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New e-commerce law, how will it impact the Saudi e-commerce market and what changes will it bring?

  • Saudi Arabia

    15-07-2019

    Historically, there have been some unscrupulous e-commerce providers operating in the Saudi market and this law is welcomed as means to ensure that e-commerce providers do not escape the regulation they would face if operating physical stores. This should increase consumer confidence and provide protection against fraudulent operators and deceptive advertisers who often target ordinary customers.

    The Kingdom is considered one of the 10 fastest-growing states in e-commerce with a growth rate exceeding 32 percent per year. The market is likely to expand further with new entrants and the clarification of the requirements for overseas companies selling into the Kingdom is especially welcomed. The presence of a defined regulatory regime gives assurance and stability to online stores and encourages them to expand their offerings, thus resulting in growth.

    With the introduction of the new law, small businesses and individuals selling online will have the opportunity to register with the new E-Shops Authentication Authority. More detail will be provided in the regulations to be issued but this should provide much needed clarity on the position of Instagram and Facebook sellers. Both platforms are very popular locally and the region at large. In particular, this provides a framework for female entrepreneurs (operating from home) to expand their business in a legal way and participate in the national transformation - one of the pillars of Vision 2030.

    Presently, the regulations only impose registration requirements with the ministry without any minimum capital outlay and some requirements around delivery and return of product and to prevent fraud and deception.

    Another significant change is the introduction of data protection requirements aimed to prevent the use of personal data without the customer’s consent or legitimate reason and the sale of personal data to third parties. This is likely to have significant ramifications for how e-commerce companies operate, for example potential restrictions on the ability to carry out targeted advertisements.

    The penalties for breach of the law include – a warning, a fine of up to one million Riyals, temporary or permanent suspension of business, temporary or permanent (partial or entire) blocking of the site and naming and shaming the violator in social media/print media.

    The law is similar to other laws in the region but goes further in specifically addressing (and potentially regulating) entities operating selling sites (as opposed to actually selling) and covering the overseas companies selling into the Kingdom.

    As customary in Saudi Arabia, much of the detail of the new law will be in the regulations to be issued later and so we await these to be able to better assess the full impact on e-commerce companies/ consumers.

    Disclaimer

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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