2022 was an intensive year in competition law. Material issues to the competition agenda were addressed in precedential determinations and rulings by the Competition Authority and by Israeli courts. These issues include excessive pricing by monopolies, new merger announcements, and ramped-up efforts to contend with restrictive trade practices. Following is a review of the main issues.
Increased Enforcement of Prohibition on Charging Excessive Prices
2022 saw two important developments in the enforcement of the prohibition on monopolies from charging unfair excessive prices.
Recognition of a cause of action in respect of unfair excessive pricing
In July 2022, the Israeli Supreme Court handed down a precedent-setting ruling in the Central Bottling Company case. The court determined the Economic Competition Law enables consumers to sue monopolies for charging unfair excessive prices. They may also file class actions on this ground. By doing so, the Supreme Court resolved a long-standing dispute: whether the prohibition on “unfair pricing” of products or services the Economic Competition Law imposes on monopolies also applies to charging an excessive price (and not just to low, predatory prices that drive competitors out of a market).
The Supreme Court also eased plaintiffs’ burden of proof and ruled that if a plaintiff succeeds in proving a monopolist charged an excessive price, the burden will shift to the monopolist to prove the price it is charging is fair. This ruling is likely to provide significant tailwind to private plaintiffs and to class plaintiffs looking to sue monopolists on the grounds of charging unfair excessive prices. [For the full update, click here.]
For the first time in Israel, fines are imposed on a monopoly and its officers for charging an unfair excessive price
In December 2022, the Competition Authority’s Director-General ruled, for the first time, that a monopoly had charged an unfair excessive price for a product it marketed. The Director-General imposed pecuniary sanctions on the monopolist and its officers as a result. These enforcement measures came against MBI Pharma, the exclusive marketer in Israel of a life-saving drug called Leadiant. According to the Director-General’s ruling, the price MBI Pharma set for the drug is excessive and unfair and constitutes abuse of its monopolistic position. The Director-General imposed sanctions on MBI Pharma totaling ILS 8 million, as well as sanctions totaling hundreds of thousands of shekels on two officers of the company.
Restriction of Release from Criminal Liability Based on Legal Advice
The Israeli Supreme Court ruled that a release from criminal liability on the grounds of reliance on assistance of legal counsel shall not apply when an attorney fails to warn about the illegality of an intended action, even if the counsel is present while the illegal action is conducted. This ruling resolved a case involving construction contractors accused of colluding not to tender bids to tenders for the construction of reinforced security rooms. The court stated that, under the circumstances of the case, the client cannot evade indictment on the grounds it relied on assistance of counsel. [For the full update, click here.]
Stricter Position on RPM Arrangements
Israel Competition Authority issued draft updated public statement regarding RPMs
RPMs are resale price maintenance arrangements in which a manufacturer, importer, or supplier of products dictates the consumer retail price of its goods to downstream distributors or retailers. The Director-General’s draft contains several changes regarding how to examine competitive concerns against the pro-competitive benefits arising from RPM arrangements. The Director-General stated the Competition Authority is taking a stricter approach toward RPM arrangements because they pose a threat of restraint of intra-brand price competition and because they raise other competitive concerns. The bottom line is that the Director-General’s position is that, as a rule, it is unwarranted to engage in an RPM arrangement that dictates a minimum price or a fixed price, unless the characteristics of the market indicate an intense level of competition, and only then for the purpose of achieving a proven pro-competitive benefit. [For the full update, click here.]
Procedures against suppliers for dictating prices to downstream retailers
In July 2022 the Competition Authority Director-General ruled that Argentools, the exclusive importer in Israel of Makita brand electric power tools, was a party to minimum RPM arrangements that constitute prohibited restrictive arrangements in the field of electric power tools. According to the Director-General, Argentools restricted the competition between retailers over the brand’s prices. The Director-General imposed a pecuniary sanction on Argentools totaling about ILS 5.5 million and sanctions on three of Argentools’ officers.
In December 2022 Energym, an importer of sports equipment, signed a consent decree with the Director-General. As part of the consent decree, Energym undertook to pay the State Treasury a total of ILS 1.65 million for intervention in the minimum prices at which retailers will advertise or sell its products (as well as for a partial response to an information request by the Authority).
These are the first cases in Israel in which the Director-General takes enforcement measures against suppliers for interfering in retail prices. These enforcement measures reflect the Authority’s stricter approach towards RPM arrangements, as outlined in the draft updated public statement.
Mergers
Change in the format for reporting mergers
The Competition Authority published a new and updated version of merger notices. Parties must now submit to the Director-General, already at the initial application stage, more information than in the past about themselves and their activities relevant to the merger. According to the Competitive Authority’s line of reasoning, the new requirements will lead to expediting the examinations of mergers that require approval and to reducing the need for additional inquiries to the merging parties and to third parties. However, to date, aside from increasing the burden on merging parties, the merger examination times have not shortened despite the changes to the reporting format. [For the full update, click here.]
Increased emphasis on examining conglomerate mergers
As a result of the strengthening of groups marketing a diverse variety of food and consumer goods in Israel (and which often hold exclusive concessions) and the increased concentration in these sectors, the Competition Authority recently placed greater emphasis on conducting deeper examinations of conglomerate mergers (i.e., mergers not between competitors and not between players in different links in the distribution chain).
Draft Public Statement on Demands to Receive Information
The Competition Authority published a draft statement laying out its policy regarding demands to receive information it requires to exercise its powers and regarding circumstances when parties that did not provide the information can ask to review it. The need to regulate this issue derives from the Competition Authority’s authority to collect information, often highly sensitive business and personal information, from various entities in the economy for the purpose of its activities. The draft statement specifies how the Competition Authority believes its demands for information should be met, and the circumstances under which other parties that did not provide this information may review it.
Focus on Examining Public Announcements
We recently witnessed the Competition Authority Director-General’s intolerance of public announcements made by market players that could harm competition and the decision to examine them as “restrictive arrangements.” A key indication of this is evident from the Competition Authority’s investigation of food manufacturers and retail chains. These investigations have continued for over a year, inter alia, on the grounds of suspected information exchanges between the players via the media or through public reports.
The Competition Authority reiterated its position at its annual conference in November. The Director-General emphasized concerns about information exchanges between competitors via the media, and the Competition Authority’s intolerance of such tactics.
Increasing Sectoral Advice to Various Ministries
In recent months, the Competition Authority has been providing advice at increasing frequency to various government ministries, including to the Ministries of Energy and Transportation. This trend is of considerable significance. Not only does it strengthen the mutual ties and dialogue between the various government bodies, but it also shows those ministries that refer to the Competition Authority for advice on competitive aspects of the public spheres under their purview are internalizing how important the relevant aspects of competition are and are also taking them into account during decision-making.
This is all in addition to the Competition Authority’s ongoing activities. These include investigations, hearings, and the filing of indictments for serious violations of core provisions of the Competition Law.
2023
In 2023, we expect to see the filing of significant indictments for violations of the restrictive arrangement offenses, also including violations of the Prohibition of Money Laundering Law; an uptrend in enforcement against monopolies; enforcement measures against companies that violate provisions of the Foods Sector Competition Promotion Law; and closer supervision of mergers with the goal of preventing food and consumer goods suppliers from becoming too dominant.
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Advs. Irit Brodsky and Ran Karmi are memebers of Barne Jaffa Lande‘s Antitrust and Competition Department.