Expected Amendment to Israel’s Food Law: Significant Regulatory Relief for Small and Mid-Sized Pharma Chains

In the coming days, the Knesset is expected to vote in second and third readings on a significant amendment to the Promotion of Competition in the Food and Pharma Sectors Law, dubbed the “Lior Adika Law.” The amendment sets a new, higher threshold for defining a “large retailer” in the pharma market. It is thus expected to significantly ease the regulatory burden currently imposed on small and mid-sized chains in the sector. This is an unusual move, in which the legislature is explicitly differentiating between dominant pharma chains (such as Super-Pharm and Be) and emerging players perceived as potential engines of competition that are intended to spur market rivalry.

Background: A “Regulatory Trap” in the Pharma Market

The Food Law was originally enacted due to concerns about excessive concentration in the food market and its impact on consumer prices. The law imposed various restrictions and obligations on “large retailers”—defined as retailers with sales turnovers exceeding ILS 286 million—including price reporting obligations, restrictions on opening branches in close proximity to competitors, prohibitions on interfering with suppliers’ prices, and limitations on the offering of private-label products.

In the pharma sector, the law’s provisions applied uniformly to all chains, regardless of their volumes of activity, sales turnovers, or actual market power. As a result, small and mid-sized chains that entered the market and attempted to bite into major chains’ market shares found themselves subject to the same heavy regulatory burden originally intended to control dominant players.

The case of the Adika Pharm chain, which had relatively small-scale operations, became a symbol of this regulatory trap.

Key Change: New Definition of “Large Retailer” in the Pharma Market

The amendment proposes a new definition of “large retailer” in the pharma market, which includes two cumulative criteria: (1) annual turnover exceeding ILS 450 million (compared to ILS 280 million today), and (2) operation of at least 12 active branches.

Only a pharma chain that fulfills both criteria will be deemed a “large retailer” subject to all regulatory obligations under the Food Law. Chains that fail to fulfill one or both of these criteria will be exempt from price reporting obligations, the requirement to obtain special approval to open branches near competitors, and other restrictions prescribed in the law.

Legal and Regulatory Implications

The amendment reflects a trend of “graduated regulation,” under which the regulatory burden is tailored to a retailer’s size and market power. Instead of imposing uniform obligations and restrictions on all market players, the legislature is differentiating between them, calibrating the level of obligations and restrictions that apply according to each player’s size and market share. This approach is well established in other sectors, such as the financial and communications sectors, and is now being applied to the pharma market as well.

In practical terms, the amendment gives small and mid-sized pharma chains more business flexibility, enabling them to exert competitive pressure on dominant chains, to whom all provisions of the Food Law will continue to apply.

Conclusion

The amendment constitutes a significant step toward graduated regulation and achieving a balance between supervising dominant players and encouraging competition and the entry of new players to the market. However, it does not change the trend of stepped-up enforcement against substantive violations of the Food Law. Therefore, companies operating in the pharma market, regardless of their size, must understand the amendment’s legal implications, should it be enacted.

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

Dr. Ran Karmi is an associate in our firm’s Antitrust and Competition Department.

Barnea Jaffa Lande’s Antitrust and Competition Department provides legal services across all aspects of antitrust and competition law. It represents clients in criminal and civil courts, before the Competition Tribunal and the Director General of Israel’s Competition Authority, and vis-a-vis other legislative and regulatory authorities. The team also guides clients in a wide range of business transactions, offering ongoing legal counsel throughout the process.

The department is at your service to answer any questions about the Promotion of Competition in the Food and Pharma Sectors Law.