The implementation of a notifiable merger prior to its clearance or without an approval is a criminal offence. The sanctions determined in the Antitrust Law for such an offence are up to three years’ imprisonment or up to five years in aggravating circumstances. (‘Aggravating circumstances’ are defined as circumstances liable to cause substantial damage to competition because of, inter alia, one or more of the following factors: the share and position of the defendant in the sector affected by the offence, the duration of the offence, the damage caused or expected to be caused as a result of the offence and the benefits obtained by the defendant.) Note, that a recent legislation proposal proposes to nullify the provision under the Antitrust Law that deals with antitrust offences committed under aggravated circumstances.
In addition, fines may be imposed, up to about 2.2 million NIS for an individual, plus 14,000 NIS for each day the offence persists. In the case of a corporation, the fine or the additional fine, as applicable, will be doubled. Moreover, the Antitrust Law includes a strict liability offence for managers, under which any person serving in a corporation at the same time that an antitrust offence is being committed, in the role of an active director, a partner (other than a limited partner) or a senior administrative employee with responsibilities in the relevant field, has a criminal liability for the offence, unless it can be shown that the offence was committed without the manager’s knowledge and that this manager took all reasonable measures to ensure compliance with the Antitrust Law.
Alternatively, the director general may issue an administrative declaration, stating that a merger has been executed unlawfully, thereby exposing the merging parties to civil lawsuits, as such declaration constitutes prima facie evidence in any judicial proceedings.
Furthermore, the Antitrust Tribunal may order the separation of an entity merged in violation of the Antitrust Law on the application of the director general and upon showing a reasonable likelihood of significant harm to competition or injury to the public in respect of the product’s price, quality, quantity, or regularity or terms of supply.
In practice, the director general has taken action against allegedly unlawful mergers in only a few cases, two of which resulted in criminal sanctions. The Antitrust Tribunal has considered only two cases in Israel brought by the director general to separate an allegedly illegally merged entity: one in 2007 - Prinir (Hadas 1987) Ltd and Milos (1989) Ltd and the other in 2003 - Baron-Fishman Communication Ltd and Yedioth Achronot Ltd.
Additionally, the Antitrust Law enables the director general and parties to an unlawful merger to agree in the framework of a consent decree, inter alia, on an amount of money to be paid to the State Treasury in lieu of criminal procedures or an administrative declaration. The consent decree may include a provision, according to which the parties do not admit responsibility (ie, that a merger has been unlawfully executed). Over the past year, the Antitrust Tribunal approved two consent decrees. The first involved two construction companies: El Har Ltd and Taan Ltd. The companies made a transfer of shares according to a share purchase agreement, prior to the submission of pre-merger notification forms. The companies agreed to pay an amount of 250,000 NIS, and the director general undertook not to take additional enforcement measures in the matter. The second consent decree involved a share purchase agreement between Tal Hel Yasca Ltd and Fresh and smooth Part 2 Ltd. Prior to the submission of pre-merger notification forms by either of the parties, the companies informed the director general that Tal Hel had transferred a sum of 5 million NIS to the acquired company, in order to enable its continued operation in light of its financial problems. According to the director general, the provision of finance was part of the merger transaction, and therefore constitutes an implementation of the transaction before approval. The parties agreed to pay the State Treasury sums of 170,000 NIS and 40,000 NIS, pursuant to an agreement that they will not admit to a violation of the provisions of the law and the director general undertakes not to take additional enforcement measures against them in this matter.
In May 2012 an amendment to the Antitrust Law came into force, enabling the director general to impose monetary sanctions in lieu of criminal indictment, inter alia, in case of an unlawful merger. In this respect, the IAA’s guidelines on the enforcement procedures for the use of financial sanctions state that financial sanctions will be imposed mostly in the case of non-horizontal mergers (this does not, however, negate the possibility that in the appropriate circumstances the IAA would choose other administrative enforcement tools over criminal ones, in respect of horizontal mergers). The monetary sanction under the new amendment is up to 1 million NIS for a person that, inter alia, performed an unlawful merger or, for a corporation of which revenues in the preceding financial year exceeded 10 million NIS - up to 8 per cent of the corporation’s annual revenues but not more than 24 million NIS.
In October 2016, the Antitrust Authority published a guideline regarding the considerations of the director general in determining the amount of financial sanctions. According to the said guideline, the amount of the sanction will be determined according to the following four stages:
- determination of the maximum amount of the sanction;
- determination of the severity of the violation based on the circumstances of the case (with an emphasis on the degree of damage that the breach may cause to competition or the public);
- examination of the violator’s part in the violation, the extent of the violating party’s influence on the performance of the violation and the actions taken by the violating party in order to stop or prevent the recurrence of the violation; and
- evaluation of external circumstances of the violation, such as the existence or absence of previous violations.
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