Oman: publication of the competition law enforcement regulations
Fair and healthy competition is the cornerstone of any market.
The Omani market is no different. As such, the Oman Law on the Protection of Competition and Prevention of Monopolies (Royal Decree No. 67/2014, as amended by Royal Decree No. 22/2018) (Competition law) prohibits anti-competitive practices such as price fixing, limitation of production quantities, restriction of trade and any other practice which may distort or manipulate fair competition in Oman. Its application is largely regulated by the Center for the Protection of Competition and the Prevention of Monopolies, a body established under Royal Decree No. 2/2018 and overseen by the Ministry of Trade, Industry and Investment Promotion. (MOCIIP) to prevent abusive market practices.
In addition, Ministerial Decision 18/2021 recently introduced the Implementing Regulation (Regulations) of the Competition Law, which entered into force on January 25, 2021, with the aim of clarifying the existing legal framework.
Ultimately, you need to understand the market in which the entities operate to verify if there have been any breaches of competition law. This objective is achieved by examining two composite elements of the market: the products concerned and the geographical scope. Those with a dominant position in the market should exercise particular caution and seek prior written approval from MOCIIP for certain transactions. The Regulations detail how to proceed and provide procedures for requesting exemptions and filing complaints.
“Economic concentration” refers to the partial or total transfer of ownership of assets, shares, interests or benefits from one person to another, or the merger of two or more entities, which establishes the “domination” of the market.
“Dominant position” refers to a situation in which one or more persons exercise control over the relevant market by acquiring more than thirty-five percent (35%) of the volume of that market. It also refers to situations in which one or more persons can influence the prices or the volume of the products offered. Market domination is not in itself a violation of competition law. This only becomes problematic if the dominant firms in the market engage in anti-competitive practices that eliminate or restrict other market players. Although MOCIIP may approve transactions that create a dominant position in the market, it will not approve actions resulting in the acquisition of more than fifty percent (50%) of the relevant market, as this is perceived to constitute a excessive dominant position in the market which unfairly restricts competition.
DEMANDS FOR ECONOMIC CONCENTRATION
Article 11 of the Competition Law obliges those who propose acquisitions of shares, transactions of sale / purchase of assets or other contractual arrangements which lead to an economic concentration to inform the MOCIIP beforehand in writing by submitting ademand for economic concentration“. Although the competition law and regulations do not say which party should submit a claim, it has so far been assumed that the burden falls on the potential acquirer (claimant).
In accordance with Articles 7 and 8 of the Regulation, the applicant must submit an application to MOCIIP, including the additional information and documentation set out in these articles. All accompanying documents must be submitted in Arabic or accompanied by a duly authenticated Arabic translation. Candidates are required to analyze the products concerned and the geographic area of the market in which they operate. Articles 2 and 3 of the Regulation define the criteria for such an analysis.
In addition, applicants are required to estimate their market shares as a result of the proposed transaction to determine whether it would create a dominant position. Article 5 of the Regulation provides that applicants must take into account, among other factors: (a) actual or potential competitiveness in the relevant market; and (b) the effect of the volume of production on the supply and demand of the product in the relevant market. The MOCIIP has ninety (90) days to rule on the request. Tacit approval is given when the time limit expires without determination. MOCIIP has three options. He may: a) approve the request; (b) approve the request subject to the fulfillment of specific conditions; or (c) reject the request entirely, giving reasons for its rejection.
In deciding whether to grant a request, MOCIIP will take into account the factors set out in Article 10 of the Regulation, which include, among other factors: (a) information provided regarding the effect of economic concentration on competitors; (b) any obstacle preventing competitors from entering the relevant market; and (c) the possible effect of economic concentration on the prices of products in the relevant market. If the MOCIIP accepts the request subject to the Applicant meeting the specified conditions, it may reconsider its approval within sixty (60) days of its granting if it considers that the Applicant does not meet these conditions.
In addition, in accordance with Article 15, if, after having checked the compliance by the applicant with specific conditions, it is not satisfied, the MOCIIP may cancel the approval. If he does so, he must inform 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 elapsed). The MOCIIP then has thirty (30) additional days to rule on the appeal. Again, if no determination is provided at the end of this period, implied approval is given.
Article 5 of the Competition Law allows MOCIIP to grant a temporary waiver for a specified period from any agreement, procedure or undertaking for the benefit of consumers. Chapter 6 of the Regulations describes the process for requesting such an exemption: that is, the party concerned must submit a request for an exemption in accordance with Article 30 of the Regulations.
MOCIIP has ninety (90) days to issue a report containing its decision, after ensuring that any exemption granted would benefit the consumer. He may, in accordance with Article 33 of the Rules: a) approve the request; (b) approve the request subject to specific conditions; (c) ask the party concerned to reconsider its request; or (d) reject the request and provide the reasons therefor. Any request for exemption granted may, at the end of its initial period, be renewed in the same way at least sixty (60) days before the end of the initial period. MOCIIP may revoke any previously granted exemption request if it considers that its issuance was based on inaccurate or fraudulent information.
GRIEVANCES AND PENALTIES
The applicant may file a complaint with the MOCIIP in accordance with Articles 17 and 18 of the Regulation if he is not satisfied with the outcome of the economic concentration request. He has sixty (60) days to do so, from the date on which he was informed of the rejection. MOCIIP has thirty (30) days to respond. If this time limit expires without a response, the grievance request is deemed to have been accepted. In all cases, the MOCIIP must inform the requester of the result within seven (7) days of its decision on the grievance request. If the initial result is reversed, the fees paid will be refunded.
In the event of non-compliance with the Rules, the offending entities must pay an administrative fine of 5,000 Omani Riyals (5,000 OMR). Repeat offenders face a doubled fine of ten thousand Omani Riyals (10,000 OMR). Persistent violations will result in a maximum daily fine of five hundred Omani Riyals (500 OMR) and a maximum aggregate fine of ten thousand Omani Riyals (10,000 OMR).
To date, enforcement of competition law provisions has been limited with respect to anti-competitive practices. However, the introduction of the regulation is likely to change this approach and, in our opinion, competition law could become a more central consideration for anyone looking to do business in Oman. If you have any questions or concerns regarding compliance with competition law and regulations, please contact us.