Oman introduces new Executive Regulations on Competition Law
Ministerial Decision 18/2021, issued on 9 January 2021, introduced the executive regulations for the Law on the Protection of Competition and Prevention of Monopoly (the Regulations), accompanying the legal framework set out in Royal Decree 67/2014 amended by Royal Decree 22/2018 (the Competition Law).
The Regulations took effect on 25 January 2021 and aim to remove uncertainty in establishing whether or not an activity falls within the scope of the Competition Law and provide clearer guidance for market participants. The Regulations will be relevant to private sector investors with a physical presence in Oman as well as those who are participating in the Oman market without having a physical presence.
Determining the relevant market
Pursuant to the Competition Law, in order to determine whether or not an action falls within its scope, it must be established that such action affects a relevant market. Although the Competition Law states that a relevant market is a market based on relevant products and geographical scope, before the Regulations were introduced there was some ambiguity as to how a relevant market was to be determined. The Regulations provide guidance on this by clarifying what constitutes a relevant product and a geographical scope for the purposes of the Competition Law.
The Regulations state that the following factors should be considered when determining relevant products:
- Whether the products are similar in properties and use;
- Ease of switching from one product to another for buyers as a result of a change in price in the short run or as a result of other competitive factors;
- The ability to switch to and market the relevant products in the short term without incurring significant additional costs or risks as a result of the changes in their prices;
- Market changes that indicate the existence of alternative products;
- Costs of shifting demand to potential alternative products and associated changes; and
- Feedback from customers and competitors in the market.
The Regulations also stipulate that the following criteria should be taken into consideration when determining the geographical scope:
- The ability for buyers of the relevant product to move between geographical areas as a result of price changes or other competitive factors and whether sellers make their commercial decisions based on this;
- How easy it is for new competitors and consumers to enter the relevant market;
- Transportation costs between geographical areas and the time taken to supply the geographical areas with the relevant products from internal or external markets;
- The basis for buyers moving between different geographical areas as a result of relative price changes or other competitive factors;
- The influence of preferences and customer loyalty on a particular product compared to other products in the geographical scope;
- Feedback from customers and competitors in the market.
The Regulations also seek to provide clarity on how dominance of a relevant market is achieved by setting out a clear formula to evaluate this. The Regulations reaffirm that in the event that a person's share of the relevant market exceeds 35 per cent during a certain period of time, market dominance is achieved. The guidance goes on to confirm that the market share is calculated based on the relevant product and geographical scope taken together.
The Regulations specify that market dominance is also achieved when a person is able to influence product prices or the volume of supply of products in the relevant market and their competitors are unable to limit the effect on prices or supply volume in that market, during a certain period of time.
The Regulations introduce the concept of a 'Cartel', which is the ability of a group of two or more people working together, either directly or indirectly, to control the relevant market and restrict competition. The guidance sets out various scenarios regarding how this monopoly position is achieved, including where two or more persons in a relevant market, uniformly or through a common policy, set prices, impose resale prices, use pricing below cost, follow predatory pricing methods, divide the relevant market into quotas and prevent alternative products from entering the concerned market.
An economic concentration is created when mergers, acquisitions or joint ventures between two or more companies result in a person or group of persons being directly or indirectly in the position of control. Pursuant to Article 11 of the Competition Law, before creating an economic concentration, approval from the Ministry of Commerce, Industry and Investment Promotion (the MCIIP) must be obtained. The Regulations provide clarity as to what data and documentation should accompany any applications made to the MCIIP for approval for the creation of an economic concentration.
The guidance requests that the application includes, inter alia, data determining the nature of the economic concentration, its structure, its image and the proposed period of time for its completion. Justifications for the economic concentration request, the applicant's evaluation of the relevant market and estimates of their market shares as well as information about competitors and their activities should also be included in the application. Applicants are also required to include an evaluation of the potential impact of the economic concentration on competition in the relevant market together with references to any regulatory restrictions in the relevant market. The Regulations stipulate that all documents accompanying the application for approval must be submitted in Arabic and if they are in a foreign language, a certified Arabic translation must be attached to them.
The new Regulations clearly set out what factors the MCIIP will take into account when considering an application for approval of the economic concentration. The MCIIP will consider:
- The impact of the economic concentration on competition;
- The level of actual or potential competition in the market or the relevant markets;
- Ease of access into the relevant market for new competitors and obstacles that prevent this;
- The potential impact of the economic concentration on prices;
- The extent of the potential impact of the economic concentration on innovation, creativity and technical competence in the relevant markets;
- The potential contribution of the economic concentration in encouraging investment, exports, building national capacities, creating jobs and increasing local added value; and
- The impact of the economic concentration on the interests of consumers.
It is interesting to note that the Regulations allow for a level of engagement between the MCIIP and the applicant and concerned parties as part of the decision-making process. The MCIIP has 90 days from the date on which it has received the application with all the required data and documentation to make its decision.
MCIIP can approve the application, approve with conditions or reject, with justifications.
Any party negatively affected by an approval granted has 60 days from the grant of such approval to request that the MCIIP reconsiders its decision and the MCIIP may decide to cancel an approval if non-compliance with the specified conditions and obligations can be proven.
The Regulations reaffirm that the MCIIP has the power to apply an exemption in respect of any agreements, actions or works that protect and benefit the consumer. The guidance sets out the data and documentation which must accompany an exemption application as well as the various factors that the Ministry will take into account when making its decision.
Businesses operating in Oman should take careful note of the new Regulations and in particular the provisions relating to Cartels and monopolistic behaviour.
The Regulations supplement the Competition Law by providing greater clarity to the existing framework and works to encourage investment into the Omani market by opening it up to market entrants and prohibiting the abuse of market dominance.
If you would like further information about the Regulations and what this means for you and your business, please do contact one of our Oman-based lawyers listed below and we would be delighted to assist.