Construction

Saudi builders fined for anti-competitive practices

August 23, 2024, 12:42 PM

Saudi builders fined, Saudi anti-competitive practices, Saudi regulation, Saudi construction — Builders working on Riyadh's Majdoul tower in 2022. 14 Saudi construction companies have been fined for collusion

$1.7m in fines issued
Problems in construction persist
Highest fine was $300,000

A Saudi regulatory authority has imposed more than SAR6.5 million ($1.7 million) worth of fines on 14 construction firms for anti-competitive practices.

They were found to have colluded in setting prices when bidding for government projects, highlighting ongoing problems in the sector.

The firms violated Saudi rules protecting fair access to public contracts, according to a final decision from a Riyadh appeals court, the General Authority for Competition (GAC) said in a statement published on social media platform X on Thursday.

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“The Authority calls on all establishments to adhere to the Competition Law and its executive regulations, and to follow the rules of fair competition that encourage consumer choices and support market growth and efficiency within a framework of justice and transparency,” the statement said.

GAC also invited all industry contractors to review guidance available on the legislation.

The highest fine of nearly SAR1.1 million ($300,000) targeted Hassan Salem Hussein Al-Khamsan General Contracting, with six other penalties above the $100,000 mark.

They ranged from SAR1 million ($266,500) imposed on Al-Mathal General Contracting to nearly SAR393,000 ($105,000) against Ibn Qamzan Trading and Contracting.

Shua’a Al-Janoub Trading and Contracting Company received the lowest fine at SAR30,000 ($8,000).

In recent years Saudi authorities have taken steps to improve antitrust efforts in the kingdom as well as the transparency and efficiency in the booming construction sector.

Saudi Arabia’s economic reform project, valued at more than $1.25 trillion, has made the country what one consultancy called the biggest construction site in the world, although lower oil prices have caused a slowdown in some giga-projects.

GAC drastically increased its investigations in 2023, even carrying out dawn raids on suspected firms, according to a tally that Baker McKenzie drew from the agency’s latest annual report.

Price fixing and bid-rigging represented more than 70 percent of all violations GAC identified last year, the law firm found.

The Saudi Contractors Authority (SCA) said in July it was launching a database to evaluate construction companies in a sector that has expanded 400 percent in the past three years to 18,000, including 1,200 foreign firms.

No other details were released about the database, but sources in Riyadh told AGBI in March that the SCA was working to digitise and standardise contracts, enhance payment guarantees and greylist bad payers.

Construction in the kingdom is beleaguered by cash flow and payment problems.

These prompt claims or disputes in more than a third of projects, a higher rate than the UAE or Qatar, according to the sixth annual Crux Insight Report from global consultancy HKA.

Baker McKenzie found that Saudi Arabia was boosting dispute resolution mechanisms and offering foreign investors and contractors “more legal certainty” through clearer legislation, regulation and “experimentation in forms of contracts”.