Israel’s Restrictive Trade Practices Law 5748-1988 (the Law) defines and regulates three types of restrictive trade practices: restrictive arrangements, merger of companies and monopolies.

Restrictive arrangements
A restrictive arrangement is defined as an arrangement between two or more persons conducting business, which limits at least one party to the arrangement in a manner that may prevent or reduce competition. The Law also provides for a number of specific restraints, the existence of which would constitute an irrefutable presumption of harm to competition. An arrangement involving a restraint relating to one of the following issues shall necessarily be deemed a restrictive arrangement: the price to be demanded, offered or paid; the profit to be obtained; market allocation; and the quantity, quality or type of assets or services in the business.

Entry into a restrictive arrangement without the authorisation of the Antitrust Tribunal is forbidden, unless the arrangement is specifically exempted by the antitrust commissioner, or is exempted by the provisions of a statutory exemption as set out in the Antitrust Law or in terms of the Block Exemption Regulations issued by the commissioner.

Mergers
A merger of companies is defined as including the acquisition of most of the assets of a company by another company, or the acquisition of shares in a company by another company which would accord the acquiring company over 25 per cent of the nominal value of the issued share capital, or the right to appoint over 25 per cent of the directors, or the right to participate in over 25 per cent of the company’s profits. The acquisition may be direct or indirect, or by contractual rights. Subject to turnover and market share thresholds (calculated with reference to the domestic market), a merger between foreign entities that conduct business in Israel is subject to the Law and requires pre-merger notification and approval thereunder.

Pre-merger notification must be submitted to the commissioner if one of the following applies: the aggregate market share of the merging parties exceeds 50 per cent, that is, the merger creates a monopoly; one of the parties to the merger is a monopoly; or the total domestic turnover of the merging entities, in the preceding fiscal year, exceeds 150 million new Israeli shekels (approximately US$40.8 million) and at least two of the merging entities have a domestic turnover of 10 million new Israeli shekels (approximately US$2.7 million) each. The commissioner shall object to a merger, or approve it subject to conditions, if in her opinion, as a result of the merger, either competition in a market, or the public interest, might be significantly harmed. The Antitrust Tribunal may, on the application of the commissioner, order the separation of an entity merged in violation of the Law.

Monopolies
A person shall be deemed a monopolist if he or she controls more than 50 per cent of the total supply, or purchase, of goods or services in a market. The criterion, therefore, is one of market share, rather than of market power. A monopolist may not unreasonably refuse to supply (or purchase) the goods or services in which it holds a monopoly (or a monopsony). Additionally, a monopolist may not act in a manner that constitutes an abuse of its dominant position in the market, in a manner likely to reduce competition in business or harm the public. Examples of such conduct are unfair pricing and discrimination (the application of dissimilar conditions to similar transactions that might grant some customers or suppliers unfair advantage over competitors). Abuse of a dominant position is considered a criminal offence, if accompanied by intent to harm competition or the public.

The commissioner has the authority to declare two or more persons who together hold a monopolistic market share, with no, or minor, competition between them, to be a ‘concentration group’. Currently, legislative steps are under way to extricate the subject of ‘concentration groups’ from the chapter on monopolies and to create a separate section in the Law to specifically regulate oligopolistic markets.

The commissioner may order a monopolist to apply certain legal restrictions on terms appearing in its common contracts and to apply official Israeli industrial standards. In addition, if the commissioner believes that competition or the public is being prejudiced as a result of a monopoly or the behaviour of a monopolist, she may instruct the monopolist as to measures to be taken by it to prevent such prejudice.

The Antitrust Tribunal may, at the application of the commissioner, order the separation of a monopoly into separate legal entities.

Criminal and civil implications
Violation of the Law by an entity or any of its employees constitutes a criminal offence, as well as a civil wrong. Further, a person (individual or corporation) with an interest in the lawsuit, a consumers’ association and, since 2006, even the Antitrust Authority may file a class action for a breach of the Law.

An administrative declaration issued by the commissioner (eg, declaring certain conduct to be a restrictive arrangement; or that a merger was carried out without prior approval; or declaring the existence of a monopoly) constitutes prima facie evidence in any civil procedure.

Recently, the Israeli Antitrust Authority has proposed an amendment to the Antitrust Law that will enable the authority to impose significant monetary sanctions in lieu of criminal procedures.

The Antitrust Authority’s structure and powers
The Israeli Antitrust Authority (the IAA) was established in 1994. It is mandated to prevent market power through merger control and anti-cartel enforcement, restrain abuse by dominant firms and preserve competition in the various markets. It has extensive investigative authority and power to initiate civil, administrative and criminal proceedings.

The commissioner can exempt parties to a restrictive agreement from the duty to apply to the Tribunal for approval of a restrictive agreement; regulate block exemption regulations; approve or object to a merger of companies; declare the existence of a monopoly; and take measures to prevent abuse of monopolistic powers, including by imposing orders on monopolists.

The IAA at present employs about 80 employees, and it is divided into three professional departments: legal, economic and investigations.

Jurisdiction
Criminal proceedings for violations of the Law may be launched by the commissioner, and are conducted exclusively before the District Court in Jerusalem. The court’s judgments may be appealed to the Supreme Court. The commissioner’s administrative actions and decisions are subject to judicial review by the Antitrust Tribunal (which sits within the district court in Jerusalem). The Tribunal’s judgments may be appealed to the Supreme Court.

Civil proceedings under the Law, including contractual claims, tort claims and class actions, may be brought before any competent court in Israel.

Epstein, Chomsky, Osnat & Co