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Antitrust & Competition


The main goal of antitrust and competition laws is to deal with the market failure of insufficient competition. This phenomenon is professionally referred to as market power and it significantly harms economies which are based on the free market mechanism such as the Israeli marketplace. Thus, it is of no surprise that the Supreme Court of Israel referred to the antitrust laws as the "Magna Carta of consumer rights".

The Restrictive Trade Practices Law – 1988, is the main antitrust legislation in Israel. The Law consists of four substantive chapters: Restrictive Arrangements, Monopolies, Mergers and Concentration Groups.

 

1. Restrictive Arrangements

This chapter applies to arrangements between businesses, which may restrict competition. The regulation regime concerning restrictive arrangements is anachronistic and it is based on very broad definitions for restrictive arrangements and thus prohibits a long list of common commercial practices. Alongside these broad definitions, the law includes different clearance mechanisms: approval from the Antitrust Tribunal, exemption from the Israeli Antitrust Authority's General Director and block exemptions which apply to different types of common commercial agreements.

The focal point of the restrictive arrangements chapter lays in the prohibition of cartels. The law prohibits a list of typical cartel patterns such as price-fixing, market allocation, bid-rigging and so on. For a detailed analysis of cartel's supervision, see here.

 

2. Monopolies

According to the law, any person possessing a market share exceeding half of either the supply or the purchase is a monopoly. The law enables the General Director the authority to declare that any such person is a monopoly, but nevertheless any person who meets the above market share test is a monopoly, regardless on whether it has been declared as such.

While there is no prohibition on possessing a monopoly, the monopolistic status holds prohibitions and obligations that do not apply to other entities. The main prohibition in the law is directed at abuse of dominance.

Different practices may be deemed as abuse of dominance, including refusal to grant access to essential facility, the price in which the monopoly provides its goods, price discrimination between different customers which affects their competitiveness in a downstream market and prohibited tying between the supply of the monopolized product and another product.

 

3. Mergers

The law defines a merger of companies as the acquisition of more than a quarter of the nominal value of the issued share capital, or of the voting power in the general assembly (or any other parallel body), or the power to appoint more than a quarter of the directors, or participation in more than a quarter of the profits, or the acquisition of the majority of the company assets.

Not all mergers require clearance from the General Director – the clearance is required only if certain thresholds are met.

If the merger requires the General Director's clearance, it is examined by the economic department in the IAA. The purpose of the examination is to examine the probable effect of the merger to the competition in the affected markets. If the General Director finds that there is a reasonable likelihood that, as a result of the merger as proposed, competition in the relevant market would be significantly harmed it has to clear the merger subject to remedies, or in the lack of remedies that can relive (ease?) these concerns – to block the merger. For a broad review of the merger review process, including foreign mergers see here.

 

4. Concentration Groups

The concentration groups' chapter is unique to Israel and there is no parallel regulation in other jurisdiction. The chapter's goal is to deal with markets in which the small number of competitors leads to lack of effective competition, without explicit coordination between competitors (an oligopolistic equilibrium). Unlike other chapters of the law, this chapter does not include prohibition on the members of a concentration group but rather enables the General Director to instruct members of the group with respect to their conduct, in order to enhance competition in the market.

 

5. Enforcement

The antitrust laws enforcement tools are of wide variety. Generally, violations of the law are exposed to both public and private enforcement.

The public enforcement is conducted by the Israeli Antitrust Authority. The Authority manages its enforcement procedures from start to end – starting at gathering the facts (including by way of a criminal investigations) and until the final decision at trial.

The Authority is equipped with a wide range of enforcement tools: any violation of the law is criminal (although in practice the IAA's policy is to bring charges only against hardcore violations); the General Director has the power to impose monetary sanctions, including against individuals; the General Director also has the authority to publish a determination according to which a certain entity or person has violated the law and such determination would serve as prima facie evidence in any other legal proceedings; in addition, some matters the General Director has the power to instruct certain entities to take a specific action or refrain from taking it.

 

In addition to all of the above, the General Director can agree on a consent decree with a person which allegedly violated the law, in lieu of other enforcement tools. A consent decree can be agreed upon without admission of liability of the alleged violator.

Any violation of the law is a tort and as such exposes the violator to private enforcement. The private enforcement could be initiated by any person that incurred damage as a result of the violation. Amongst others, private enforcement could be made by way of class actions, and recent years have shown a considerable increase in such class actions.

