Thursday, March 28, 2024 | Ramadan 17, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Limits on economic concentration, market dominance

HASSAN-SHAD
HASSAN-SHAD
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The first article in this newspaper on the Sultanate of Oman’s Competition Protection and Monopoly Prevention Law, Royal Decree No 67/2014 (“Law”), touched upon the object and scope of Law and the concept of monopoly. The second article on the Law elaborated upon the concept of “dominant position” under the Law and the activities that are prohibited to be undertaken by persons (natural and juristic) who enjoy a dominant position in the market.


Another important concept introduced in the Law is that of “economic concentration” which has implications for foreign and Omani companies contemplating an acquisition or a merger. Before finalizing any move towards a merger or acquisition, it is imperative for companies to appreciate the nuances and legal requirements under the Law so that they are not caught off guard and unprepared.


“Economic concentration” has been defined under the Law as any act resulting in partial or whole transfer of equity for assets, shares, dividends, interests, rights or obligations assumed by any person towards another, or the establishment of consortiums, mergers, consolidation of two or more than managements within one joint management, in such manner that the same directly or indirectly renders such person or group of people in a dominant and controlling position.


Although the above definition is loaded with legal terminology and a layperson may get overwhelmed by the requirements stated therein, the meaning becomes simpler when the definition is dissected and read in part.


Covered in the definition of “economic concentration” are any acts that result in a whole or partial transfer of equity. The equity can be transferred in exchange for assets, shares, dividends, interests, or in the form of rights or obligations assumed by any person towards another. Also covered in this definition are acts resulting in the establishment of consortiums or mergers or consolidation of two or more managements within one joint management. The result required is that the foregoing must directly or indirectly render such person or group of persons in a “dominant position”.


As covered in the previous article, “dominant position” has been defined in the Law as: “The ability demonstrated by an individual or a group of people directly or indirectly co-engaging in the control over the concerned market, and hence, acquiring a rate exceeding (35pc) thirty-five per cent of the volume of this particular market”.


The Law specifically requires any person undertaking an action that could result in “economic concentration” to submit a written request to the Public Authority for Consumer Protection or PACP. Upon receipt of the application, PACP is required to render its decision on the request within a period of ninety (90) days of the receipt of the request.


In case of rejection of the request, the concerned person can appeal to the Chairman of the PACP who is required to render his decision within a period of thirty (30) days from the date of the request. It is to be noted that if any action resulting in economic concentration will lead to a rate exceeding 50 per cent of control of the concerned market, no approval will be granted by PACP or the Chairman of PACP.


In addition to the above, broad powers and authorities have been vested in PACP to enforce the Law. This includes the power of PACP to peruse any cases of monopoly and economic concentration and investigate forbidden practices.


PACP also has the power and authority to scrutinize and audit the required information and records to determine when there is a violation of the Law by any company or group of companies.


Lastly, the Law contains severe penalties for violations of the Law and these include lengthy imprisonment, imposition of hefty fines on the violating company as well as the closure of the company and its business in the event of a repeat of the violation.


The Law also subjects an entity or company’s chairman of board of directors, members of the board, chief executive officer, authorized directors and managers to criminal and civil penalties if it is established that they were substantially aware of the violation in question and their failure to fulfill the required duties entrusted to them resulted in the violation.


In addition, the violating entity or company will also be held jointly responsible for the financial penalties, remedies and liquidated damages if any decreed by court.


Notwithstanding that a lot of terms and concepts used in the Law are yet to be tested before Omani Courts which will render their application and scope clearer, purely from a corporate compliance perspective, companies must fully familiarize themselves with the Law in every essential and particular, and undertake thorough due diligence to ensure that they do not fall foul of the Law and thus trigger adverse implications for their current and future business operations.


HASSAN SHAD


hassan.shad@arab-law.om


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