Background

• In 2023, the Authority received several complaints from parents of students in private and international schools in Saudi Arabia with regards to the obligation imposed on them to buy school uniforms from exclusive suppliers selected by the school. 
• The Authority found that some schools entered into exclusive agreements with suppliers to sell school uniforms for periods ranging from five to 15 years. Such exclusive agreements prevent other suppliers from entering the market and selling uniforms to parents; which lead to higher costs for parents and issues concerning quality and pricing.
• To address this and to ensure ongoing fair competition in the education sector, the Authority decided to prevent schools from mandating exclusive suppliers in order to promote market competition and provide parents with several options to purchase school uniforms. The Authority's aim is to protect consumers' rights and aid parents in making informed decisions when purchasing school uniforms.

Scope of application

The guidelines clarify that school uniforms and related items/accessories are considered an ancillary market to that of educational institutions (i.e., after-sales), as school uniforms are mandatory to be worn during school hours. Consequently, since schools determine their respective uniform's (i) specifications, (ii) sales mechanism and policy and (iii) sales outlets, each school is deemed dominant in the market of "supply, distribution and sale of school uniforms and related items".

Prohibited practices for dominant entities include:

• Setting prices or conditions for the sale or resale of goods or services (i.e., price-fixing); and
• Bundling/tying of unrelated products.

Prohibited practices for dominant entities apply to all educational institutions, manufacturers and suppliers of school uniforms and related items. All relevant entities that operate in this market must comply with the issued directives and instructions.

Prohibited practices in supplying and selling school uniforms and related items

1. Bundling/tying of unrelated products

Bundling unrelated products (i.e., requiring the purchase of an additional unrelated product) restricts the students' ability to choose items that are the most appropriate for them when purchasing their school uniform. It is prohibited to compel a student to purchase an entire uniform set or its accessories (e.g., sports clothes).

E.g., a school puts an obligation on parents to purchase the entire school uniform from a specific distributor/retailer and prevents parents from purchasing the uniform individually based on the student's actual need.

2. Price-fixing

Fixing the distributors' / retailers' retail prices of school uniforms and related items is in violation of Article 5.1 of the Competition Law. This restricts the distributor's / retailer's ability to set its own prices, hence preventing fair competition among suppliers and buyers.

E.g., a school agrees with suppliers A, B and C to manufacture/supply / distribute school uniforms and fixes the retail prices of the same, or sets a minimum reselling price.

3. The sale of school uniforms and related items exclusively at the school premises or by an exclusive supplier 

This is in violation of Article 6.7 of the Competition Law as it limits (i) the ability of other suppliers and manufacturers to compete in this market and (ii) the consumer's options in choosing the most appropriate products in terms of quality and price.

4. The agreement between schools and suppliers for the exclusive manufacture and supply of school uniforms and related items through specific outlets only

• This is in violation of the Minister of Education's Circular No. 38742779 which prohibits entering into such agreements to prevent monopolies in this market. Such agreements limits the student's freedom of choosing different suppliers with different prices and/or quality most suitable to the student.

E.g., a school enters into an agreement with one supplier to manufacture and supply its school uniform, obligating students to purchase exclusively from this supplier through the school itself.

Obligations to consider when issuing the school uniform

• All entities active in the market of "supply, distribution and sale of school uniforms and related items" must avoid the abovementioned anti-competitive practices (or any other similar practices) and must comply with the following:

1. School uniforms should have designs, shape, colours, complicated patterns or embroidery which are available from more than one source.
2. School uniforms must be available in multiple sales outlets.
3. Schools should announce the description of its uniform at least ninety (90) days prior to the start of the academic year.
4. Students must have the option to purchase the school uniforms either in full or by piece (and not bundled).
5. Schools should not fix the price or set minimum retail prices at sale outlets.
6. The school logo should be provided separately (and at a symbolic price) for students to sew at a later time, if needed.
7. Schools should deal with all relevant manufacturers, suppliers and distributors unless there is a valid reason not to.
8. Schools must not enter into exclusive agreements with any manufacturer, supplier or distributor.

For further details on the Saudi Competition Law and its practical impact on your operations in Saudi Arabia, please do not hesitate to contact our Saudi Antitrust & Competition team.

* Ruwaa AlAbdullatif, Trainee Associate, has contributed to this legal update.

1 Competition Law issued by Royal Decree no. M/75 dated 29/6/1440H (corresponding to 6 March 2019) and its Implementing Regulations issued by a resolution of the Board of Directors of the Authority on 25/1/1441H (corresponding to 24 September 2019).