© All rights reserved to Barnea Jaffa Lande Law offices

Doing Business in Israel: Antitrust and Competition Aspects of M&A Transactions


Every foreign company considering a merger with an Israeli company (or with an international company connected to an Israeli company) must pay great attention to the various elements characterizing Israeli merger control. While competition laws (and especially merger control laws) are usually a local issue (unless two international giants merge), the truth regarding Israeli merger control laws is a bit different. Some of the elements to pay attention to are the Israeli Competition Director-General’s broad interpretation of the issue of “presence” and definition of a “merger of companies”; the thresholds for a merger to be notifiable, some of which are relatively unique (and might also capture small acquisitions made by international corporations in Israel); and the potential risks in case of failure to file.

The Legal Norm and the Regulator

The Economic Competition Law, and the regulations and rules promulgated thereunder, govern Israeli competition legislation.


The supervisory authority responsible for enforcing antitrust laws in Israel is the Competition Authority. The Director-General of Competition heads the Competition Authority.


The main rule in this codex governing merger deals is section 19 of the Economic Competition Law, which provides:


“Companies shall not merge unless, prior to this, a merger notification has been submitted and the consent of the Director-General to such merger has been given, and if such consent was conditioned – upon the conditions set by him…”



Accordingly, parties to a merger that requires notification, must obtain the Director-General’s approval prior to taking any operative step that one may view as the starting point of a merger. Examples of such steps include the transfer of money or shares, the granting of loans to the target company or to the seller, the appointment of an officer or director, interference with the activities of the acquired business, etc.

What Is a “Merger of Companies”?

Determining if a transaction requires the Director-General’s approval involves two procedural examinations. The first is to examine if the transaction constitutes a “merger of companies.”


Section 1 of the Economic Competition Law defines the term a “merger of companies” as follows:


“Including the acquisition of most of the assets of a company by another company or the acquisition of shares in a company by another company by which the acquiring company is accorded more than a quarter of the nominal value of the issued share capital, or of the voting power, or the power to appoint more than a quarter of the directors, or participation in more than a quarter of the profits of such company; the acquisition may be direct or indirect or by way of rights accorded by contract.”



Regarding a share acquisition deal, the Director-General’s position is that a “merger of companies” occurs upon crossing the holding threshold of 25% (or an additional 25%) with respect to any of the types of rights mentioned in the definition. For example, if A holds 24% of the voting power in B, and increases its holdings to 40%, a “merger of companies” is constituted. If A increases its share in the voting power in B to 60%, another “merger of companies” is constituted.


Regarding an asset acquisition deal, the interpretation of the term “most of the assets of a company” is not clear, and has not yet been decided by the Israeli courts. However, the Director-General’s position is that an acquisition of an asset that constitutes a significant element in the selling corporation’s competitive ability in an examined line of business is sufficient in order to satisfy this requirement.


Please note that, according to this position, a joint venture will be classified as a “merger of companies” if one entity is given, as a result of the constitution of the JV, a foothold in “most of the assets” of another entity (This is regardless of whether such a “foothold” is given in an existing entity, or if for the purposes of the transaction a new entity is founded, to which those assets are being transferred).


Except for the specific cases that constitute “a merger of companies” according to the above-mentioned definition, the Director-General’s position is that the word “including” used at the start of the definition indicates that any transaction that creates (or significantly strengthens) a substantial and continuous influence connection between the decision-making mechanisms of the companies involved in the transaction, either directly or indirectly, falls within the definition of a “merger of companies,” whatever the formal structure of such transaction is and whatever technique is used to create such a connection.


Section 1 of the Economic Competition Law defines the term a “company” as including, inter alia, companies that were founded and registered in Israel, including foreign companies so registered.


Principally, the Economic Competition Law is territorial, applicable mainly to Israeli entities. However, in a merger between an Israeli entity and a foreign entity that was not incorporated as such in Israel, however (a) owns more than 25% in an Israeli company, or (b) more than 25% of the shares of which are held by an Israeli company, or (c) has a “place of business” in Israel, the Director-General’s position has usually been that the Economic Competition Law shall apply to such a merger. The Director-General has applied the same position to a merger between two foreign companies, to the extent both companies meet the above-mentioned conditions.


