Unprecedented Sanction for Failing to Provide a Full Response to the Israel Competition Authority’s Demand for Data

A few days ago, the Israel Competition Authority’s Director General announced her intention to impose a financial sanction on Neto Malinda Trading Ltd. for ILS 8,649,210, subject to a hearing. This sanction follows the company’s failure to provide a full response to the Director General’s demand for data pertaining to the company’s agreements with a food retailer.

The Director General reached her decision after Neto Malinda forwarded only partial information to the ICA in response to its demand for data. The demand was issued to the company as part of the ICA’s extensive efforts to examine the legality of commercial agreements between major food suppliers and major retailers.

Neto Malinda declared it had forwarded full and complete information, but the ICA discovered Neto Malinda was in possession of additional documents and correspondence that it withheld from the Director General. (According to the Director General’s announcement, the ICA received these additional materials from other parties.)

The Director General announced that she intends to impose a financial sanction on Neto Malinda totaling about ILS 8.65 million for violating the law. The Director General deems this violation to be an attempt to obstruct enforcement of the Economic Competition Law and the Food Law. Neto Malinda is entitled to a hearing before the Director General before she reaches a final decision in this regard.

Declaration of Intent

This is not the first decision to impose sanctions on companies that fail to respond adequately to the ICA’s demands for data. In recent years, the Director General has imposed financial sanctions for failure to provide full responses to demands for data on Ynet, Bezeq, the Israel Electric Company, Tnuva, Supergas, Leadiant Biosciences Ltd., and Leadiant Biosciences S.p.A.

However, the Director General is now issuing a clear declaration of her intent to enforce laws rigorously, as this is the highest sum ever imposed on a company for failing to provide an adequate response to the ICA’s demand for data. This sum approaches the maximum sanction the Director General may impose on a corporation that fails to fulfill its obligation to provide a full response, i.e., ILS 8,906,500.

It is evident the Director General intends to exercise the authorities vested in her pursuant to the Food Law and the Economic Competition Law in an uncompromising manner.

Courses of Action

It is important to keep in mind that any company that deliberately or maliciously fails to provide a full response to demands for data exposes itself to the risk of indictments against the corporation and its senior executives. For example, this was the outcome for Huliot Agricultural Cooperative Society Ltd. and its CEO, Mr. Paul Steiner, who was convicted and sentenced to community service.

Therefore, any company that receives a demand for data from the Director General, whether by virtue of the Food Law, the Economic Competition Law, or any other law, should be meticulous about full compliance with such demand.

However, when responding to demands for data, companies may have a right not to disclose particular materials since they can be privileged or confidential. Moreover, there are courses of action that may enable them to protect such information from perusal by third parties.

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Barnea Jaffa Lande’s Antitrust and Competition Department is at your service to answer any questions in this regard.

Adv. Gal Rozent heads the department.

Adv. Ran Karmi is an associate in the department.