New Competition Law in Oman - Major Highlights

Oman has enacted the Royal Decree 67/2014 on Competition Protection and Monopoly Prevention, which came into force on 8th, December 2014. The executive regulations of the law should have been issued in June 2015 and which should provide more guidance in respect to the implementation of the law.

This is the first law that specifically regulates anti-competitive behavior in the Sultanate. Currently, all of the GCC Countries have enacted competition laws with the exception of Bahrain.

Enterprises with business in Oman will now need to undertake a thorough review of their existing agreements and practices to identify any potential violations and take action to ensure compliance with the new law.

Dominance
Owning market share of 35% or more of the relevant market and the ability to directly or indirectly control or affect the relevant market. The market share condition of dominance under Omani Competition Law is higher than the international practice which requires only 25% market share.

Merger/Acquisition
In the event of a merger/acquisition, authorization from the Public Authority of Consumer Protection must be sought. However, the Authority may only approve a merger/acquisition to the extent that it would result in no more than 50% of the relevant market.

Abuse of Dominance
The abuse of dominance under the law is in line with international practice, such as prohibiting selling below actual cost, controlling quantities of product in the market to create unreal shortage to increase prices, tying the sale of a certain product or service to the purchase of another product or service, fixing resale price, resale discounts or resale terms and conditions, discrimination without a reasonable cause among similar clients, exclusive agreements with manufacturers or suppliers or inducing dealers not to allow certain competitor to use their facilities or services.

Restrictive Agreements
In line with the international practice, the law prohibits any horizontal or vertical agreement or contract, whether written or oral, implied or express, concluded inside or outside of Oman, for the purpose of preventing, elimination or undermining competition, such as:
1) Agreement to fix Prices, discounts, or the terms and conditions for product sale or purchase or provision of services.
2) Agreement to divide the market geographically, or by consumption, or by clients, or by products, or by season or specific time periods.
3) Agreement on the production quantities:
a. Fixing quantities, limiting the flow of the products into the market or removing products from the market, whether totally or partially, by storing them or refusing to sell, or
b. Provide excessive quantities in the market in a sudden and unexpected manner leading to unreal prices.
4) Colluding in auctions and tenders including colluding in respect to the terms and conditions.

Exclusive Agents
The major highlight of the new law is that it allows any person to conclude an agreement to import any product permitted from abroad for the purpose of selling, distributing, marketing or promoting it “regardless of whether the imported product’s importation, sale, distribution, marketing, or promotion has been restricted by an exclusive agent.”

The Competition Law reinforces the recent changes to the Oman Commercial Agencies Law (Royal Decree No. 26/1977 as amended) which removed various statutory protections for agents under exclusive agency or distributorship agreements and allows any individual or company to import goods that are subject to any agency in Oman. The Oman Commercial Agencies Law states that “In case of the presence of monopoly of specific types of commodities and services that negatively affects supply and demand, and causes unjustified rise in prices, the Council of Ministers shall determine the number of allowed agencies for each agent and their kinds according to the recommendation of the entity related to competition and prevention of monopoly.”

Penalties
The key highlight of the penalties for competition law violation is that it is tied to the benefit gained out of the violating practice and as a percentage of the annual sales of the enterprise and not a fixed amount, thus the penalty structure is more fair and proportionate to the size of the enterprise in violation.

Officers of an enterprise that enters into a restrictive agreement or engages in practices that constitutes an abuse of its dominant position may be subject to either or both of the following penalties (i) prison term from 3 months to 3 years, (ii) a fine equivalent to the profits gained from the violating practice, in addition to, a penalty of 5-10% of the total annual sales of the product under violation.

Other violations such as preventing the employees of the Authority from entering the establishment, withholding information, giving misleading information, or concealing or destroying a document may result in the violator facing imprisonment from one month to three years and/or between 10-100K OMR (approximately 26-260 KUSD).

Delay in the payment of imposed fines are punishable by a penalty of 100-10K OMR for every day of delay. The fine imposed under the law may be doubled in case of repeated offense during 5 years and commercial activity may be banned for a period of 30 days.

The Competition Law empowers the court to reduce the penalty or exempt an enterprise that has violated the provisions of the Competition Law if the concerned enterprise contributes to the uncovering of a violation by submitting relevant supporting evidence at any stage of the investigation, inquiry or trial.
The penalties described above are intended to provide an overview of some of the sanctions imposed and do not reflect all the available penalties as provided for in the Law.