Israel Competition Authority Increases Enforcement against Exclusivity Arrangements

On December 30, 2020, the Israel Competition Authority (ICA) notified SOS, a company in the field of fueling services, it was imposing a financial sanction of NIS 6.3 million on the company. In addition, it imposed a financial sanction of NIS 350,000 on an executive officer in the company.

Following a complaint an SOS competitor filed with the ICA, the ICA concluded SOS had entered into exclusivity agreements with its clients. The company also implemented a policy whereby it would not provide fueling services to a client if the client simultaneously engaged with a competing fuel service provider.

In a reasoned decision, the ICA’s Director General found that SOS abused its monopolist power in a manner that may restrict competition unlawfully.

According to the decision, SOS abused its monopolist power by instating a policy of exclusivity by threatening to withhold field-fueling services to clients who began working with other providers. SOS did so in a manner that could reduce competition among businesses or harm the public. SOS linked its field-fueling services at different locations and threatened to stop providing such services to clients that did not use its services exclusively.

The ICA views monopolies, even if not officially pronounced as such, as responsible for not abusing their monopolist powers in ways that could reduce competition in the markets in which they operate. The ICA’s decision is a further step in increasing enforcement against monopoly holders and corporate officers.

In this case, the ICA imposed the financial sanction against a monopoly. However, in some cases, the ICA may interpret exclusivity arrangements as prohibited restrictive arrangements for corporations that do not necessarily hold the same market share and do not meet the definition of a monopoly.

It should also be noted that according to the law, even were SOS interested in doing so, it would not be permitted to indemnify or insure the executive officer who was sanctioned with a NIS 350,000 fine. Said executive officer must pay the sum to the Israeli State Treasury out of pocket.

The ICA’s enforcement and sanctions policies highlight the importance of securing legal advice in the area of competition law.