On 1st January 2019, a series of amendments to the Restrictive Trade Practices Law (“the Law”) were approved by the Israeli parliament. These amendments relate to the Israeli merger control regime, to the monopoly chapter in the Law, to the administrative fines, and to office holders’ criminal liability. The amendments encompass a number of significant changes that directly impact upon the business sector. We summarize below the main changes of relevance, but it should firstly be noted that the law will now be called the “Economic Competition Law”. Correspondingly, the name of the Antitrust Authority will be changed to the “Competition Authority” (“the Authority”) and the Director General will now be called the “Commissioner of Competition” (“the Commissioner”).
Broadening the definition of a “monopoly”, so that it will include undertakings with “significant market power”:
Prior to the recent amendments, a monopoly was defined as an entity having a market share that exceeds 50% of the supply or purchase of products or services in a specific market. Following the amendments, a monopoly will also be defined as an entity having “significant market power”, even if the market share is less than 50%.
As remarked by the Commissioner, in the framework of the discussions that took place in the Israeli parliament, it is possible for entities to hold significant market power even for a limited period of time only.
According to the Commissioner, the Authority intends to publish a guideline with respect to the manner for examining the existence of significant market power and, as noted by her, no enforcement measures will be implemented in this regard until publication of the guideline on the subject.
In light of the above, it is recommended that corporations, and particularly those that operate in oligopoly markets (even if the market share held by them is less than 50%), prepare for the anticipated new regime, in which they will be subject to the duties imposed on monopolies and, correspondingly, will be exposed to administrative, criminal and civil enforcement (including class actions on the ground of abuse of their monopolistic power).
The aggregate sales turnover of merging companies, that are duty bound to file merger notices, will be increased to NIS 360 million (approximately 85€ million or $100 million):
The Law sets out three alternative criteria which, upon the fulfilment of one of them (or more), will oblige parties to a merger to report same to the Authority and request its approval. One such criterion deals with the joint sales turnover of the parties. In accordance with the recent amendments, the reporting duty will be triggered when the aggregate sales turnover of the merging parties exceeds NIS 360 million, as opposed to the customary threshold that, until now, had been NIS 150 million. It should be noted that the supplementary term concerning minimum sales turnover in Israel, which was NIS 10 million for each party, remains unchanged.
Another significant change in this regard is the grant of powers to the Authority to extend the period of time as specified in the Law for the examination of mergers (which is currently 30 days), at regular intervals, up to a maximum period of 150 days, without it being necessary to obtain the parties’ consent thereto.
Also, in this manner, the examination period for restrictive trade practices will be up to 30 days (with the same extension option as the mergers examination), instead of the current period of 90 days.
The level of administrative fines which the Authority is authorized to impose on a corporation has been increased to NIS 100 million:
Prior to the amendment, the level of administrative fines that could be imposed on a corporation for breach of the Law amounted to 8% of the sales turnover of the corporation, and up to a maximum cap of NIS 24.5 million. From now on, the maximum sanction which the Authority is authorized to impose on a corporation for committing a breach of such nature is NIS 100 million.
The cap for sanctions imposed on an individual remains unchanged and is still NIS 1 million.
Modifications in the criminal liability – severity in the punishment for a restrictive arrangement offence (cartel) and for “office holder” liability:
The penalty for committing a restrictive arrangement offence (cartel) will be increased, so that the maximum penalty will be five years’ imprisonment (even if the offence was not committed under aggravated circumstances). In addition to the severity of the penalty in this regard, the amendment has further implications, such as extension of the period of prescription (the statute of limitations) and authorizing the Authority to engage in wiretapping during the course of investigation proceedings involving the suspected commission of a restrictive arrangement offence (subject to the approval of the court).
In addition, the said amendment revokes the vicarious liability that is imposed on an office holder in a corporation in breach and, instead, imposes on him a broad duty to supervise and to take active measures in order to ensure compliance with the Law by the corporation or by any of its employees. With respect to breach of this duty, there will be imposed on the office holder the maximum term of imprisonment of one year, as well as a fine as prescribed for an individual in view of the principal offence that was committed by the corporation or any of its employees.
In addition, the definition of “office holder” was amended, and now also encompasses “an officer who is responsible on behalf of the corporation for the field in which the offence was committed”.
The recent amendments, are generating significant changes in the business activity of companies and may expose companies and office holders to new risks. Thus, although the purpose of these amendments is to reduce the regulatory burden imposed on the business community, in practice, these amendments impose a much greater duty of caution and self-assessment, and require corporations to engage in a thorough study of the Law and appropriate preparedness.
This Memorandum is not a legal opinion, is not a substitute for legal advice, and is not intended for readers to rely on it as a legal opinion. In any case, you should seek professional legal advice.