Antitrust Update

The Israel Antitrust Authority has recently stepped up its enforcement measures, and local courts are imposing stricter penalties for violations of the Antitrust Law. As a result, the Israeli business community faces greater antitrust compliance risks.

Up until a few years ago, Israeli courts treated individuals convicted of restrictive arrangements with relative leniency. They limited punishments to community service, probation, and fines of no more than NIS tens of thousands, except in the most clear-cut cases of cartel establishment and management.

The turning point in sentencing came in the “Shufersal” affair ruling. A court convicted Mr. Effie Rosenhaus and Mr. Eliezer Gidor of attempting to establish a restrictive arrangement and sentenced them to imprisonment.

The trend of increased severity in punishment continued in the “Bread Cartel” affair. The District Court sentenced several of the defendants to a year in prison, in addition to suspended sentences and fines of NIS hundreds of thousands.

Recently, the Israel Antitrust Authority filed an appeal with the Supreme Court in this matter. It requested the defendants’ punishment be even more stringent and closer to the sentencing cap of five years’ imprisonment and a NIS 4 million fine. This decision joins additional verdicts in the past few weeks, in the Veterinary Medical Association affair and in the price-fixing in the Meteorological Service tender affair.

The new regulatory reality requires business managers to fully comprehend the implications of any inclusion of restrictive arrangements (i.e., exclusivity clauses or non-compete clauses) in their agreements.

The trend toward increased enforcement and stricter punishments emphasizes the importance of consultation with relevant professionals prior to making any restrictive arrangement. This applies regardless of if the arrangement is a vertical arrangement, whose impact on the competition depends on the circumstances, and in many cases is likely to be justified as having a legitimate business purpose, along with an insignificant effect, if any, on the competition.