The 16th Amendment to the Antitrust Act Comes Into Force

the 16th amendment of the restrictive trade practices act, 5748-1988 (hereinafter: “the antitrust law”) revokes the statutory exemption of mutual exclusivity agreements from anti-trust supervision which from now on will be subject to the general regime prescribed by the antitrust law. This change applies also to agreements that are currently in force.

The Amendment

An amendment to the Restrictive Trade Practices Law, 5748-1988 (hereinafter: “the Antitrust Law”), enacted in November 2014, is coming into force on August 25, 2015. The amendment deals with mutual exclusivity distribution agreements and other matters. The commencement date of the part of the amendment that deals with mutual exclusivity agreements was however been recently postponed, under certain conditions, in view of requests from the public as detailed hereinafter.

Hitherto, mutual exclusivity agreements between a purchaser and a seller (e.g. agreements where both the local distributor and the foreign supplier commit to exclusivity) were exempted from being regarded “restrictive” under Subsection 3(6) of the Antitrust Law¹. The amendment now cancels this exemption.

The Purpose of the Amendment

According to the Bill, the cancellation of Subsection 3(6) was aimed at equating the legal regime applicable to all exclusivity agreements whether mutual or not. Accordingly, mutual exclusivity agreements will be subject to the regime prescribed by the Antitrust Law namely, they will be deemed unlawful unless obtaining a specific approval from the Antitrust Tribunal, obtaining an exemption from seeking approval from the Antitrust Commissioner, or unless sheltered under a Block Exemption. With the coming into effect of this amendment, unless exempted under any of the Block Exemptions pertaining to one-sided exclusive arrangements, the legality of these arrangements will be determined on the basis of their probable competitive effect.  

The Consequence of the Amendment

The above detailed change, which applies to existing arrangements as well as new ones, might have significant implications on the operation of many enterprises, which so far used to distribute their products under mutual exclusivity arrangements, in particular, but not only, those companies where the manufacturer or distributor holds substantial market share in the area of its operation.

The Antitrust Authority’s Adjustment

On August 6, 2015, answering to public complaints that the time period afforded by the Amendment was insufficient for evaluating the compliance of existing mutual exclusivity agreements with the amended Antitrust Law, the Antitrust Commissioner published a notice (available in Hebrew²) according to which the enforcement of the amendment detailed above on mutual exclusivity agreements will be postponed until February 25, 2016, provided that the parties to such agreements submit a notice to the Antitrust Authority (“the Parties Notice”). The Parties Notice should inform the Antitrust Authority of the existence of a mutual exclusivity agreement, should include an executive summary thereof and the full text of the mutual exclusivity clause(s). Notwithstanding, it was also noted, that the Commissioner reserves the right to enforce the Antitrust Law in cases he deems appropriate and justified.

¹ This subsection reads:

3. Notwithstanding the provisions of Section 2, the following arrangements shall not be deemed restrictive arrangements:
…
(6) An arrangement entered into by the purchaser of an asset or service and its supplier, involving restraints, all of which constitute a commitment of the supplier not to supply certain assets or services for marketing other than to the purchaser, and a commitment of the purchaser to purchase such assets or services only from the supplier, provided that both the supplier and the purchaser are not engaged in the production of such assets or the provision of such services; such an arrangement may apply to the entire area of the country or to a part thereof;

²  And available at the following link: https://www.antitrust.gov.il/subject/103/item/33738.aspx