Moreover, the Director-General’s policy has usually been that, in certain circumstances, it is sufficient for the foreign entity to have an office, an agent, or even an exclusive licensee/distributor in Israel, to consider such an entity a “company.”


The presence in Israel of a foreign company for the purposes of section 1 of the Economic Competition Law will face examination on a group-wide basis, i.e., it is necessary to review the presence in Israel of all the entities that are in direct or indirect “control relationships” (for this purpose, “control” is the holding of more than 50% of the voting power or of the power to appoint directors, directly or indirectly) with the merging company.


Where the seller sells all its shares or holdings in a business, only the presence in Israel of the sold business/company and its controlled entities requires examination, and the presence in Israel of the selling group is not relevant for this purpose.

Which “Merger of Companies” Requires Filing?

A transaction that constitutes a “merger of companies” would require the parties to file merger notices, and to wait for the approval of the Director-General if meeting any of the following criteria, as stipulated in section 17 of the Economic Competition Law. All criteria refer to the companies on a group-wide basis, including all companies controlling or controlled by the merging company, directly or indirectly.


  1. The “turnover” threshold: The aggregate sales volume, in Israel, of the merging parties in the year preceding the merger exceeded NIS 367.9 million (approximately USD 106 million), and the sales volume in Israel of at least two of the merging parties was, in the year preceding the merger, not less than NIS 20 million (approximately USD 6 million).
  2. The “monopoly” threshold: One of the merging companies has a monopoly in any market in Israel, even if such a market has no linkage to the certain transaction. Under the Economic Competition Law, a “monopoly” is a person that holds more than 50% of the supply or consumption in a relevant market in Israel.

    We note that if the transaction meets only this threshold, and the assumed “monopoly” in Israel is in a market that has no horizontal, vertical, or complementary connection to the transaction, the parties may apply for an exemption from the requirement to file (a no-action letter).

  3. The “aggregate market share” threshold: As a consequence of the merger, the merging companies will become a monopoly.


For parties that conduct business inside and outside of Israel, the aforesaid provisions apply only to the relevant party’s volume of sales, or market shares, in Israel.


Additionally, the relevant sales volume or market shares attributed to the parties are their sales volume and share in Israel. This is as opposed, for example, to revenues generated from sales of the parties’ products into Israel, made by independent distributors buying the parties’ products outside of Israel and selling them in Israel.

Potential Risks When a Merger Was Executed without the Required Approval

Closing a merger, or even starting to execute the merger (“jumping the gun”), prior to receipt of the Director-General’s (required) approval may expose the parties and their respective officers to enforcement measures:


  1. Criminal measures (relevant if the merger has anti-competitive concerns):
    • An individual faces up to three years’ imprisonment (or up to five years, in case of aggravating circumstances), and a fine of up to NIS 2.26 million (approx. 600 thousand USD). An officer not involved in breaching the law but that failed to supervise may face up to one year’s imprisonment.
    • A corporation faces a fine of up to NIS 4.52 million (approximately USD 1.2 million).
  2. Administrative measures (relevant if the merger raises no anti-competitive concerns):
    • An individual faces a fine of up to NIS 1.057 million (approximately USD 0.3 million).
    • A corporation with turnover that exceeds NIS 10 million faces a fine of up to 8% of its turnover, but the maximal fine will not exceed approximately NIS 102 million (approximately USD 30 million). In practice, the fines will not exceed a few million shekels.
    • The Director-General has the authority to issue a “determination” that a certain merger required filing. Such a determination constitutes “prima facie evidence of its contents in any legal procedure.” (In other words, to the extent third parties claim the parties breached the Economic Competition Law by way of executing an unapproved merger, the burden of proof to demonstrate the claim is erroneous shifts to the defendants).
    • In cases where execution of the merger violates the Economic Competition Law, and significantly harms competition or the public, the Competition Tribunal, following the Director-General’s application, may order a separation of the merged companies.

