Saudi Arabia’s General Authority for Competition (“GAC”) recently announced that its board of directors had blocked Saudi Arabia’s listed National Gas and Industrialization Co. (“GASCO”) from acquiring a majority stake in Best Gas. Carrier Co. of Saudi Arabia (“Best Gas”) from its sole shareholder. GASCO announced the proposed transaction in February 2022. GASCO is a monopoly wholesale distributor of liquefied petroleum gas (“LPG”) (primarily butane, propane and their mixtures). Best Gas buys LPG, empty LPG cylinders and parts from GASCO and sells filled LPG cylinders to end users.

GAC board announcement says proposed merger could allow GASCO to use its monopoly supplier position to benefit Best Gas by raising fees or reducing the quality of its products and services to Best’s competitors Gas. According to the GAC Board of Directors, this conduct would reduce retail competition and harm consumers. GAC rejected the parties’ claim that the merger would lead to efficiencies in the distribution of LPG, considering that these gains were insufficient in relation to the potential harm to competition. The GAC statement said it had studied LPG markets in a number of countries and found that most had liberalized competition in the LPG distribution chain. These countries have tended to limit or prevent the vertical integration of the LPG distribution stages. GAC’s theory of harm and analysis in this transaction is consistent with recent vertical transaction enforcement actions by other competition authorities, including in the United States and Europe.

This development marks only the second rejection of a transaction by GAC, both of which have occurred in the last approximately six months. Both rejections involved the proposed acquisition of a consumer-facing company. The previous challenge, described in our December 2021 Alert, involved the acquisition of a national meal delivery app by an international competitor that also operated in the Kingdom. GASCO’s challenge stalled a national LPG retailer’s proposed vertical acquisition with its sole national supplier. To date, GAC has only blocked acquisitions of domestic companies.

These developments are a reminder that parties to acquisitions with a connection to Saudi Arabia should expect GAC’s review to be more than cursory. Transactions involving consumer-facing businesses operating in Saudi Arabia may be of particular interest to GAC. Merging parties should conduct an early competitive assessment to determine whether Saudi merger control applies and whether the transaction is likely to raise regulatory issues.