In the dynamic M&A landscape of the GCC, competition authorities are becoming increasingly assertive in enforcing pre-merger notification and standstill obligations. In both Saudi Arabia and the United Arab Emirates, failing to obtain prior approval from the competition regulator, or behaving as though clearance has been granted before it actually is, can result in substantial financial and legal consequences.
This conduct, commonly referred to as gun jumping, has recently gained heightened scrutiny across the region. While each jurisdiction applies its own thresholds and procedural rules, the underlying principle is consistent: do not implement any element of a notifiable transaction before clearance is issued.
A recent enforcement action in Turkey offers a compelling case study for dealmakers in Saudi and the UAE, especially given the convergence of enforcement practices across MENA.
It is crucial to note that informal coordination, even if seemingly insignificant, can be interpreted as premature integration by competition authorities.
The Tekfen Case: A Regional Warning Sign
In Turkey, the Competition Authority (TCA) fined Can Holding for acquiring de facto control of Tekfen Holding before receiving formal merger clearance. Despite submitting a notification, Can Holding had its representatives appointed to Tekfen's Board of Directors at a General Assembly, effectively exercising governance control prior to approval.
The TCA emphasized two key points:
- Control means more than legal ownership: Actions such as board appointments or influence over strategic decisions, even before closing, can constitute effective control.
- Transactions without prior clearance are not legally valid: Implementing any step of a notifiable transaction before approval is granted is both unlawful and sanctionable.
These findings are highly relevant to GCC jurisdictions, where competition authorities have begun applying similarly strict interpretations of pre-clearance conduct.
Saudi Arabia: GAC's Expanding Enforcement
Under Saudi Arabia's Competition Law, a merger or acquisition must be notified to the General Authority for Competition (GAC) if the combined global turnover of the parties exceeds SAR 200 million, regardless of local nexus. The law explicitly prohibits implementation prior to clearance, and GAC has issued significant fines "ranging from SAR 100,000 to SAR 10 million" for both non-notification and gun jumping.
Importantly:
- Premature integration, joint management, or even informal cooperation between the parties may be viewed as early implementation.
- GAC increasingly investigates post-closing conduct and can impose fines even if the transaction is eventually approved.
As in the Turkish case, control is interpreted broadly; not only as legal ownership, but also as the ability to influence or direct strategic decisions of the target.
UAE: Growing Oversight under the New Competition Law
In the UAE, merger control is governed by Federal Decree Law No. 4 of 2012, recently amended in 2023. Transactions exceeding the thresholds must be notified to the Ministry of Economy's Competition Department, particularly when they may lead to a dominant position or restrict competition.
While fines for non-compliance are less frequent than in Saudi Arabia, the legal consequences of gun jumping may include invalidation of the transaction or restrictions on exercising acquired rights (e.g., voting rights, board appointments).
Sector-specific regulators—such as the Central Bank, Telecommunications and Digital Government Regulatory Authority (TDRA), and Securities and Commodities Authority (SCA), may impose additional restrictions, especially in sensitive industries.
Key Takeaways for UAE and Saudi Transactions
- Wait for the clearance: Signing is not enough, do not close, integrate, appoint directors, or exercise control until the regulator gives a formal green light.
- Control includes conduct: Board representation, joint business planning, or information exchange can be viewed as de facto control, triggering violations.
- Regulators are aligned with global standards: The shift from formalistic to substantive enforcement is evident across the GCC.
- Public companies are not exempt: Acquiring minority stakes may be permissible, but entering the boardroom or steering strategic decisions without approval is risky.
- Penalties are real: Fines in Saudi Arabia are increasing in both number and severity. UAE's regulators are also stepping up compliance monitoring, especially in sectors of national interest.
Conclusion
As GCC competition enforcement continues to mature, companies and legal counsel must approach the interim period between signing and closing with heightened caution. The Tekfen/Can Holding decision in Turkey, though foreign, illustrates a trend that is firmly taking root in Saudi Arabia and the UAE: gun jumping is no longer overlooked.
In the current regulatory climate, the safest course of action is clear, secure merger clearance first, move later.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