The relevant enforcement measure depends on the circumstances, inter alia, the significance of the merger, its threat to competition in Israel (if any), the status of the parties, the parties’ “history” as infringers of the Economic Competition Law, etc.

Additional Substantive Aspects Regarding Notifiable Mergers

  1. The fact that companies negotiate a potential merger does not allow them to exchange sensitive business information in a way that may jeopardize competition. Accordingly, in mergers between actual or potential competitors, the parties should take sufficient measures to avoid the unlawful exchange of such sensitive information.

    Such measures might include, for example, limitations on the number and offices of people that may review the sensitive information, non-disclosure of certain types of information (until an advanced stage of the negotiations, and sometimes until the merger approval is granted), disclosure only to third parties, sharing of aggregated data only, etc.

    The type and scope of such measures depend on the circumstances of the case, such as the type of required information, the risk to competition involved in the deal itself (and its chances of approval), the risk that the deal will not consummate for other reasons, etc.

  2. Non-compete and non-solicitation restraints included in the merger agreement, as well as other possible restraints (such as exclusive dealing and exclusive licensing of certain rights and assets), may be regarded as “restrictive arrangements.” They may also require a different legal analysis, as to whether such restraints fall within any of the “block exemptions” for certain types of restrictive arrangements. Such block exemptions cover non-compete and other restraints that are ancillary to mergers, non-horizontal restraints in general and exclusive dealing restraints specifically, etc.

Additional Procedural Aspects Regarding Filing in Israel

A few additional procedural issues are relevant in case of filing:


  1. Each merging party should file its own notice. An appropriate officer from the filing party should sign the notice. In addition, an internal or external legal counsel must confirm the authority of the signatory. The parties may file a notice after signing a binding agreement. There may be exceptional and rare occasions where the Competition Authority is willing to review a merger prior to the reaching of such a signed agreement.
  2. The Competition Authority may issue requests for information to the parties and to third parties (such as competitors, suppliers, customers, and so on). The time required for the Competition Authority to issue such inquiries, to receive responses, or to analyze the information does not come out of the statutory review period. Responding to such RFIs is obligatory, and failing to provide complete and authentic responses may lead to enforcement measures. In cases of intentional non-provision of complete information, such measures may even include criminal indictments.
  3. The parties are free to submit any material they deem relevant for the review of the merger. Third parties may also bring their arguments before the Director-General, and submit papers and opinions in this regard.
  4. The written opinion of the team reviewing the merger comes before an advisory committee, which can support the team’s opinion, ask for further inquiries, or reject the opinion. The Director-General is not obliged to accept the committee’s advice.
  5. The Director-General has 30 calendar days, starting upon the submission of full and complete notices, to provide his or her decision. Most decisions on mergers occur within this 30-day period. If the merger requires a more thorough review and/or raises anti-competitive concerns, the Director-General may extend the 30-day period by 60 additional days. After consulting with the advisory committee, he or she may then also extend by an additional 60 days. In most cases, the Director-General prefers to receive the parties’ consent to such extensions.
  6. The parties may appeal the Director-General’s decision to object to the merger or to approve it upon conditions to the Competition Tribunal. Any person who may be harmed by the merger, trade associations, and consumer organizations can appeal the Director-General’s decision to approve a merger (conditionally or unconditionally).



Gal Rozent is a partner and head of the firm’s Antitrust and Competition Department.

Barnea Jaffa Lande Law offices is at your service for any inquiry regarding M&A transactions in Israel.


More on Doing Business in Israel: 

Doing Business in Israel: Fintech

Doing Business in Israel: How to Take Part in Israeli Innovation

Doing Business in Israel: Forming a Limited Liability Company in Israel

Doing Business in Israel: Infrastructure Projects

Doing Business in Israel: Hedge Funds

Doing Business In Israel: Regulation of Carbon Pricing

Doing Business in Israel: Jurisdiction and Arbitration Stipulations

Doing Business in Israel through Agents and Distributors

Doing Business in Israel – Being an Employer