Amendment to the Israeli Restrictive Trade Practices Law
On January 1, 2019, Israel’s parliament approved an amendment to the Restrictive Trade Practices Law. This amendment seeks to deepen and focus the Antitrust Authority’s efforts to prevent activities posing potential harm to competition and to the public. In addition, it aims to reduce the current bureaucratic and regulatory burden created by the control mechanisms imposed.
The sales turnover alternative for reporting mergers includes a two-fold test: (1) the aggregate sales turnover of the merging parties exceeds NIS 150 million and (2) the sales turnover of at least two of the merging parties is not less than NIS 10 million each. The amendment to the law raises the reporting threshold of the aggregate sales turnover test to NIS 360 million instead of NIS 150 million.
The current outcome is that a merger involving a large corporation (with a sales turnover in excess of NIS 360 million) and a small corporation (with a sales turnover of, let’s say, NIS 11 million) will be deemed subject to supervision prior to approval, despite the fact that this is not a merger that raises any concern about harm to competition, nor which triggers any other reporting alternatives prescribed in the law. In order to supplement the amendment, it would have been appropriate to also amend the Restrictive Trade Practices Regulations (Registration, Publication and Reporting of Transactions), 5764 – 2004, so that the NIS 10 million sales turnover threshold would also be raised significantly.
The amendment expressly clarifies that the provisions of the law will also apply to mergers involving nonprofit organizations.
The amendment extends the review time frame of the merger-approval application, if the Antitrust Commissioner finds that this is necessary due to the complexity of the merger and other questions arising from it. Consequently, the Antitrust Commissioner may extend the merger review period by two additional 30-day periods each. He also may, after consulting with the Exemptions and Mergers Committee, extend the period by another 60 days. This is a very substantial extension, which does not require a judicial proceeding or the parties’ consent, but rather is set by reasoned administrative decision.
The amendment broadens the definition of “monopoly holder” so that, in addition to the existing sole criterion whereby any party holding more than a 50% market share of a particular market is deemed a monopoly holder, it will also include any party holding significant market power. At issue are two criteria, and it is sufficient to fulfill one of them to be deemed a “monopoly holder.”
This means that companies with a market share of less than 50% but commanding significant market power, and companies commanding a market share of 50% and more but not wielding significant market power, will both fall under the new definition of “monopoly holder.” In both cases, the “monopoly holder” status does not require a formal declaration by the Antitrust Commissioner to subject a company to the provisions of the law applicable to monopoly holders. Therefore, companies with a material market presence are required to constantly self-assess their market positioning, prior to taking various business decisions.
Restrictive trade arrangements (cartels)
The amendment shortens the review period for applications for exemptions to restrictive trade arrangements to 30 days (instead of 90), unless the Antitrust Commissioner believes the review of the exemption application justifies extending the examination period for up to 120 additional days, cumulatively.
The amendment imposes a stiffer sentence on parties convicted of running a cartel—five years of incarceration instead of three.
The amendment increases the maximum pecuniary sanction that may be imposed on a corporation found in violation of the provisions of the law from NIS 24.5 million to NIS 100 million.
The amendment materially modifies and increases officers’ liability for the antitrust violations of a corporation. Officers will be required to supervise and do everything in their power to prevent violations of the law by the corporation or by any of its employees. If a corporation violates provisions of the law, the presumption now is that the officers are in breach of their duties, unless they can demonstrate they did everything possible in order to fulfill their duties. This represents an extraordinary enhancement of the IAA’s enforcement power. Prior to the amendment, the presumption was that the corporation bears ultimate responsibility for any violation of the law. However, as a result of the amendment, officers may be personally charged with a “failure to prevent” offense in certain instances and may potentially be subject to one year of incarceration and a financial fine.
Finally, the amendment changes the name of the law from the “Restrictive Trade Practices Law” to the “Economic Competition Law.” Accordingly, the Antitrust Authority will be called “the Competition Authority,” the Antitrust Commissioner will be called “the Competition Commissioner,” and the Antitrust Tribunal will be called “the Competition Tribunal.”