The Kingdom of Saudi Arabia (KSA) continues its journey to realize the Vision 2030 by creating a thriving economy that is open for business. With a global expansion in the size of the ecommerce market, it was only natural that KSA would look to increase its contribution to the future of trade. In order to do so, KSA has issued the E-commerce law, published on 26 July 2019 effective on 24 October 2019 (Law) to regulate and oversee the transactions conducted online which differ from those conducted in brick and mortar trade. Our reading of the Law is that its primary objective is to regulate the practice of e-commerce by increasing transparency, ensuring consumer protection and enhancing trust in online transactions.
Previously, KSA did not have a stand-alone law regulating e-commerce, different elements of online transactions were governed by provisions that were scattered in several laws like the Electronic Transactions Law regulating e-signatures and records and the Implementing Regulations for E-Publication which governed the activity of e-publications including e-advertising.
In addition to our overview below which highlights the key components of the Law (not exhaustive for the purposes for this client alert), the Ministry of Commerce and Investments (MOCI) should issue implementing regulations, which will expand on the general guidelines as set out in the Law as the Law as drafted is relatively simple referring to a few basic principles and procedures.
The Law applies to consumers and e-commerce services providers, whether established in KSA or not provided they are selling to consumers in the Kingdom. Furthermore, the Law recognizes and applies to individual e-service providers and does not restrict the application of the law to corporate vehicle, this explicit covers sellers with (Marketplace) models utilized by many e-shops.
In order to encourage the public to buy from e-shops, the Law explicitly sets out a process for rectification where an error is made by consumers, which obliges e-service providers to accept if followed correctly.
Data retention and privacy issues are of great concern and the Law limits the duration in which an e-service provider may keep the consumer's personal data to the duration in which the services are provided, however the Law did not specify a maximum period. The Law also explicitly places the burden of data protection on e-service providers who are prohibited from using and/or disclosing such data without having the customers consent. As the Law is silent on the matter, we hope that the implementing regulations -once issued- will address data transfer outside KSA.
As transparency is crucial in the e-market, the Law obliges e-service providers to display a minimum set of information in the e-store: name/e-shop name, address, contact details, commercial registration reference or any other public registration available for public. This is quite similar to the rules applicable to offline stores, as they must attach in a visible place a copy of the commercial registration certificate and other government licenses. The law also obliges the e-services provider to address in the e-contract amongst other things the e-service providers' contact details, the significant characteristics of the e-services/goods, the total inclusive price, delivery, payment mechanisms and any applicable warranties.
E-advertising is also regulated by the Law, explicitly prohibiting the presentation of false statements that would in any way mislead the consumer, and/or unlawful usage of a trademark. Non-compliant advertisement will be subject to the sanctions prescribed under the Law.
The Law also awards the consumer with a termination right within seven days of receiving the product if the products were not already used. There are exceptions to such termination rights which include: purchases of custom made products, catering services or the sale of newspapers, books and CDs. Further to the above termination right, consumers may terminate the contract if delivery of the service/product took longer than 15 days from execution of the contract or the date of delivery as agreed upon with the e-service provider.
The Law also provided sanctions breaching the Law including warnings, fines not exceeding SAR1,000,000, suspension of the e-service provider from undertaking e-commerce activities temporarily or permanently and blocking the e-store partially or completely, temporarily or permanently.
Although the Law is a starting point, we believe that the implementing regulations will not be less important than the Law. If you wish to know more about the E-Commerce Law and how it will impact your business or future investments in KSA, please contact the authors.
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.