First enforcement proceedings in Israel imposing a fine in respect of harm to parallel imports
On December 15, 2024, the Director-General of the Israel Competition Authority announced her intention to impose, subject to a hearing, a fine of approximately ILS 15.7 million on the Ofer Avnir Group and an additional fine of approximately ILS 400,000 on one of its officers for a prima facie violation of the provisions of the Economic Competition Law regarding parallel imports.
This marks the first instance in which the Israel Competition Authority is enforcing the new provisions added to the Competition Law in 2023, which prohibit harm to parallel imports to Israel (see our previous update about the amendment here).
Backdrop to the proceeding
The Ofer Avnir Group, an importer of Kymco scooters, allegedly engaged in actions that resulted in the discontinuation of supply of Kymco scooters to Get Moto, a parallel importer that had initiated efforts to import them into Israel.
According to the Director-General’s announcement, at the beginning of 2024, shortly after Get Moto began its parallel importing, a representative of the Ofer Avnir Group visited Get Moto’s showroom and photographed the VIN numbers of scooters imported through parallel importing. An officer of the Ofer Avnir Group then forwarded those photographs to the scooter manufacturer. On the very same day, the Polish supplier providing scooters to Get Moto notified it was ceasing supplies due to instructions from the manufacturer.
The Director-General stated that obstructing the supply of scooters to the parallel importer harmed the nascent parallel importing activity and hindered the development of this competitive channel in Israel’s scooter market, where the vast majority of scooters are imported by just three importers, including the Ofer Avnir Group.
Parallel import provisions and Position Statement 2/23
The parallel import provisions introduced in the 2023 amendment to the Economic Competition Law aim to strengthen parallel imports as a key competitive channel against vis-à-vis direct importers.
The Competition Law prohibits direct importers from engaging in actions specified in the law if they meet any of the following criteria:
- They may harm parallel or personal imports in the relevant sector, and, consequently, harm competition in that sector.
- Their primary purpose is to prevent or reduce competition from parallel or personal imports, without a legitimate business purpose (regardless of the potential or actual outcome of the action).
- They may prevent or reduce competition from parallel or personal imports and are not necessary for the fulfillment of the primary purpose of importing the goods as a direct importer, even if this purpose is legitimate and not intended to harm competition.
The types of prohibited actions for a parallel importer (provided they meet the conditions prescribed in the law) include: engaging in arrangements, dictating commercial terms, instructing retailers to mark or display goods originating from parallel imports differently, refusing to provide goods or services, reporting goods originating from parallel imports, and making unilateral changes in commercial conditions.
Public Statement 2/23, published by the director-general in September 2023, provides interpretation and guidelines regarding provisions of the law on parallel imports. It clarifies that the legality of a direct importer’s conduct is s assessed based on the specific circumstances of each case, taking into account the nature of the act, its motives, and its potential consequences.
In the current case, the Director-General believed that Ofer Avnir Group’s conduct satisfied all three criteria for violations of the Competition Law: This conduct harmed parallel imports by Get Moto and obstructed competition from parallel imports, caused (or at the very least could have caused) significant harm to competition in the scooter market, and constituted actions primarily aimed at preventing or reducing competition from parallel imports.
Looking Ahead: Competition Law Enforcement Regarding Parallel Imports
As noted, this is the first case in which the Competition Authority enforces the new provisions in the Competition Law regarding parallel imports, and we believe it signals a trend of increased enforcement by the Competition Authority in this area.
Since the boundary between legitimate competition by a direct importer and actions that may be considered a violation of the law is not always clear, it is important for direct importers to carefully examine their conduct in relation to parallel imports and parallel importers in order to minimize the risk of violating the law. At the same time, parallel importers should familiarize themselves with the protections granted to them under the law.
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Our firm’s Competition and Antitrust Department is at your service.
Adv. Irit Brodsky is a partner in the department.