcomes. High-risk rebate structures include: (i) progressive rebate tiers tied to volume targets that effectively compel purchases irrespective of demand; (ii) conditional support linked to a customer’s adherence to a specific shelf price or promotion; and (iii) selective, non-transparent funding that advantages one key account over similarly situated rivals without objective justification.
Such practices may violate article 5.1 of the Competition Law by constituting a fixing of sale conditions or resale price maintenance. For entities in a dominant position, article 6.4. introduces an additional layer of risk, as discriminatory treatment of trading partners can constitute an abuse of dominance.
Recurring Abuse of Dominance Issues
Entities holding market shares at or above 40% trigger a dominance analysis. Common missteps include leveraging discount structures and funding to discipline retailers that deviate from preferred RSPs and refusing to supply, or threatening delisting, to curb parallel trade or extract favourable terms. While such conduct is problematic for all market players, it is significantly amplified under article 6 for dominant entities. Practices such as price-conditioned supply and discriminatory terms attract heightened scrutiny and pose a substantially greater enforcement risk for dominant entities.
Refresher: Key provisions of the Competition Regime
the KSA Competition Law empowers the GAC to investigate anti-competitive behaviours in Saudi markets. As a reminder of the provisions addressed under our previous installment, remember that the Compettion Regime enables empowers the GAC to undertake its duties as follows:
- Article 15 of the Competition Law authorizes investigators of the GAC to inquire, gather evidence, and investigate violations of the Competition Regime where the GAC personnel would have equivalent to law enforcement capacity.
- Article 16 of the Competition Law authorizes the GAC personnel to seek the assistance of the competent authorities, including law enforcement agencies, to enable them to carry out their duties.
- Article 16 also prohibits any entity from obstructing the operations of any GAC officers or investigators, including prohibiting or withholding any information, providing misleading information, or concealing or destroying documents that benefit the investigation by the GAC. This is further emphasized by articles 36 through 38 of the Regulations. Such an umbrella of authority is furthered by granting GAC personnel extra-territorial authority to investigate foreign incidents with effects on the KSA market per the provisions of article 35 of the Regulations.
A key element in fostering a healthy competitive landscape is recognizing the GAC’s substantial investigatory authority and proactively complying with the Competition Regime.
Reiterating Competition Law Compliance
As outlined in our previous instalment, proactive compliance measures are critical for mitigating risk under the Competition Regime. The following steps are fundamental to establishing robust antitrust policies and avoiding substantial financial sanctions.
- Conduct Regular Audits: Entities are advised to undertake legal due diligence reviews of their documents, operations, and commercial correspondence to ensure compliance. This is essential for identifying and remedying potential violations, and for assessing the entity’s overall risk profile, whether or not it is currently subject to GAC scrutiny.
- Fair Rebates: All entities in the market are encouraged to review their rebate schemes and implement an objective rebate programme, one that does not discriminate between any of the vendors benefiting from its implementation.
- Implement Employee Training Programs: Entities should provide comprehensive antitrust and competition training to all employees, with a focus on personnel in leadership, sales, and procurement roles. Training should delineate lawful versus unlawful practices, establish clear communication protocols, and detail reporting mechanisms to prevent violations.
- Establish Robust Internal Policies: Entities must draft and implement internal policies designed to mitigate anti-competitive risks. These should include clear guidelines on interactions with competitors, vendors, and customers, as well as protocols for pricing and market analysis.
- Seek Proactive Legal and Regulatory Guidance: When navigating complex or novel situations, seek expert legal counsel to ensure compliance and pre-empt regulatory issues.
Conclusion
Combating anti-competitive behaviour remains a work in progress for market participants. While multiple factors impact a company’s ability to ensure full compliance, consistent internal action and the cooperative nature of the GAC are key elements that enable businesses to successfully navigate the pitfalls of the Competition Regime and mitigate the risks associated with allegations of anti-competitive conduct and abuse of dominance.
Authors: Asad Ahmad, Head of Anti-Trust & Competition and Khaled Al Khashab, Associate