Legislation and jurisdiction1 What is the relevant legislation and who enforces it? The law that deals with restrictive arrangements is theRestrictive Trade Practices Law 5748-1988 (the Antitrust Law). Two enforcement institutions were established under theAntitrust Law: the Israeli Antitrust Authority (IAA) and theAntitrust Tribunal. The IAA is an independent government enforcement agencyestablished in 1994 through an amendment to the Antitrust Law. TheIAA is mandated to prevent market power through merger control andanti-cartel enforcement, to restrain abuse by dominant firms and topreserve competition in the various markets. It is thus vested withinvestigative authority, power to initiate civil and criminalproceedings and the authority to order monopolies not to act in amanner that constitutes abuse of a dominant position. The IAA employs about 70 staff and is divided into threeprofessional departments: legal, economic and investigations. TheIAA's annual budget (which has not significantly changed inrecent years) is about 20 million new Israeli shekels(approximately e3.5 million). The Antitrust Tribunal, sitting with the District Court inJerusalem, has exclusive jurisdiction over non-criminalgovernmental antitrust proceedings. The District Court of Jerusalemhas exclusive jurisdiction over criminal antitrust matters. 2 What is the substantive law on cartels in thejurisdiction? A 'restrictive arrangement' is defined as an arrangementmade between two or more persons conducting business, whichrestricts at least one party to the arrangement in a manner thatmay prevent or reduce competition (section 2(a) of the AntitrustLaw). In addition, the Antitrust Law provides in section 2(b) for anumber of specific restraints, the existence of which constitute anirrefutable presumption that damage to competition exists (ie, perse illegal practices). Accordingly, an arrangement involving arestraint relating to one of the following issues shall be deemedto be a restrictive arrangement: the price to be demanded, offeredor paid; the profit to be obtained; the division of all or part ofthe market, in accordance with the location of the business or inaccordance with the persons or type of persons with whom businessis 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 verticalagreements ? both might be found to be restrictivearrangements. For example, an exclusive agreement may be consideredas market allocation, and therefore a restrictive arrangement notonly under the general definition determined in section 2(a), butalso under the irrefutable presumption of section 2(b). Entry into a restrictive arrangement without the authorisationof the Antitrust Tribunal (or without a temporary authorisation) isforbidden, unless the arrangement was specifically exempted by thegeneral director, or is exempted according to one or more of theblock exemptions. An infringement of the restrictive arrangements chapter in theAntitrust Law is considered a criminal offence but is also subjectto civil and administrative procedures. 3 Are there any industry-specific offences and defences? Section 3 of the Antitrust Law provides that, notwithstandingthe definition given in section 2 thereof to restrictivearrangements, several types of arrangements, some of them relate tospecific business sectors, shall not be deemed restrictive(therefore granting them 'statutory exemption'), asfollowing: an arrangement involving restraints, all of which areestablished by law; an arrangement involving restraints, all of which relate to theright to use copyrights; an arrangement entered into by a person assigning a right toreal property and a person acquiring such right, involvingrestraints, all of which relate to the types of assets or serviceswhich the acquirer of the right is to engage in on suchproperty; an arrangement between growers and/or wholesale marketers,involving restraints, all of which relate to the growing ormarketing of domestic agricultural produce; an arrangement entered into by a company and itssubsidiary; a vertical mutual exclusivity arrangement; an arrangement involving restraints, all of which relate tointernational air or sea transportation, or combined sea, air andground transportation, provided that all parties to the arrangementare: sea or air carriers; or sea or air carriers and an international association of sea orair carriers, approved for this purpose by the minister oftransport; an obligation of the seller of a business, sold in itsentirety, to the purchaser of the business, not to engage in thesame type of business, provided such obligation does not contradictreasonable and acceptable practices; and an arrangement to which a trade union or employers'association is party, involving restraints, all of which relate tothe 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 byinternational air carriers and covering all arrangements betweenthem. Several types of arrangements, including code-sharingarrangements, will now require the prior approval of the generaldirector or the Antitrust Tribunal, unless exempted by a new blockexemption to be published. Under the new amendment, in any one ofthe following cases a specific approval of the general directorwill be required: an arrangement of which both parties are Israeli aircarriers; an arrangement between air carriers, of which at least one isIsraeli 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; providedthat one of the major issues of the arrangement is air transport toor from Israel, and the restrictions in the arrangement regard theactivity, or abstention from activity, in Israel, of any of theparties. The general director's approval will not be required in thelatter two cases, if the arrangement was approved by the ministersof foreign affairs and of transportation for the purpose ofpreventing injury to Israel's international relations, or toassure continuance of flying rights between Israel and othercountries. The amendment will come into force either two months after thegeneral director publishes a block exemption to arrangementsbetween air carriers, or on 1 July 2008, whichever is the earliest.To date, the general director has not published such blockexemption, therefore the amendment has not yet come into force. 4 Does the law apply to individuals or corporations orboth? The Antitrust Law applies to 'persons conductingbusiness', ie, both to corporations and individuals, providedthat they are engaged in the conduct of business. 5 Does the regime extend to conduct that takes place outsidethe jurisdiction? The Antitrust Law does not explicitly mention that it applies toconduct that takes place outside of Israel, and yet does notdecline its application to such foreign conduct either. However,based on the purpose of the Antitrust Law ? theprevention of restrictive practices that have harmful consequencesfor competition within Israel ? and based on theprovisions of the Penal Law, the general director has previouslydeclared that restrictive practices committed outside Israel, butwhich have a harmful effect on competition within Israel, aresubject 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 ofindustry, trade and labour, for the re-examination of the AntitrustLaw. A few months later, the committee...
Cartel Regulation 2008
|Author:||Mr Eytan Epstein|
|Profession:||Epstein, Chomsky, Osnat & Co.|
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