Bahrain’s new Law for the Encouragement and Protection of Competition (Competition Law) was published in the Official Gazette on July 19, 2018 and its provisions – with the exception of Chapter 2 – came into effect on February 1, 2019. Chapter 2 establishes and relates to the Authority for Encouragement and Protection of Competition, came into force on August 1, 2018. While the authority had not yet been formed, as of October 2019, Decree No. 8 of 2019 stipulates that the Consumer Protection Directorate of the Ministry of Industry, Commerce and Tourism will assume the functions and powers of the authority in this interim period.
The provisions of this legislation, Law No. 31 of 2018, apply to any act or arrangement that results in hindering competition in Bahrain. Provisions of the Competition Law also apply extraterritorially to economic activities that have an effect on competition in Bahrain.
In accordance with Article 3 of the Competition Law, all arrangements that target or result in hindering competition in Bahrain are prohibited, particularly arrangements that target or result in the following:
- Affecting the prices of products by raising, reducing or fixing by sham, fictitious transactions or any other means.
- Limitation in production, marketing, technical advancement or investment.
- Sharing markets or sources of supply.
- Knowingly disseminating incorrect information about products and prices.
- Collusion on bids for auctions or tenders.
- Fabricating a sudden abundance of products leading to unreal prices that affect other competitors; and
- Collusion of purchase rejection, sale or provision from a specific facility or facilities to prevent or obstruct activities of the same.
Any arrangement which falls under these descriptions will be deemed null and void.
The following arrangements are specifically excluded:
- Arrangements that lead to a notable improvement in the production or distribution of products.
- Arrangements that lead to promoting technical or economic development in the field of producing or distribution of products.
- Arrangements that grant a fair share of any resulting benefit to the product’s consumers.
- Arrangements that do not enable the elimination of competition in a large segment of the product’s market.
- Other arrangements that do not impose restrictions on competition.
In line with Article 8 of the Competition Law, a market player may be considered as having prevailing status in an area if it enjoys an economic leverage that enables it to deter any effective market competition, which grants it the ability to independently perform from its competitors and clients, and consequently from its product consumers. Unless otherwise proven, a particular market player may be considered as having prevailing status if its share in a specific product market exceeds 40%. A group of market players, two or more, is considered as having prevailing status if the collective share of the group in a specific product market exceeds 60%.
However, a player may be considered as having prevailing status in a specific product market even if its share does not correspond to these percentages. Any player that enjoys prevailing status in the market is prohibited – whether solely or in conjunction with one or more others – from undertaking any action or refraining from any act that entails misuse of their status, in particular:
- Direct or indirect imposing of sale or purchase prices or any other trading terms.
- Restricting the production, marketing or technical advancements, leading to damage to consumers.
- Discrimination in contracting or agreeing in any form with vendors or with clients when the contracting terms are the same; whether in prices, quality, products or any other transaction.
- Abstaining, without a justified reason, from the sale or purchase of a specific product with any facility; or sale of its products for less than the actual cost; or permanently suspending transacting with a facility leading to the exclusion of competitive facilities from the market, or inflicting losses to make it difficult for them to continue business.
Criminal penalties for violating the Competition Law range from fines of BD 100 ($265) to BD 50,000 ($133,000) and imprisonment for one month up to one year. Provisions of the Bahrain Civil Code apply to civil liability ensuing from violation of the Competition Law.
(This article was published on Oxford Business Group The Report: Bahrain 2020 Edition)