Contributed By Goldfarb Seligman & Co Law Offices
Antitrust litigation in Israel is truly evolving, with use of arguments from the realm of competition law in civil litigation constantly increasing. The law is also changing significantly.
Excessive Pricing Charged by a Monopoly
In July 2022, the Supreme Court of Israel (the Supreme Court) rejected the District Court's decision to certify a class action on the grounds of excessive pricing against Coca-Cola. For the first time, the Israeli Supreme Court has ruled on the excessive pricing cause of action, and determined that the excessive pricing cause of action exists in Israeli competition law.
According to the Supreme Court's ruling, the provision of Section 29a(b)(1) of the Economic Competition Law, which prohibits a monopolist from setting an unfair price for a product or service, includes (besides prohibition on predatory pricing) a prohibition on excessive pricing. It was also determined that it is possible to enforce this prohibition by way of conducting a class action.
The Supreme Court has adopted the Israeli Competition Authority's (ICA) and the Attorney General's past positions, according to which a cautious and restrained approach should be taken in determining that an excessive price has been charged by a monopoly, even though the Competition Law prohibits excessive pricing.
In addition, based on the Competition Authority's and the Attorney General's past positions, the Supreme Court has stated that the test for assessing the existence of excessive pricing is twofold: first, it has to be determined whether the price is significantly higher than the price that would have been set in a competitive market, and, if so, whether the price is unfair (ie, what are the circumstances that led to this price). However, the Supreme Court determined that, while in relation to the first test the burden of proof rests with the plaintiff, in relation to the unfairness test the burden of proof rests with the defendant. Namely, if the plaintiff proves that the monopoly has charged an excessive price, the monopoly would have to prove that the price is fair.
The Supreme Court also rejected the legal thesis of the District Court with regard to discovery of documents, according to which the extent of the defendant's discovery must be linked to the plaintiff's burden of proof at the stage of the approval request. Namely, if the defendant refrains from disclosing information, the plaintiff's burden of proof will be reduced, and vice versa. The Supreme Court has stated that the burden is on the plaintiff to establish a sufficient legal evidentiary foundation at the motion certification stage, regardless of the scope of the defendant's disclosure. If it is necessary, the plaintiff has the right to request discovery of documents in accordance with the Class Actions Law, 5766-2006 (the Class Actions Law). The plaintiff's request will be examined on its merits by the court, in accordance with the relevant legislation and ruling.
Based on the above, the Supreme Court annulled the District Court's decision to certify the class action, and returned the case to the District Court in order to discuss the discovery process, and then to examine the certification request based on the Supreme Court's ruling.
Another important development regarding the excessive pricing cause of action, which occurred before the Supreme Court's ruling in the Coca-Cola case, is the ICA's announcement that, subject to a hearing, it intends to impose financial sanctions of ILS8 million on MBI Pharma Ltd and ILS614,450 on its officers, due to the price MBI set for the drug “Lidiant” - a life-saving drug for patients with CTX disease.
Parallel Imports Restrictions on Competition
The Supreme Court has recently determined, in the framework of the Schweppes case, that the parallel import of a brand would not be protected if the import infringes a trade mark registered in Israel. The Supreme Court annulled the District Court judgment and declared that the parallel importer is not allowed to import Schweppes products made in Ukraine, under the trade mark “Schweppes”, without getting the permission of Jafora-Tabori, the owner of the Israeli trade mark.
The Supreme Court stated that trade marks are limited to the borders of each country and its laws. Based on this principle of territorial protection of trade marks, the Supreme Court has stated that when the imported products are under an Israeli trade mark, the import is only possible if the owner of the trade mark in the origin country also holds the Israeli trade mark, or if the imported products were originally purchased from the owner of the Israeli trade mark and imported to Israel for resale purposes. Parallel import that violates the rights of the trade mark owner in their country is not legitimate or allowed.
Although the Supreme Court's ruling is based on intellectual property laws rather than competition law, it significantly affects parallel importers' ability to use competition-related arguments in case of a violation of a local trade mark. Prior to the Schweppes case, a parallel importer could raise competition-related arguments against the official distributer or importer. Post-Schweppes, competition-related arguments might be irrelevant in the event that the official importer is the owner of the brand trade mark in Israel.
It is possible that this decision will be challenged to a “re-discussion” in front of the Supreme Court.
Remedy by Using the Law of Unjust Enrichment
The Supreme Court ruled that a person who enjoyed an unjust enrichment as a result of a breach of competition rules, in certain circumstances, would be forced to return their profits, which can exceed the damage suffered by the plaintiff. This ruling is significant as it deviates from recent case law, which granted the plaintiff financial remedies on the ground of violating competition law only for the damages it suffered.
