Developments in the regulation of anti-competitive practices in Oman

Overview

In August 2020, the Ministry of Commerce, Industry and Investment Promotion (the “MOCIIP”) assumed all regulatory responsibilities under the Competition Law. In the exercise of these responsibilities, the Competition Law was supplemented in January 2021 by executive regulations issued by the MOCIIP pursuant to Ministerial Decision No. 18/2021 (the “Executive Regulations”).

The Executive Regulations provide further guidance as to the circumstances in which an arrangement will be treated as a prohibited practice under the Competition Law, and also clarify when an arrangement will need to be referred to the MOCIIP for clearance.

These developments are expected to result in greater scrutiny of anti-competitive arrangements and practices in Oman

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Background

In broad terms, the Competition Law prohibits the following practices:

-> Prohibited Practice 1: Agreements and arrangements having the objective of securing a “monopoly” or the performance of any monopolistic act that would affect the market.

-> Prohibited Practice 2: Agreements, arrangements and practices having the objective of preventing, limited or weakening competition.

-> Prohibited Practice 3: Any practices carried out by persons enjoying market “dominance” which are likely to prejudice, restrict or prevent competition.

-> Prohibited Practice 4: “Economic concentrations” resulting in the acquisition of more than 50% of the “relevant market”.

In addition, “economic concentrations” resulting in the acquisition of less than 50% or more of the “relevant market” are subject to regulatory pre-approval under the Competition Law if the acquisition would likely result in one or more persons enjoying market “dominance”.

Economic concentrations can result from the transfer of the ownership of all or part of a person’s assets, shares, right of use, rights (including IP rights), or obligations, as well as combinations of managements, and so are not restricted to economic concentrations flowing from conventional M&A transactions.  

The terms “monopoly”, “dominance”, and “economic concentration” are defined in the Competition Law. “Dominance” is defined in the Competition Law to include a person enjoying more than a 35% share of the “relevant market”, and the “relevant market” is determined by reference to the “relevant products” and the “geographical scope”. “Monopoly” has quite a wide definition in the Competition Law, and covers situations in which a person or persons directly or indirectly control the quantity and prices of certain goods or services in a manner that would have an adverse effect on freedom of competition.

The Executive Regulations

The Executive Regulations provide specific guidance as to the meaning of “monopoly”, “dominance”, “relevant products” and “geographical scope”. Given that “economic concentration” is defined by reference to market “dominance”, and given that “relevant market” is defined by reference to “relevant products” and “geographical scope”, the Executive Regulations will need to be consulted when interpreting all of the foregoing terms. Assessing whether an arrangement is prohibited, or whether a transaction requires MOCIIP pre-approval, will require detailed consideration but will not always be a precise science.

Notably, the Executive Regulations provide that market “dominance” can be triggered where a person is able to influence the price of products, or the volume of the supply of products, even if that person’s share is less than 35% of the “relevant market”. The Executive Regulations also make it clear that the “monopoly” prohibition can be triggered where there an economic linkage between products which has the effect of excluding competitors.  

The Executive Regulations set out the process to apply for MOCIIP approval for an economic concentration. The application must be supported by several documents, including copies of reports, studies and questionnaires prepared for the purpose of assessing the economic concentration, and audited financial statements for the previous three years. The MOCIIP have 90 days to consider the application, and the arrangement that is the subject of the application may not be completed before the expiry of that period. The MOCIIP have the power to grant their approval subject to conditions, and to monitor the applicant’s compliance with any such conditions. An application which is rejected or conditioned by the MOCIIP can be appealed to the Minister of the MOCIIP.

The Minister of the MOCIIP may temporarily exempt any person, for a specified period of time, from any agreement, action or work which relates to products that would result in the reduction of initial costs and which protects and benefits the consumer. The Executive Regulations set out the process to apply for such exemption; certain information and documents must be provided in support of the application, including information showing market share of the relevant market, a report setting out exemption justifications/objectives, and annual financial statements for the previous three years.

The Competition Law empowers the MOCIIP to conduct judicial investigations under the Competition Law and the Executive Regulations. In a signal that the MOCIIP will actively monitor compliance, the Executive Regulations provide that the MOCIIP may, either on its own initiative or following its receipt of a complaint, investigate any person’s compliance with the Competition Law or the Executive Regulations.

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Originally published in The MENA Business Law Review No. 01/2021

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