Insights on the New Competition Protection Law no. 72/2020

Insights on the New Competition Protection Law no. 72/2020:

As a result of the rapid developments and the changes on global and regional levels and in light of what the world is witnessing of a shift to a free market based on the freedom of competition that was adopted by the World Trade Organization since its establishment in 1995,and the desire of most countries to pass legislation and adopt economic policies aligned with this transformation, the Kuwaiti Parliament approved the protection of Competition law no. 72 that was issued and became effective staring November 1st, 2020.

The new law voided the provisions of the previous law no. 10/2007 that did not distinguish clearly between the economical practices that are considered illegal monopolistic practices and the other practices that are competitive and legitimate, the matter that has a great impact on achieving a balance between the principle of freedom of trade on one hand and the need to control the freedom of the market in a way that safeguard the achievement of the public interest.

The new law guarantees the freedom to practice economic activity for everyone in a manner that does not lead to restriction of free competition in accordance with the provisions of the law and without prejudice to the international treaties and agreements in force in the State of Kuwait.

The law excluded from the scope of its application the activities of the public utilities and state-owned companies that provide basic goods and services to the public.

The new law limits the ability of large companies to prejudice competition and harm medium and small -sized enterprises, and shall provide goods to consumers at a fair price, the diversification of choices before consumers. The aforementioned law amended the concept of the controlling or monopolistic position as it was according to the previous law acquiring more than 35% of the size of the concerned market. As for the new law, it defined a new term considering the dominant position and canceled the previous percentage.

The new law granted the Competition Protection Agency more power in the market to enforce the law and to address harmful practices in competition. The law granted the employees of the agency the status of judicial investigative authority. The above-mentioned law shall contribute to attract more local and foreign investments. The Competition Protection Agency consists of the Board of directors whose five members are assigned by the cabinet of Ministers for a term of renewable four years. The CEO of the competition agency shall be assigned by the Minster and shall have at least ten years of experience in legal and economic sciences. The disciplinary Council of the agency consists of five members appointed by the minster three of who are judges from the high judicial council, and the other two members shall be experienced in economical and legal matters. The disciplinary council shall examine the decisions referred to by the board of directors, and shall decide on the complaints submitted by concerned parties. The decisions of the disciplinary council is final.

The protection of Competition law clarifies the agreements or business related to horizontal relations that are harmful to competition considering the relationship is between current or potential competitors in the same relevant market that may affect the product prices, sharing or dividing markets of goods or services, or fixing the quantity of production or distribution or selling of goods, determining the method or means of providing services, or restricting technical development or investment in relation to an investment to produce, distribute or sell a good or provide a service or colluding with others in submitting bids or offers to sell, buy or supply any good or service.

Law no. 72/2020 prohibits persons to engage in any agreements or illegal coordinated practices or actions related to horizontal relations that would restrict, limit or prevent competition.

The above-mentioned law also prohibits persons with a vertical relationship- which is a relationship between people at different stages of activity where one of its parties has a dominant position in a specific market- engage in any agreements or practices that would restrict, limit or prevent competition. The Law also prohibits the dominant person from misusing his position in a way that leads to restricting, limiting or preventing competition in the concerned market.

The new law authorized the council of the Agency, upon the request of the concerned parties, to approve some agreements, actions, or coordinated practices mentioned above which would limit the freedom of competition in accordance with the conditions and the controls set by the board in this regard in accordance with this law.

The law allowed the Board of directors to set conditions and controls for cases to be considered economic concentration. The law also stipulated on some cases that are not considered economic concentration.

The protection of competition law requires persons participating in economic concentration operations in the State of Kuwait to submit an application to the Competition agency accompanied by a receipt of payment of the fees if the value of the registered assets or their annual sales exceeds – according to the audited financial statements for the last fiscal year before concentration – the individual and the total limits which will be stipulated in the executive bylaw that shall be issued in six months commencing from the date of publishing the law in Kuwait Gazette. The Competition Agency will examine the submitted applications to determine the harms and benefits of the concentration in question and study the possibilities of its negative impact on the free competition in the relevant market, and then present its report to the Board of directors.

The new law confirmed the right of any person to inform the agency about any agreements, actions or practices that violate the provisions of this law.

The penalties of the new law were developed to be clear and easily applied, as 10% of the company’s total revenues were determined among the penalties. The new law enabled the Competition Protection Agency to enforce legal measures quickly and effectively, given that slow justice is an injustice, and the amendments aspire to achieve prompt justice, so the speed of taking a deterrent and decisive action will protect many competitors and shall maintain protection of market competition.

The same penalties of the new law might be applied on the actual manager of the moral person responsible for committing the actions that violate the provisions of this law.

The protection of the competition law permits reconciliation with the offenders for a maximum amount of 50% of the decided penalties.

To encourage the initiatives to report harmful competitive practices, the new law decided to exempt all violators from penalties who took the initiative to inform the agency and disclose their participation in any of the agreements, practices, or prohibited contracts before being discovered by the Competition protection agency.

 

International Department Team Dr. Bader S. Al-Otaibi

Law Firm & Intl. Arbitration

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