A few days ago, the Israeli Antitrust Authority published a draft statement presenting its position with regard to the circumstances under which a supplier will be able to dictate the resale price of its products to its distributor for the next link in the supply chain (Resale Price Maintenance arrangements – RPM), without such an arrangement being considered an illegal restrictive arrangement.

The draft statement came in the wake of the precedent set about a year and a half ago by the Israeli Supreme Court in the Shufersal judgment (AR 5823/14).

Until the judgment was handed down, many vertical arrangements (i.e. arrangements between non-competitors such as supplier-distributor), including RPMs, had been included in the peremptory presumption and deemed unlawful restrictive arrangements – even if they did not pose any substantive harm to the competition – unless the arrangements had been permitted through one of the mechanisms prescribed in the Israeli Restrictive Trade Practices Law.

According to Shufersal judgment, RPMs will be examined according to the extent of their probable impact on competition. In other words, vertical arrangements having no potential restraining or curbing effect on competition will no longer be classified as restrictive arrangements, even if such arrangements concern matters included in the law’s peremptory presumptions.

The purpose of the Antitrust Authority’s recent statement is to clarify how it will be examining RPM arrangements and to make it clear that it will be examining RPM arrangements more meticulously than other vertical pricing arrangements.

The draft statement outlines the “rules of thumb” to be applied when examining whether RPM arrangements could potentially harm competition. According to the statement, an RPM arrangement will not be deemed a restrictive arrangement if the arrangement does not raise concerns of a probable adverse impact on competition in the specific market relevant to the parties, and furthermore, that the RPM serves a clear purpose of boosting competition. It is important to note that the Antitrust Authority’s statement differentiates between an RPM arrangement between a supplier and a retail distributor, and an RPM arrangement between a supplier and a wholesale distributor.

In its statement, the Antitrust Authority is advising parties to engage in retail segment RPM arrangements only if the following two conditions exist: (1) the RPM is not in a market characterized by scant competition or is not in a market plagued by a concern of collusion between the players in the market; (2) the RPM is needed in order to promote inter-brand competition and in a way that is beneficial to consumers. Insofar as the market characteristics indicate scant competition, an RPM arrangement will have to irrefutably justify that it is directly and concretely geared towards improving competition. As for arrangements not relating to the retail segment, their classification as restrictive arrangements will depend upon the nature of the relations between the supplier and the distributor.

The draft statements, coupled with the Shufersal judgment, herald substantial news for the Israel trade market, since they clarify matters considerably for both suppliers and distributors.