 


 


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Antitrust & Competition


The main goal of antitrust and competition laws is to deal with the market failure of insufficient competition. This phenomenon is professionally referred to as market power and it significantly harms economies which are based on the free market mechanism such as the Israeli marketplace. Thus, it is of no surprise that the Supreme Court of Israel referred to the antitrust laws as the "Magna Carta of consumer rights".

The Restrictive Trade Practices Law – 1988, is the main antitrust legislation in Israel. The Law consists of four substantive chapters: Restrictive Arrangements, Monopolies, Mergers and Concentration Groups.

 

1. Restrictive Arrangements

This chapter applies to arrangements between businesses, which may restrict competition. The regulation regime concerning restrictive arrangements is anachronistic and it is based on very broad definitions for restrictive arrangements and thus prohibits a long list of common commercial practices. Alongside these broad definitions, the law includes different clearance mechanisms: approval from the Antitrust Tribunal, exemption from the Israeli Antitrust Authority's General Director and block exemptions which apply to different types of common commercial agreements.

The focal point of the restrictive arrangements chapter lays in the prohibition of cartels. The law prohibits a list of typical cartel patterns such as price-fixing, market allocation, bid-rigging and so on. For a detailed analysis of cartel's supervision, see here.

 

2. Monopolies

According to the law, any person possessing a market share exceeding half of either the supply or the purchase is a monopoly. The law enables the General Director the authority to declare that any such person is a monopoly, but nevertheless any person who meets the above market share test is a monopoly, regardless on whether it has been declared as such.

While there is no prohibition on possessing a monopoly, the monopolistic status holds prohibitions and obligations that do not apply to other entities. The main prohibition in the law is directed at abuse of dominance.

Different practices may be deemed as abuse of dominance, including refusal to grant access to essential facility, the price in which the monopoly provides its goods, price discrimination between different customers which affects their competitiveness in a downstream market and prohibited tying between the supply of the monopolized product and another product.

 

3. Mergers

The law defines a merger of companies as the acquisition of more than a quarter of the nominal value of the issued share capital, or of the voting power in the general assembly (or any other parallel body), or the power to appoint more than a quarter of the directors, or participation in more than a quarter of the profits, or the acquisition of the majority of the company assets.

Not all mergers require clearance from the General Director – the clearance is required only if certain thresholds are met.

If the merger requires the General Director's clearance, it is examined by the economic department in the IAA. The purpose of the examination is to examine the probable effect of the merger to the competition in the affected markets. If the General Director finds that there is a reasonable likelihood that, as a result of the merger as proposed, competition in the relevant market would be significantly harmed it has to clear the merger subject to remedies, or in the lack of remedies that can relive (ease?) these concerns – to block the merger. For a broad review of the merger review process, including foreign mergers see here.

 

4. Concentration Groups

The concentration groups' chapter is unique to Israel and there is no parallel regulation in other jurisdiction. The chapter's goal is to deal with markets in which the small number of competitors leads to lack of effective competition, without explicit coordination between competitors (an oligopolistic equilibrium). Unlike other chapters of the law, this chapter does not include prohibition on the members of a concentration group but rather enables the General Director to instruct members of the group with respect to their conduct, in order to enhance competition in the market.

 

5. Enforcement

The antitrust laws enforcement tools are of wide variety. Generally, violations of the law are exposed to both public and private enforcement.

The public enforcement is conducted by the Israeli Antitrust Authority. The Authority manages its enforcement procedures from start to end – starting at gathering the facts (including by way of a criminal investigations) and until the final decision at trial.

The Authority is equipped with a wide range of enforcement tools: any violation of the law is criminal (although in practice the IAA's policy is to bring charges only against hardcore violations); the General Director has the power to impose monetary sanctions, including against individuals; the General Director also has the authority to publish a determination according to which a certain entity or person has violated the law and such determination would serve as prima facie evidence in any other legal proceedings; in addition, some matters the General Director has the power to instruct certain entities to take a specific action or refrain from taking it.

 

In addition to all of the above, the General Director can agree on a consent decree with a person which allegedly violated the law, in lieu of other enforcement tools. A consent decree can be agreed upon without admission of liability of the alleged violator.

Any violation of the law is a tort and as such exposes the violator to private enforcement. The private enforcement could be initiated by any person that incurred damage as a result of the violation. Amongst others, private enforcement could be made by way of class actions, and recent years have shown a considerable increase in such class actions.

 


 

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Concentration Law >


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Food Law >


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Price Control >