This briefing provides an update on developments in the Oman competition law regime resulting from issuance of Ministerial Decision 18/2021 implementing the Executive Regulations to the Competition Protection and Monopoly Prevention Law (Executive Regulations). It also contains an analysis on the implications of the Executive Regulations in the context of M&A transactions and commercial contracts entered in or with respect to Oman.
Overview of Oman’s competition law framework
The Competition Protection and Monopoly Prevention Law (Royal Decree No. 67/2014) (Competition Law), which came into force on 8 December 2014, provides the legal framework for regulation of competition in Oman. The Competition Law had provided for the Executive Regulations to be issued within a period of 6 months from the date of issuance of the law and the responsibility for implementation of the Competition Law entrusted to the Public Authority for Consumer Protection was transferred in 2018, to the Competition Protection and Monopoly Prevention Centre (CMC), a newly established, autonomous legal entity. In 2020, the CMC was dissolved, and its functions and staff were transferred to the Ministry of Commerce, Industry and Investment Promotion (MCIIP). The Executive Regulations, issued by the Minister of MCIIP, completes Oman’s intended Competition Law legal framework. The Executive Regulations provide for a detailed mechanism for:
seeking approvals under the merger control regime
applying for exemptions for restrictive and monopolistic agreements
filing of complaints by concerned parties alleging violation of the Competition Law
appealing against a decision of the Minister granting/refusing an exemption/merger approval
The Executive Regulations further outline the substantive factors to be considered by the MCIIP when:
making a determination of a relevant market
considering the existence of dominant position in a relevant market
considering a merger approval application
considering an exemption for a restricted/monopolistic agreement
considering an appeal against a decision made by MCIIP under the Competition Law.
When does a dominant position exist?
An entity will be deemed to be in a dominant position where its market share exceeds 35% in a relevant market. However, a dominant position may also exist where an entity’s market share is lower than 35% if it has the ability to impact prices of products or the volume of supply in a relevant market during a certain period of time, independently of its competitors.
The factors to be considered when assessing dominant position include the level of competition in a market, market shares of the relevant parties, the asset and revenue value and number of employees of the concerned entities etc. When calculating market share, the regulator will look at components of the relevant product and geographic market during the relevant time period.
The Executive Regulations do not specify whether the market share will be based on an entity’s revenue or sales and how this data is to be collected and presented to the MCIIP.
What is a Relevant Market?
Whilst the Competition Law provides that a relevant market consists of a relevant product market and a relevant geographic market, it leaves it for the Executive Regulations to define these terms. The Executive Regulations provide a comprehensive list of factors to be considered when determining the scope of a product market such as interchangeability of products, cost of switching to similar products, barriers created by regulatory and legal requirements, opinion of customers and competitors etc. Similarly, the factors relevant to determination of geographic market include, ability of buyers to switch in case of price increase, transportation costs, barriers to entry, non-tariff barriers etc. By providing a specific list of factors to consider, the Executive Regulations streamline the process of determining whether or not a dominant position is likely to be created in the context of mergers and acquisitions.
Implications for M&A transactions
Whilst the Competition Law has been in force since 2014 and the relevant regulatory body(ies) have accepted applications for merger approval, the specific procedural and substantive requirements of the Executive Regulations will need to be considered in relation to M&A transactions involving an Economic Concentration i.e., any transaction whether by way of acquisition of assets, shares or otherwise that is likely to place an entity in a dominant position.
The Executive Regulations contain a list of factors to be considered in making a determination of whether or not a transaction requires pre-merger approval under Omani law. Transaction parties would need to assess factors beyond market share to assess the requirement for pre-merger approval. For instance, a target or acquiring entity, with less than 35% market share, will be considered to be in a dominant position if it has the ability to increase prices in the said market by it holding a concession from the Government or any other form of economic advantage in a relevant market, necessitating a filing.
The MCIIP will issue a filing form for this purpose. Nevertheless, transaction parties must include in their submission, names of concerned entities, details of the transaction structure, proposed timing for completion, the parties’ assessment of the relevant market, their market shares, names of suppliers and competitors, assessment of likely impact on competition, applicable regulatory restrictions etc. The onus is on the applicant entity(ies) to provide data and information to prove that the transaction will not negatively impact competition.
The Executive Regulations require a host of documents to be submitted in support of an application including, the commercial registration documents, annual accounts for past 3 years, regulatory licenses, draft merger agreement(s), copies of studies undertaken to assess impact of competition in Oman, approval obtained from other regulatory authorities in Oman or internationally etc. The MCIIP reserves the right to ask for further documents. The clock on the approval timeframe will not start unless all documents and information has been received by the regulator to its satisfaction. Documents may be submitted in Arabic, or in a foreign language if accompanied by a certified translation.
If it is likely that the transaction parties will need to file with MCIIP, early consideration will need to be given to how this will impact the deal timetable. Whilst the Executive Regulations do not specify a timeframe within which to file the application, it prohibits parties from completing the transaction before approval is granted. It would be advisable to file the application immediately following execution of a letter of intent or MOU in respect of the transaction.
Once the filing is submitted (and accepted), the MCIIP has 90 days under the Competition Law to approve the transaction or grant its approval subject to conditions or reject the application. If a decision is not made by the Minister within this period, the application for the economic concentration is deemed to have been approved. As the merger control regime is suspensory, transaction parties will be subject to standstill obligations until the earlier of the expiry of this period and the date approval is granted. These obligations will need to be factored into the SPA, e.g., by way of appropriate conditions precedent and separately ensuring that obligations on the parties set out in the SPA for the period between signing and completion. In case of an adverse decision, the concerned party may file an appeal against the decision of the MCIIP with the Minister.
Implications for Commercial Contracts
Entities that have entered into or are entering into commercial contracts involving Oman that may qualify as either a restrictive or monopolistic agreement under the Competition Law should seek a temporary exemption from the MCIIP to avoid risk of penalty.
The Executive Regulations outline the procedure for filing an exemption application and prescribe requirements relating to the content of such application, the supporting documents to be provided, the timeline applicable to processing of exemptions and the renewal of an exemption after expiry of the initial approval period. As with merger approval filings, the documentary and information requirements for exemption applications are robust and place the onus on the applicant to make a case as to why the exemption should be granted (i.e., agreements that lead to cost reduction and consumer benefit).
Penalties, Complaints and Judicial Officers
Violation of the Executive Regulations can attract an administrative fine of RO. 5,000 and the amount will be doubled if the violation is repeated. The Executive Regulations authorize the MCIIP to designate its officers to carry out investigations and such employees shall have powers to enter premises, copy and cease documents etc. A procedure for filing complaints with the MCIIP and their investigation and outcome has also been laid out in the Executive Regulations if violation of the Competition Law is suspected with respect to a market or an entity in Oman.
The Executive Regulations are comprehensive in terms of procedural detail for filing of exemption and merger approval applications and the factors concerning substantive determination of relevant market and dominant position. Nevertheless, some areas require clarification. For instance, given the broad definition of market share, it is likely that clarity on the application of this definition will only be obtained once a body of judgments develops or further guidance on this point is issued by the MCIIP.
The MCIIP will need to compile an official form for merger approvals and exemption applications and the need to provide extensive supporting documentation to the MCIIP, are somewhat cumbersome for foreign market participants and will likely evolve as they become more established. Overall, the Executive Regulations bring clarity and nuance to interpretation and implementation of Competition Law in Oman and are to be welcomed. AMJ’s has lawyer worked closely with the regulator in preparing, drafting and finalizing the Executive Regulations and hence places AMJ in a unique perspective on interpretation and application of the Regulation