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Israel: New Law on Encouragement of Competition in the Food Sector

(May 30, 2014) On March 19, 2014, the Knesset (Israel’s parliament) passed the Law for Encouragement of Competitiveness in the Food Sector, 5774-2014. The Law’s stated objective is to increase competitiveness in the food sector and in the area of consumer products manufacturing in order to achieve a reduction in consumer prices. (Law for Encouragement of Competitiveness in the Food Sector, 5774-2014 [in Hebrew; hereinafter Competition Law], § 1, SEFER HAHUKIM [Book of Law, Israel’s official gazette] No. 2447, Ministry of Justice website.)

The Law prohibits a supplier from dictating, recommending, or interfering in any way in decisions made by a wholesaler regarding the consumer price the wholesaler charges for a product supplied by another supplier. A supplier is similarly prohibited from interfering with the conditions under which a wholesaler sells to a consumer a product supplied by another supplier. (Id. § 5). Wholesalers are also prohibited from interfering with consumer prices and other conditions associated with the sale of products by other wholesalers. (Id. § 6).

Specific prohibitions apply to “big wholesalers” and to “big” suppliers, based on, among other factors, the level of their sales in the previous year. (Id. § 2.) “Big” wholesalers or suppliers are generally prohibited from interfering in arranging products in stores, from setting prices of products at a fee lower than that of their cost to the big wholesaler, and, in the absence of special permission, from making the sale of a product subject to the acquisition of other products supplied by the same big supplier, etc. (Id. §§ 7-9.)

The Law authorizes the Head of the Business Antitrust Agency (HBAA) to publish on the Agency’s Internet website a list of “very big suppliers” (defined as those whose yearly sales exceed ILS1 billion, about US$286 million) whose products’ placement must not exceed 50% of the total shelf space available in any one of the wholesaler’s biggest stores. (Id. § 10).  The limitation on shelf space will apply for one year following the Law’s entry into force, but can be extended by the HBAA with the approval of the Knesset Economic Affairs Committee on a yearly basis for up to four years. (Id.)  The HBAA is appointed by the government in accordance with the Business Antitrust Law, 5748-1988 (§ 41, SEFER HAHUKIM No. 1258, p. 128, as amended).

The Competition Law further regulates “geographic competition by wholesalers.” (Competition Law, Ch. B.) Accordingly, the HBAA must define, for every “big store” (defined as a store whose selling area is at least 250 square meters, approximately 2,690 square feet) of a big wholesaler, its corresponding “competitive geographic area.” In defining a big store’s “competitive geographic area,” the HBAA must consider among other factors, the size of the store, its distance from consumers, and its location in either an urban or non-urban environment. (Id. § 15(a).

The Law requires the HBAA to define for each big wholesaler’s big store the “competitive group” to which it belongs based on the level of overlap that exists between the population of the group’s competitive geographic area and that of the competitive geographic area of the big store. The level of overlap beyond which special permission will be required for the opening of any additional big store by the same wholesaler in a competitive geographic area is determined by the HBAA based on a formula prescribed by the Law. (Id. §§ 15- 17.)

The Law establishes transparency requirements for big wholesalers. Unless exempted for a limited period and under conditions determined by the HBAA, wholesalers must publish on the Internet, for each of their stores, the full updated price of any product sold in their stores. This must be done no later than an hour after price updating is done at the store or within another time period as determined by the Minister of Economic Affairs. (Id. § 30.) The Minister of Economic Affairs, with the approval of the Minister of the Treasury, may issue regulations on the type of the publication, the required data content and frequency of publication, and any other provisions to implement the transparency requirements. (Id.) The Law provides that “any person may access the publication and the information and data included in [it] and use them, freely and without cost, for private or commercial purposes … .” (Id. § 30(e).)

The Law introduces enforcement measures to ensure compliance with its requirements. These include penalties of up to three years of imprisonment for those who violate certain provisions of the Law, fines for prohibited activities committed by individuals, and double fines for violations of the Law committed by corporations. (Id. §§ 23-28 & 33-42.) The Law also establishes procedures for issuing warnings to suspected offenders. (Id. §§ 43-45.)