Last year, the Israeli parliament, the Knesset, passed a reform to Israeli competition law. The newly legislated section 31f (a) of the Economic Competition Law, 1988 (formerly the Restrictive Trade Practices Law, 1988), enables the Israeli Antitrust Commissioner (the "Commissioner") to impose instructions on a Direct Importer. Such instructions do not imply a prior violation of the law. In addition, such instructions can only be imposed if the Commissioner finds that, as a result of the Direct Importer's status or behavior, there is concern of significant harm to parallel or private import, and, as a result, significant harm to competition in the relevant sector.
Recently, The Israeli Competition Authority ("ICA") announced that it started a first hearing procedure to apply section 31f, in the matter of Shestowitz, who is Colgate's representative in Israel, and distributor of the Colgate toothpaste brand.
According to the ICA's press release, Shestowitz would report to Colgate about its products imported to Israel by parallel importers, in order to prevent or impede such parallel import.
According to the ICA, this behaviour raises concerns of significant harm to competition in the toothpaste market. The ICA's press release pointed to the following market characteristics, which demonstrate a low-level inter-brand competition, such that it is important to preserve intra-brand competition:
The Colgate brand has a significant market share, which is stable over time; There is no additional dominant brand with a market share close to the Colgate brand; Consumers show clear preference to the Colgate brand; Consumers rarely switch between brands. Therefore, the Commissioner is contemplating instructing Shestowitz to cease all such reports.
The Commissioner's suggested instructions are available for public...