Parallel importation – regulated under the amended Economic Competition Law

The Israel Economic Competition Law (aka anti-trust law) was recently amended in furtherance to the draft bill published by the Commercial Competition Authority back in 2022. The amendment of the law aims to regulate the issue of parallel imports in the aspect of economic competition. The main purpose of the amendment is to prevent harm to competition by way of thwarting or reducing competition from parallel imports by an authorized or licensed importer of goods.

Unlike the authorized importer who enters into an agreement with the goods manufacturer or supplier, and is granted the status of an authorized importer of the goods, the parallel importer is unknown to the manufacturer and purchase the goods from whoever purchased the goods in other territories like export surpluses of suppliers in other countries, or from retail chains.

Competition on the part of parallel imports has been recognized as significant, especially in terms of price competition.

The amendment includes a number of prohibitions which mainly impose restrictions on the authorized importer in order to prevent him from acting in a manner which may harm parallel imports provided that these acts might harm competition in the industry in which the authorized importer operates; or acts whose main purpose is to prevent or reduce competition from parallel imports unless the direct importer has no other way (which is not likely to harm competition from parallel imports) to achieve the same legitimate business purpose that underlies the act under consideration.

Along with the aforesaid prohibitions, Commissioner is authorized to impose financial sanctions on violations of the above prohibitions by the authorized importer. The amendment further imposes on the Commissioner the duty to report to the economic affairs committee once a year, during the following five years, the measures taken to enforce the amendment mentioned above and the sum of financial sanctions imposed by it.

Although the amendment does not affect the right of intellectual property rights holders in general, and trademark owners in particular, to protect their property against unfair use, it is important to understand the effect of the amendment on agreements entered into with authorized importers in Israel.