Competition 2020 Kuwait
1. What is the name of the main regulator/ regulators governing the competition law in this jurisdiction?
The Competition Protection Authority (CPA).
2. In the context of a merger acquisition in what circumstances, are the seller and/or the purchaser required to notify the competition regulator?
Each merging company must comply with Kuwait Law No. 10/2007 on the Protection of Competition (as amended by Kuwait Law No. 2/2012) and its Implementing Regulations if the merger would lead to control or increase the existing control of the relevant market value. A merger filing will be required when a market share of more than 35% is acquired or strengthened. The scope of application of the merger provisions applies to companies licensed by the CPA or listed on the stock exchange. The companies involved in a merger must submit the Draft Merger Contract (DMC) to the CPA for it to approve. The Central Bank's approval is required for the units subject to its supervision. The DMC cannot be published or circulated to shareholders or partners before obtaining these approvals.
3. What steps will a competition regulator take if there are potential concerns around a company obtaining a dominant market position following a merger/purchase of a competitor?
A Notification along with other required documents will be submitted to the CPA at least 60 days before the date fixed for the start of control or for increasing such control (more than 35% of the particular market).
The CPA will then publish a summary of the notification in the Kuwait Official Gazette and at the expense of the notifying person in four daily local newspapers in Arabic. The interested person may object to the notice within a period of 15 days from the date of the publication. In the event of an objection, the decision will be suspended pending the settlement of the matter of the objection.
4. How would a dominant market position be derived?
Dominance is defined as a situation when a person or a group of persons working together gain direct or indirect control of the market by acquiring more than 35% of a particular market.
5. Is it possible to appeal a decision by the competition regulator- how does this work?
Yes, the applicants have 60 days to appeal the CPA's decision.
6. How quickly is any decision on a competition risk as a result of a merger/company purchase normally taken?
The relevant person will be notified of the approval or rejection decision of the CPA within 15 days from the date of taking the decision by means of a registered letter.
7. What remedies are generally taken when a dominant market position is established which would a merger or acquisition?
The CPA will permit and except the application of the Competition Law on the cooperation between companies which aim to facilitate the market activity and the commercial entities which operate in research and development.
8. What penalties apply for failure to follow competition law in a merger or acquisition?
Under Articles 19 to 22 of Kuwait Law No. 10/2007, the violators of the Competition Law may be fined 100,000 Dinars or the amount of the illegally acquired gain, whichever is greater and this can be doubled where the infringement is repeated. The CPA also has the discretion to order the confiscation of the commercial activity or its restriction for up to three years.
9. Are there any rules governing the way a company seen as having a dominant market position must sell or market their products - which are the most important ones?
Under Article 4 of Kuwait Law No. 10/2007, the company cannot manipulate or fix prices through fictitious transactions contrary to market principles and in a way which harms competitors or sell the goods at a lower price than their actual cost.
The company cannot restrict the flow of goods into and out of the market without justification by concealing or refraining them from dealing in the same. The company will not flood the market with goods, causing an unreasonable price which harms competitors.
10. What are the penalties for failure to apply competition rules when selling or marketing products?
Under Articles 19 to 22 of Kuwait Law No. 10/2007, the violators of the Competition Law may be fined 100,000 Dinars or the amount of the illegally acquired gain, whichever is greater and the sum can be doubled where the infringement is repeated. The CPA also has the discretion to order the confiscation of the commercial activity or its restriction for up to three years.
11. Are there any rules which prevent companies from colluding with competitors in the market when setting prices?
Under Article 4 of Kuwait Law No. 10/2007, 'Preventing or hindering a competitor from conducting business in the market' is a violation of the Competition Law. Any company which colludes with competitors and prevents another competitor from conducting business in the market is committing a violation.
12. What are the penalties for colluding with competitors?
The violators of the Competition Law may be fined 100,000 Dinars or the amount of the illegally acquired gain, whichever is greater and the sum can be doubled where the infringement is repeated. The CPA also has the discretion to order the confiscation of the commercial activity or its restriction for up to three years.
13. Are there any rules governing the way a company seen as having a dominant market position as related to one product is able to sell or market other products?
There are no specific rules as the rules laid down are for a company having a dominant market position in general.
14. Are there any specific industries, which have particular competition rules? Give examples of some of the main ones- and the legislation governing this regime.
The Competition Law expands its applicability to the violations committed in Kuwait, as well as to those taking place abroad but with harmful effect in the internal market. The exceptions to the scope of the Competition Law are limited to state-owned entities, all the activities required by a particular law, the cooperation between companies which aim to facilitate the market activity and the commercial entities which operate in research and development.
15. Do the free zones have a different competition regime from mainland?
16. Are there any industries in which only state or public owned enterprises are allowed to operate? Give the main examples.
The Negative List codified in Kuwait Ministerial Decision No. 75/2015 consists of the following activities:
- Extraction of crude oil or natural gas;
- Manufacturing of coke ovens and products related to it;
- Manufacturing of fertilisers and nitrogenous formulas;
- Manufacturing of coal gas and distribution of gaseous fuels through main pipelines;
- Restate activities, except for construction development projects for private operations;
- Activities related to security and investigations;
- Membership organisations; or
- Activities for the sourcing of labour, including household workers.
17. Are there any industries where fixed/state regulated pricing must apply? Give the main examples.
Pricing in Kuwait is regulated by the Commerce and Industry Ministry.
18. What restrictions govern the inclusion of non-compete clauses in employee's contracts?
Article 196 of Kuwait Decree-Law No. 67/1980 states the general principle a contract is the law of the contracting parties and neither party to it may separately rescind or amend its stipulation except to the limits allowed by agreement or where the law provides otherwise. The employer's interests protected by the court will depend on the conditions expressly agreed to by the employer and employee in the employment contract. The interests of the employer such as trade secrets and customer goodwill can be enforced provided the employer and the employee have agreed to the conditions in the employment contract.
The employer cannot enforce any restrictive covenants which are not expressly agreed to in the employment contract. The court will limit enforcement to a 'reasonable' geographic area and/or time frame. In practice, the court will limit enforcement of the restrictive covenants up to two or three years. An indefinite restriction will therefore not be enforceable. However, the restriction can cover the entire geographic area as Kuwait is a very small country.