The Israeli Parliament recently enacted a major reform of the Restrictive Trade Practices Law. The amendment provides the antitrust commissioner with new enforcement powers in an attempt to address the challenges posed by markets that demonstrate a tendency towards oligopolistic equilibrium.

The amendment empowers the commissioner to declare, under certain circumstances, that a small group of competitors dominating more than 50% of a market are a 'concerted group' and thus a potential target for antitrust enforcement measures.

The power to declare the existence of a concerted group in oligopolistic markets existed prior to the amendment. However, such declaration required the commissioner to prove that there was virtually no competition between the members of the oligopoly. This requirement proved very difficult to overcome and the commissioner effectively abandoned its powers to disrupt oligopolistic equilibrium, instead concentrating on the prevention of such equilibrium by blocking mergers based on the coordinated effects theory.

In recent years the Antitrust Authority has constantly advocated changes to the law in order to provide the commissioner with effective powers to intervene and disrupt oligopolistic equilibrium. The authority argued that the prevention of oligopolistic competition through merger control is insufficient, since many markets in Israel already suffer from low oligopolistic competition. The authority's efforts have finally materialised following the recent amendments to the law.


Under the new legislative regime, the commissioner is no longer required to prove that the members of an oligopoly do not compete among themselves in order to declare them a 'concerted group'. It is sufficient for the commissioner to establish that there are "conditions supportive of limited competition" in the market, and that there are conditions which the commissioner can impose, that will prevent significant harm to competition, significantly increase competition or create conditions for such increased competition.

The amendment states that conditions supportive of limited competition exist, among other things, where there is an entry barrier to the market with two additional components, such as switching costs, cross-holdings between competitors, market share symmetry, homogenous products or the transparency of terms and conditions in the market. These attributes may exist in many oligopolistic markets.

The amendment not only makes it easier for the commissioner to declare members of an oligopoly a concerted group, but also provides the commissioner with a wide variety of powers to regulate their activities in order to preserve or even enhance competition.

The commissioner may, among other things, take measures to:

  • decrease barriers to entry or expansion - for example, by forbidding the use of long-term contracts with customers or the inclusion of high termination fees in such agreements; or
  • terminate facilitating practices, such as information exchanges.

In addition, the Antitrust Tribunal is vested with the authority to order a member of a concerted group to divest its holdings (even minority holdings) in a competing firm, if such measure would prevent significant harm to competition or significantly enhance competition.


The amendment represents a major change in Israeli antitrust law and stands out from a global antitrust perspective. The amendment was the subject of great interest from international institutions and, according to the press, the American Bar Association even provided the Antitrust Authority with a detailed paper commenting on the proposed amendment.

The amendment is unique not only because it prescribes new ways to deal with oligopolies, but mainly because it appears to deviate from long-enduring principles of antitrust enforcement policy.

First, while antitrust enforcement action is usually aimed at preventing anti-competitive conduct (eg, cartel agreements or exclusion by monopoly), the amendment enables the use of antitrust enforcement measures to change market characteristics. According to the amendment, an enforcement action may be taken against firms simply because they operate in a market whose structure is poised for oligopoly pricing, regardless of any illegal conduct on their part.

Second, while antitrust enforcement is usually aimed at simply preserving competition, the amendment instead provides measures aimed at actively increasing competition.

Third, the Antitrust Authority was traditionally an enforcement agency and the task of ongoing regulation was vested exclusively in the hands of market regulators (eg, the Ministry of Telecommunications or the Bank of Israel). Reforms aimed at increasing competition in these markets were led by these regulators, with the authority merely serving as a adviser. This separation of powers was based on the idea that market regulators are more familiar with the industry and therefore better suited to regulate it. Moreover, the market regulator is capable of analysing competition within a wider framework, taking into account other important aspects of industry regulation. The authority, on the other hand, can consider only the interest of competition. This argument is best illustrated in the banking industry, where the market regulator (the Bank of Israel) must maintain a balance between competition and other interests, such as the financial stability of the banks (insofar as these interests contradict).

The amendment attempts to address possible conflicts between market regulators and the commissioner. The amendment states that if the commissioner intends to implement enforcement measures in an industry that is regulated by another regulator, he must first consult that regulator. Moreover, if the commissioner wishes to implement measures in order to promote competition in a regulated industry, he must obtain the relevant regulator's consent. Special arrangements were implemented in the area of banking and capital markets.

In recent months, Israel has witnessed a wave of social protest aimed at, among other things, monopolies and oligopolies. This climate increases the likelihood that the authority will make use of its new powers in the coming months.

For further information on this topic please contact Shai Bakal at Tadmor & Co by telephone (+972 3 684 6000), fax (+972 3 684 6001) or email ([email protected]).