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ISRAEL: An Introduction to Competition/Antitrust

Israel has witnessed several significant trends in the competition/antitrust space during 2024, among the most notable being the stringent enforcement actions taken against food and retail companies, on both the supplier and retailer levels. Additionally, 2024 was marked by prolonged review proceedings handled by the Israeli Competition Authority (ICA), mainly with respect to merger control, which drew some judicial criticism for excessive focus on trivial matters (see, for example, case 2299/24, State of Israel v Moore, and case 30218-10-24, Wet Naps Ltd v the Insolvency Commissioner, discussed below).

Strict Approach Toward the Israeli Food and Retail Sector

Over the past year, the ICA has paid special attention to the food sector. As part of this effort, the Law on the Promotion of Competition in the Food Industry, 5774-2014, was amended and renamed the Law on the Promotion of Competition in the Food and Pharma Sectors (the “Food and Pharma Sectors Law”), extending its applicability to pharm-store chains.

Under this amendment, for certain products, contracts with what the Food and Pharma Sectors Law terms “pharma retailers” are now subject to detailed and precise regulations governing agreements, discounts, display arrangements and shelf space allocation. As a result, any contractual engagement requires careful scrutiny. The Food and Pharma Sectors Law aims to lower consumer prices by enhancing competition in these sectors.

During the last year, the ICA has vigorously enforced the Food and Pharma Sectors Law, imposing several fines on food companies, such as Tempo Beverages Ltd. (around USD1 million), Sano-Bruno’s Enterprises Ltd. (around USD4.3 million), Neto Malinda Trading Ltd. (around USD4.9 million), Diplomat Distributors (1968) Ltd. (around USD2.4 million) and Sugat Industries Ltd. (USD4.9 million).

In addition to this legislative amendment, the ICA appears to have intensified its enforcement actions against food suppliers and companies under the Economic Competition Law, 5748-1988 (the “Competition Law”). Thus, the ICA has recently filed indictments against supermarket chains and their executives. These indictments were the result of an extensive investigation by the ICA’s Investigations Department. In addition to allegations of “traditional” collusion and Food and Pharma Sectors Law breaches, these indictments include several charges of attempted collusion through public statements.

Moreover, in a precedent-setting move, the Competition Commissioner (the “Commissioner”) imposed the maximum possible financial sanction of approximately ILS111 million (over USD30.5 million) on Strauss Group Ltd. (“Strauss”). According to the Commissioner, Strauss and a small competitor in dairy alternatives engaged in gun-jumping by prematurely implementing certain provisions in a merger agreement between them. Specifically, a clause in their merger agreement restricted the small competitor from operating in certain fields during the interim period between the signing and closing of the transaction. This decision marks a significant milestone in the Commissioner’s enforcement approach, signalling a harsher stance on competition law violations.

Increased Scrutiny on Importers Operating in Israel

Recently, the ICA has also intensified its focus on importers operating in Israel.

This greater scrutiny has been enabled by Section 31f of the Competition Law, a new and globally unique provision that grants the Commissioner the authority to take both criminal and administrative actions against “direct importers” who reduce or harm competition. “Direct importers” are importers or distributors of imported goods who have an agreement with a goods manufacturer outside of Israel, or local franchise-manufacturers licensed by a franchisor outside Israel. This amendment creates a completely new “restrictive trade practice”, which, to the best of our knowledge, has no equivalent anywhere else in the world, limiting freedom of action for direct importers operating in Israel, as it includes a series of new prohibitions on direct importers that prohibit them from taking actions that prevent or reduce competition from parallel and personal imports.

The Commissioner has already exercised her powers under this new amendment in several matters discussed below.

Most recently, in the matter of scooter importer Ofer Avenir, a parallel importer purchased scooters from a foreign agent and began marketing them in Israel. Allegedly, representatives of the official importer visited the parallel importer’s showroom, took pictures of the scooters imported through the parallel importer, and passed the pictures on to the manufacturer. According to the ICA, the actions of the official importer led to the parallel importer receiving communications from the foreign agent, following which the manufacturer ordered them not to sell any more scooters for marketing in Israel, accompanied by the aforementioned photographs. According to the ICA, the actions of the official importer constitute a violation of Section 31f of the Competition Law since, according to the ICA’s interpretation, their main purpose was to prevent or reduce competition through parallel import.

In 2023, in the matter of MBI Pharma Ltd., an importer of the pharmaceutical known as “CDCA Leadiant”, a consent decree was reached after the local importer allegedly set excessive prices for the pharmaceutical. The importer was challenged even though the price increase was initiated by the international manufacturer, who faced excessive pricing allegations in other jurisdictions.

In the case of Metro Motor Marketing (1981) Ltd., the Commissioner notified it of its intention to impose administrative fines on the importer regarding the importing and marketing of Yamaha ATVs.

Finally, in the case of Argentools Ltd., the local importer of the Makita tool brand, the Commissioner, Argentools and its officials reached a settlement in the Competition Tribunal regarding resale price maintenance allegations, mostly in electronic sales.

Given these developments, importers should remain vigilant and manufacturers outside Israel should take the local prohibitions into account when setting expectations for their local representatives.

Lengthy and Extensive Examination Procedures

Over the past few years, the ICA’s review procedures have grown longer and more exhaustive, with inspected companies receiving increasingly extensive requests for information, including information from third parties, and being subject to prolonged proceedings for relatively minor transactions. This has raised concerns that the ICA may be over-focusing and spending resources on low-impact cases.

 

In a recent example, the Israeli Supreme Court stated ,in case of 2299/24 State of Israel v Mor, that the alleged offences (statements by the head a restaurateurs’ trade union during COVID-19) did not sit at the core of competition law, and questioned the ICA’s prioritisation of enforcement cases.Similarly, in case 30218-10-24 Wet Naps Ltd. v the Insolvency Commissioner, the court criticised the ICA’s delayed decision regarding the proposed acquisition of an insolvent company.

These cases highlight concerns that the ICA may over-invest in certain minor cases while under-investing in more crucial matters. Lengthy procedures may impose unnecessary costs on businesses, diverting resources that could be more productively allocated.

Conclusion

In conclusion, 2024 has seen the ICA intensify and expand its enforcement efforts, with an emphasis on food and retail companies and importers. Alongside the imposition of stricter sanctions, transaction review procedures have become increasingly demanding and time-consuming. Moving forward, it will be interesting to see whether the ICA heeds judicial criticism and improves its efficiency, or whether these trends will persist in the coming years.