Since its establishment in 1994, the Israeli Antitrust Authority ("IAA") has had strong enforcement powers, including extensive investigatory powers and the ability to file criminal charges.
However, the introduction of administrative fines in 2012 allowed the IAA to take the enforcement of the antitrust law to a new level. It took the IAA some time before it could use its new administrative powers. Though the second half of 2015 saw this process come to fruition with both consent decrees and unconsented administrative fines. This was coupled recently by an unprecedented criminal sentence of 12 months in jail for two of the members of the so-called "Bread Cartel".
Adv. Michal Cohen of the IAA, then acting chief legal counsel, in a recent conference (October 28th, 2015) explained that the power to impose administrative fines also allows the IAA to reach more effective consent decrees.
The increased enforcement trend is manifested, among other things, by the prominent decisions described in this client update.
These decisions relate to all different infringements covered by the antitrust laws: unlawful restrictive arrangements; abuse of monopoly power; and mergers that were consummated without the approval of the Israel Antitrust Authority's Commissioner ("Commissioner").
Consent Decree in the matter of Harel Insurance Company and Madanes Insurance Agency
- Vertical Restraints in the insurance business
- In October 2015, the IAA published its intention to file with the Antitrust Tribunal a request for consent decree under section 50B of the Restrictive Trade Practices Law, 1988 ("RTPL") in the matter of Harel Insurance Company and Madanes – an insurance agency, concerning an exclusivity and non-competition agreement between them regarding medical malpractice insurance.
- Under this prospective consent decree the parties will abolish all exclusivity and noncompetition clauses in the agreement between them and pay the total sum of NIS 6 million (4 million by Harel and 2 million by Madanes).
- This consent decree will be a step up in enforcement, since the relevant agreements are vertical in nature: exclusivity agreements between an insurer and an insurance agent. Following the publication of the prospective consent decree, a class action was also filed against the parties.
Consent Decree in the matter of retail chain Bitan Wines – mergers in food retail business
- In November 2015, the Antitrust Tribunal approved a consent decree with regard to supermarket chain Bitan Wines. The Antitrust Tribunal's decision states that Bitan Wines was, between the years 2007 and 2012, party to a series of acquisitions amounting to "mergers of companies" under the RTPL, which Bitan Wines did not duly notify to the Commissioner.
- According to the consent decree, Bitan Wines will pay the sum of 600,000 NIS to the state. The Bitan Wines decision is one of a series of decisions to enforce compliance, even in cases which do not involve first order harm to competition.
- A decision defending similar principles was rendered at the time in the matter of Beit Milano, where an administrative fine was imposed for non-compliance with an IAA request for information.
Administrative Fines on Ashdod Seaport for an Alleged Breach of Monopoly Laws
- On December 21st, 2015, the Israeli Antitrust Commissioner published a precedential decision in the matter of Ashdod Seaport Company. The decision concerns rebates given by the Seaport, which, according to the Commissioner, created a "significant expansion barrier" to Haifa Seaport in the field of vehicle unloading from roll-on roll-off ships from Europe and the USA.
- According to the decision, Ashdod Seaport offered Israeli vehicle importers some rebates, which were allegedly dependent on targets for the amounts of vehicles to be unloaded. The targets were set in a differential manner with different targets for each importer.
- The Commissioner concluded that rebate agreements were individually tailored to each importer, and that rebates were given "retroactively". The Commissioner argues that a vehicle importer who did not reach the targets due to unloading of vehicles in Haifa Seaport lost the rebate under the agreement. The Commissioner also reasoned that Ashdod Seaport reached de-facto exclusivity with vehicle importers.
- In the decision the Commissioner declared, for the first time, that Ashdod Seaport is a monopoly and that it abused its position and imposed a NIS 9 million fine on Ashdod Seaport (instead of the 12 million originally considered) and personal fines of NIS 20,000 each on two Ashdod Seaport officers(instead of the 200,000 originally considered). Our firm represented the two officers.
- The Ashdod Seaport decision is precedential in many ways, and inter alia since it imposes for the first time, administrative fines on a corporation's officers and not just on the corporation itself, as was the case until now.
- The decision is part of a regulatory environment which leaves great ambiguity as to when monopoly pricing is prohibited under Israeli law. Since a monopoly in Israel is defined as over 50% market share, and no dominance must be shown, any entity with a market share above 50% in Israel should tread very carefully with regard to pricing, incentive policies, discounts and rebates.
The Bread Cartel – Unprecedented Criminal Punishment
- On January 13, 2016 the district court of Jerusalem imposed jail sentences on two of the participants in a cartel between industrial bread bakeries which covered about 90% of the market for price-supervised bread in Israel.
- The verdict followed a partial admission of some of facts by the convicted participants. According to the District Court's decision, the bread bakeries came to an agreement to cease price wars (by way of sales promotions) that erupted on the background of a longsettled practice to avoid competition on existing customers and limit competition to new customers only.
- A sentence of one year imprisonment was imposed on two of the participants – the CEO of one of the largest two bakeries in Israel as well as the owner of a smaller bakery. 6 months of community service were imposed on one of the bakeries' VP marketing, who was not sent to jail due to "highly exceptional circumstances" pertaining to his family. The case continues to be heard in the district court of Jerusalem with respect to other defendants.
- This decision sets the sanctions bar even higher than before for cartels, and shows that cartel enforcement and the risks involved in cartels have not decreased in the least.