Freedom of competition in the various economic sectors requires control and supervision by the state to prevent monopolistic practices in all their forms that would affect the freedom to practice economic activities.Therefore, the state must enact a law aimed at protecting both the market and competition, which is what the State of Kuwait initiated in support of economic development goals.
Is there a law regulating competition protection in the State of Kuwait?
Law No. 72 of 2020 regarding the protection of competition was promulgated on 27 October 2020 and published in the Official Gazette on 1 November 2020. The Executive Regulations of this law were also issued pursuant to Resolution No. 14 of 2021 on 30 June 2021 and published in the Official Gazette on 04 July 2021.
The law affirms that the freedom to engage in economic activity is guaranteed to everyone in a way that does not lead to restricting, preventing, or harming freedom of competition.
Thus, the law protects the market from unfair competitive processes that may occur and cause market turmoil.
What are the objectives that the Competition Protection Law seeks to achieve?
The aims of Law No. 72 of 2020 regarding competition protection are:
- Freedom of competition and the prevention of monopolistic practices in all their forms that would affect the freedom to exercise economic activity.
- Providing protection for dealers in the relevant market in a way that guarantees fairness and competition.
- Consumer freedom of choice and economic pluralism.
- Maintaining a competitive market structure.
- Educating the public about the provisions of the law and the principles of the free market in general.
- Working to ensure compliance with the law, its executive regulations, and the relevant decisions and instructions.
The law creates an open and fair market characterized by competitive fairness and competition protection, which contributes to controlling monopolies, preventing price manipulation, and thus ensuring consumer rights and protecting the competitive process.
Is there a legal body for competition protection in the State of Kuwait?
Yes. It is the Competition Protection Agency (CPA), an existing body of a legal personality under the supervision by the Minister of Commerce and Industry. It is the competent authority for enforcing Law No. (72) of 2020 regarding competition protection and its executive regulations.
What is economic concentration?
According to the definition contained in Law No. 72 of 2020 regarding competition protection:
Economic concentration is a state of permanent change in control in the relevant market, and it arises in the event of a merger or acquisition, as well as in the event of establishing a partnership between two or more persons who provide an Independent economic activity permanently.
The law seeks to ensure the application of rules and procedures for protecting competition, controlling monopoly, and competitive fairness during economic concentration processes among business entities,This leads to preventing price manipulation and unfair competitive processes and contributes to strengthening consumer rights in competition and creating an open and fair market.
What is an economic concentration application?
In accordance with Chapter One of the Executive Regulations of Law No. 72 of 2020 regarding competition protection, an application is submitted by interested parties to the CPA for approval of economic concentration.
What are the cases of economic concentration?
In accordance with the provisions of Article 10 of Law No. 72 of 2020, the following cases are considered an economic concentration in applying the provisions of this law:
- The merger of two or more persons by consolidation, absorption, and merger of parts of persons leading to control or increased control.
- One or more persons acquire direct or indirect control over a person or other persons, in whole or in parts, whether by acquiring assets, equity, or rights of use or purchase of stocks, shares, obligations, or by any other means.
- The existence of a partnership between two or more persons that leads to a permanent and independent economic or commercial activity, regardless of the legal form or activity being practiced.
- Any other case is to be determined by a decision of the CPA’s Board of Directors.
When are applications for economic concentration submitted?
Article 76 of Law No. 72 of 2020 stipulates the following:
Persons participating in economic concentration process must submit an application to the Competition Protection Authority before completing such processes, If the value of registered assets or their annual turnover in the country exceeds, according to the audited financial statements of the last financial year before the concentration, total and individual limits in accordance with the conditions and controls set by the Board of Directors of the Competition Protection Authority.
Resolution No. 26 of 2021, issued by the Competition Protection Agency, stipulates that the concentration parties are obligated to submit a request for approval for the economic concentration process If;
- One of the concentration parties achieves annual turnover in Kuwait exceeding (KD 500,000) Kuwaiti Dinars Five Hundred Thousand in accordance with the audited financial statements of the last financial year before concentration.
