Cartel Regulation 2008

Author:Mr Eytan Epstein
Profession:Epstein, Chomsky, Osnat & Co.
 
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Legislation and jurisdiction

1 What is the relevant legislation and who enforces it?

The law that deals with restrictive arrangements is the

Restrictive Trade Practices Law 5748-1988 (the Antitrust Law).

Two enforcement institutions were established under the

Antitrust Law: the Israeli Antitrust Authority (IAA) and the

Antitrust Tribunal.

The IAA is an independent government enforcement agency

established in 1994 through an amendment to the Antitrust Law. The

IAA is mandated to prevent market power through merger control and

anti-cartel enforcement, to restrain abuse by dominant firms and to

preserve competition in the various markets. It is thus vested with

investigative authority, power to initiate civil and criminal

proceedings and the authority to order monopolies not to act in a

manner that constitutes abuse of a dominant position.

The IAA employs about 70 staff and is divided into three

professional departments: legal, economic and investigations. The

IAA's annual budget (which has not significantly changed in

recent years) is about 20 million new Israeli shekels

(approximately e3.5 million).

The Antitrust Tribunal, sitting with the District Court in

Jerusalem, has exclusive jurisdiction over non-criminal

governmental antitrust proceedings. The District Court of Jerusalem

has exclusive jurisdiction over criminal antitrust matters.

2 What is the substantive law on cartels in the

jurisdiction?

A 'restrictive arrangement' is defined as an arrangement

made between two or more persons conducting business, which

restricts at least one party to the arrangement in a manner that

may prevent or reduce competition (section 2(a) of the Antitrust

Law).

In addition, the Antitrust Law provides in section 2(b) for a

number of specific restraints, the existence of which constitute an

irrefutable presumption that damage to competition exists (ie, per

se illegal practices). Accordingly, an arrangement involving a

restraint relating to one of the following issues shall be deemed

to be a restrictive arrangement: the price to be demanded, offered

or paid; the profit to be obtained; the division of all or part of

the market, in accordance with the location of the business or in

accordance with the persons or type of persons with whom business

is to be conducted (ie, market allocation); and the quantity,

quality or type of assets or services in the business.

Section 2 does not distinguish between horizontal and vertical

agreements ? both might be found to be restrictive

arrangements. For example, an exclusive agreement may be considered

as market allocation, and therefore a restrictive arrangement not

only under the general definition determined in section 2(a), but

also under the irrefutable presumption of section 2(b).

Entry into a restrictive arrangement without the authorisation

of the Antitrust Tribunal (or without a temporary authorisation) is

forbidden, unless the arrangement was specifically exempted by the

general director, or is exempted according to one or more of the

block exemptions.

An infringement of the restrictive arrangements chapter in the

Antitrust Law is considered a criminal offence but is also subject

to civil and administrative procedures.

3 Are there any industry-specific offences and defences?

Section 3 of the Antitrust Law provides that, notwithstanding

the definition given in section 2 thereof to restrictive

arrangements, several types of arrangements, some of them relate to

specific business sectors, shall not be deemed restrictive

(therefore granting them 'statutory exemption'), as

following:

an arrangement involving restraints, all of which are

established by law;

an arrangement involving restraints, all of which relate to the

right to use copyrights;

an arrangement entered into by a person assigning a right to

real property and a person acquiring such right, involving

restraints, all of which relate to the types of assets or services

which the acquirer of the right is to engage in on such

property;

an arrangement between growers and/or wholesale marketers,

involving restraints, all of which relate to the growing or

marketing of domestic agricultural produce;

an arrangement entered into by a company and its

subsidiary;

a vertical mutual exclusivity arrangement;

an arrangement involving restraints, all of which relate to

international air or sea transportation, or combined sea, air and

ground transportation, provided that all parties to the arrangement

are:

sea or air carriers; or

sea or air carriers and an international association of sea or

air carriers, approved for this purpose by the minister of

transport;

an obligation of the seller of a business, sold in its

entirety, to the purchaser of the business, not to engage in the

same type of business, provided such obligation does not contradict

reasonable and acceptable practices; and

an arrangement to which a trade union or employers'

association is party, involving restraints, all of which relate to

the employment of workers and to working conditions.

In January 2007, an amendment to the Antitrust Law was approved,

substantially narrowing the wide statutory exemption enjoyed by

international air carriers and covering all arrangements between

them. Several types of arrangements, including code-sharing

arrangements, will now require the prior approval of the general

director or the Antitrust Tribunal, unless exempted by a new block

exemption to be published. Under the new amendment, in any one of

the following cases a specific approval of the general director

will be required:

an arrangement of which both parties are Israeli air

carriers;

an arrangement between air carriers, of which at least one is

Israeli and at least one of them is not;

an arrangement between air carriers none of which are Israeli,

but at least one has activity or representation in Israel; provided

that one of the major issues of the arrangement is air transport to

or from Israel, and the restrictions in the arrangement regard the

activity, or abstention from activity, in Israel, of any of the

parties.

The general director's approval will not be required in the

latter two cases, if the arrangement was approved by the ministers

of foreign affairs and of transportation for the purpose of

preventing injury to Israel's international relations, or to

assure continuance of flying rights between Israel and other

countries.

The amendment will come into force either two months after the

general director publishes a block exemption to arrangements

between air carriers, or on 1 July 2008, whichever is the earliest.

To date, the general director has not published such block

exemption, therefore the amendment has not yet come into force.

4 Does the law apply to individuals or corporations or

both?

The Antitrust Law applies to 'persons conducting

business', ie, both to corporations and individuals, provided

that they are engaged in the conduct of business.

5 Does the regime extend to conduct that takes place outside

the jurisdiction?

The Antitrust Law does not explicitly mention that it applies to

conduct that takes place outside of Israel, and yet does not

decline its application to such foreign conduct either. However,

based on the purpose of the Antitrust Law ? the

prevention of restrictive practices that have harmful consequences

for competition within Israel ? and based on the

provisions of the Penal Law, the general director has previously

declared that restrictive practices committed outside Israel, but

which have a harmful effect on competition within Israel, are

subject to the Israeli Antitrust Law.

6 Are there any proposals for change to the regime?

In 2005 a public committee was established by the minister of

industry, trade and labour, for the re-examination of the Antitrust

Law. A few months later, the committee...

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