Recently, the Israel Antitrust Authority (IAA) published a memorandum of law entitled “Strengthening Enforcement and Reducing the Regulatory Burden.” At issue is a comprehensive amendment to the Restrictive Trade Practices Law. This amendment seeks to focus the prohibitions prescribed in the law on the core prohibited trade practices. It also seeks to increase the enforcement measures against entities with a material impact on the economy.
Following is a brief summary of the key amendments:
Expanding the application of the law -The memorandum expands the definition of the term “company” to explicitly include foreign companies, foreign partnerships, and NPOs. This means the relevant provisions of the law will also apply to foreign companies (and partnerships) not registered in Israel. This will be based on their nexus to the Israeli market.
Relieving the burden – The memorandum seeks to increase the minimal turnover threshold for triggering the prior notification requirement for mergers to aggregate sales turnover of the merging parties to NIS 360 million (instead of the current NIS 150 million). In other words, merging parties whose joint sales turnover in Israel exceeds NIS 360 million will be required to submit a merger notice and obtain prior approval for the merger from the Antitrust Commissioner.
Shortening time frames – The IAA seeks to shorten the time period granted to the Antitrust Commissioner to handle an application for an exemption from obtaining an approval for a restrictive trade arrangement from 90 days to 30.
Revising the monopoly test – The Restrictive Trade Practices Law determines the existence of a monopoly based on a single test—the holding of more than a 50% market share of the relevant market. Within the scope of the memorandum, the IAA is proposing to expand the definition by adding an alternative to the market share definition. Thus, a monopoly would also be defined as any entity that holds “significant market power,” i.e. any entity that can significantly influence the quantity of products or services being traded in the market or the price at which they are sold, even if that entity’s market share is less than 50% of the market.
Sanctions – The memorandum proposes that the offense of being a party to a restrictive trade arrangement be subject to the most severe punishment—up to five years of incarceration—even without the existence of aggravating circumstances. On the other hand, the memorandum proposes that, in relation to other violations of the law, such as a failure to fulfill conditions imposed by the Commissioner in a restrictive trade arrangement or merger approval, abuse of a monopolistic power, and other supplementary provisions, the maximum punishment be three years of incarceration, regardless of the existence of aggravating circumstances.
Administrative sanctions – The IAA seeks to amend the law so that the current maximum penalty within the scope of an administrative proceeding—equal to NIS 24,490,070—be vacated and the updated maximum penalty be set at 8% of the sales turnover of the offending corporation. The updated “differential punishment” formula would eliminate the de facto leniency enjoyed by major corporations.
Although this is still an early stage of the legislative process, the memorandum suffices to indicate the IAA’s intention of aligning the competition laws in Israel with the competition laws customary in developed economies around the world.