- The concentration parties achieved a consolidated annual turnover in Kuwait exceeding (KD 750,000) Kuwaiti Dinars Seven Hundred and Fifty Thousand, according to the audited financial statements for the last financial year before concentration.
- The value of the registered assets of the parties exceeds concentration in Kuwait, which is worth (KD 2,500,000) Kuwaiti Dinars Two Million Five Hundred Thousand, according to the audited financial statements of the last financial year before concentration.
Are there penalties for not submitting economic concentration applications?
Provisions of the Executive Regulations of Law No. 72 of 2020: The Disciplinary Council of the Competition Protection Agency shall undertake the disciplinary accountability referred to it by the Board of Directors relating to violations related to practices that cause harm to competition,including banning persons from entering into any agreements, coordinated arrangements, or actions related to horizontal relationships that would disrupt, limit, or prevent competition, as well as banning persons engaged in a vertical relationship from making any agreements or coordinated arrangements that would restrict, limit, or prevent competition.
What are the financial penalties taken by the Disciplinary Council in the event of not submitting a concentration application?
In accordance with Article 34 of Law No. 72 of 2020, the Council may impose a financial penalty of no more than 10% of the total revenues of the parties to the concentration during the previous financial year in the event that the concentration application is not submitted.
What is a consultation application?
Article 74 of the Executive Regulations of Law No. 72 of 2020 stipulates that anyone who wants to enter into the concentration process may submit an application for a consultation to the Competition Protection Agency in order to hold a consultation meeting with the agency’s employees before submitting an economic concentration application.
What is the purpose of the consultation application?
The purpose of consultation application in accordance with Article 74 of the Executive Regulations of the law is to advise on whether a proposed economic concentration application shall be submitted or on how to comply with all requirements for submitting an economic concentration application during the pre-application consultation process.During the consultation phase prior to submitting the application, the parties may also request the Competition Protection Agency to exempt them from providing some of the information required in the economic concentration application form if it is unnecessary while attaching a justification.
What are the exemption applications from the Competition Protection Law?
According to the definition contained in Chapter One, “Definitions and General Provisions” of the Executive Regulations of the Law, an exemption application is a request submitted by interested parties to the Competition Protection Agency to allow them to certain agreements or coordinated arrangements mentioned in Articles 6, 7 and 8 of the law.
What are the cases in which an exemption application is submitted?
- Entering into any agreements, coordinated arrangements, or businesses related to horizontal relationships that would prejudice, limit, or prevent competition.
- Making any agreements or coordinated arrangements by persons in vertical relationships that intend to restrict, limit or prevent competition.
- Any person exploiting the dominant position.
What is a settlement offer or settlement application?
According to the definition contained in Chapter One, “Definitions and General Provisions” of the Executive Regulations of the Law, a settlement is an offer or application submitted (to / by) a violator of any provision of the law to stop the measures taken against him after the approval of the Board of Directors of the Competition Protection Agency,and that is before the Disciplinary Council’s decision to impose penalties or a firm ruling in consideration for paying an amount to the Competition Protection Agency that is not less than half of the maximum financial penalty or fine, provided that it does not exceed the maximum penalty/ fine.
Who has the right to object to an economic concentration request?
According to the provisions of Article 83, “Objection to the Economic Concentration Application” of the Executive Regulators of the Law, every interested party may submit to the Competition Protection Agency a reasoned objection to the economic concentration application within a period not exceeding (15) Fifteen days from the date of notification or publication.
What are the services provided by Baker Tilly Kuwait regarding competition protection?
- Preparing, submitting, and following up on the economic concentration application for the Competition Protection Agency.
- Preparing, submitting, and following up on the consultation application for the Competition Protection Agency.
- Preparing, submitting, and following up on the exemption application to the Competition Protection Agency.
- Preparing, submitting, and following up on the settlement application for the Competition Protection Agency.
- Preparing, submitting, and following up on the objection application for the Competition Protection Agency.
- Preparing the asset valuator’s report.