The New Block Exemption

The Director of the Israeli Antitrust Authority has recently enacted a new block exemption, which constitutes a material reform in Israeli antitrust regulation.

The new block exemption applies to arrangements that withstand four conditions:

  1. The arrangement is non-horizontal (also known as vertical). Vertical restrictive arrangements are arrangements between parties that are not competitors, usually being arrangements between parties that are different links of the supply chain (such as manufacturer and distributor).
  2. The arrangement does not contain price restrictions for resale, other than maximum prices for resale.
  3. The restrictions in the arrangement do not significantly impair competition;
  4. The restrictive arrangement is not mainly for the reduction of competition (i.e. it is mainly for commercial reasons).

What Changed?

The new exemption exempts arrangements complying with the aforesaid conditions from the requirement under the Israeli Antitrust Law, 1988, to have it approved in advance by the Antitrust Court. However, compliance with such conditions is still subject to scrutiny by the Antitrust Authority after the arrangement is entered into. Therefore, what the new exemption actually does is shifting to a "self-assessment" regime, as customary in the USA and EU.

The new exemption is based on substantive criteria, unlike former exemptions in the same field that were based on numeric or formalistic criteria. In addition, the new exemption permits maximum resale prices (as customary in the USA and the EU). Until now, maximum resale prices were generally regarded as prohibited under Israeli antitrust law.

Advantages and Disadvantages

The vague definition of "Competitor" in the exemption as well as the lack of formalistic guidelines therein may cause certain legal uncertainty in matters that may have material implications, including the broadened administrative measures the Antitrust Authority may apply and criminal implications.

On the other hand, the new exemption modernizes Israeli antitrust law in light of the free market theory and should save resources valuable to the authorities and the business sector. The flexibility of the exemption also makes it more practical and eases antitrust regulation on vertical arrangements, where it is allegedly less critical.

What do you think? Will the new exemption materially affect antitrust regulation and how?

Link to the full version of the exemption: