The SR3 billion ($800 million) PepsiCo franchise deal by the National Bottling Company, a division of Ahmad Hamad Al-Gosaibi & Brothers, has been termed illegal by the Competition Council of the Ministry of Commerce and Industry, a report said.

The agreement violates rules of fair competition and antitrust practices, the council was quoted as saying in the Arab News.

The company violated regulations because it did not notify the council or get permission to sign a deal. It also did not consider the negative economic consequences of the agreement, they added.

The council said it would probe the legality of the deal, which saw Al-Jomaih Bottling & Can Making Plants, also a representative of PepsiCo in the Kingdom, buy the franchise for SR3 billion from Al-Gosaibi, the report said.

Article 6 of the country's antitrust laws stipulate that firms merging to become a dominant market player should seek permission from the council 60 days before signing any deal, said the report.

The other international agents for Pepsi in the Kingdom are the Saudi Industrial Projects Company and Abdul Hadi Al-Qahtani & Sons.