The Supreme Court discussed an appeal against the District Court's decision in favour of Unipharm (a generic pharmaceutical company) after ruling that Sanofi (an ethical pharmaceutical company) knowingly and intentionally misled the Israel Patent Office and thus extended the patent application process. It was determined that the deception allowed Sanofi to continue to enjoy de facto exclusive rights over the drug Plavix (for the treatment and prevention of heart attack and stroke in high-risk patients) illegally, for 15 months.
The main question discussed by the Supreme Court is whether the deception of the patent registrar constitutes an abuse of monopoly power, and whether it may establish a remedy using the law of unjust enrichment. The Supreme Court rejected the appeal, examining the cause of unjust enrichment under three different paradigms and ruled that it can also be applied to the Competition Law. The Supreme Court ruled that the obligation to return the enrichment stems from the need to deter competitors from violating the competition rules, and its violation is harmful to the public.
The new Civil Procedure Regulations 5778-2021 (CPR or New CPR) came into force on 1 January 2021, bringing many changes, both technical and substantial. Some of the changes will be noted in subsequent sections, but it is still important to draw attention to further changes.
According to the CPR, the court's permission is required in order to serve a statement of claim on a foreign entity that is not located in Israel. The court can allow this only if one of the alternatives in Regulation 166 of the New CPR or Regulation 500 of the Old Civil Procedure Regulations (Old CPR) applies to the case at hand.
Recently, another alternative was added in both the Old and New CPR, which states that the court can permit the service of a statement of claim on a foreign entity if the claim is based on the damage that the plaintiff suffered in Israel from a product, service or conduct of the defendant, so long as the defendant could have anticipated that the damage would be incurred in Israel and that the defendant or a related person deals in international commerce or services on a significant scale.
Every plaintiff (whether a natural person or a corporation) can avail itself of civil remedies for breach of the Competition Law. These remedies stem from the provisions of Section 50 of the Competition Law, which provides that the breach of any of the provisions of the Law shall be tantamount to a tort.
The Law does not define the elements of the tort and does not prescribe any provisions regarding the remedy that is to be granted for the breach of any of the provisions that amount to a tort. For the purpose of giving the tort substance, Section 50 of the Law refers to the Civil Wrongs Ordinance (CWO) and all of the general principles that are set out therein and in case law.
One of the elements of the tort is proof of damage – a breach of the Law that does not cause damage will not entitle the injured party to compensation.
A not inconsiderable portion of the claims that are submitted in the context of competition law are follow-on claims, which are submitted after the ICA has taken enforcement steps. The existence of the enforcement process by the Competition Commissioner enables plaintiffs to rely on the ICA's proceedings and, after those enforcement proceedings, there is a higher chance that civil claims will be submitted for the same actions.
In Israel, there is a designated tribunal for competition issues, but it does not deal with civil claims. The function of the tribunal is to constitute an instance for judicial review of the decisions made by the Director General of the ICA, such as the decision to approve a merger, but there is no expert court in civil matters on the grounds of competition law.
There are proceedings in place for the transfer of matters between courts, but these do not arise incidentally to the question of expertise in competition matters.
The decision of the ICA does not bind the court, but it is of considerable weight. Section 43(e) of the Competition Law provides that a ruling of the ICA constitutes prima facie evidence of its content in any legal proceedings. The Supreme Court has held that the ruling is prima facie evidence of significant weight.
With respect to the decisions of a foreign competition authority, there is no evidentiary force to findings made in foreign proceedings or in a foreign legal system. This is the case in general and, in particular, taking into account the clear provisions set out in Section 43(e) of the Law.
The ICA does not directly intervene in civil proceedings, but there might be cases in which the court requires the ICA to appear in court in order to express its position on various issues. In addition, the Prosecutor General can join any claim in court in order to set out the position of the state. These are exceptional proceedings and if they take place in a tort claim on the grounds of breach of competition law, it might be expected that the Prosecutor General’s position will be in accord with that of the ICA.
The burden of proof falls on the plaintiff, with the prescribed standard being the “balance of probabilities” (ie, that the court is persuaded that the plaintiff’s version is the more reasonable one).
There are defence arguments that transfer the burden of proof from the plaintiff to the defendant. Thus, for instance, the argument of the “passing on of damage” transfers the burden of proof from the plaintiff to the party claiming that the plaintiff has passed the damage onwards.
As noted in 2.1 Legal Basis for a Claim, a breach of the provisions of the Competition Law will be deemed to be a tort by virtue of Section 50 of the Law. Therefore, the general doctrines in the CWO apply.
The doctrine of compensation is set out in Section 76(1) of the CWO and provides that a plaintiff will be entitled to compensation “only for such damage that might naturally flow in the ordinary course of affairs, and that comes directly from the defendant’s tort”. The causal link doctrine prescribes that there must be a causal link between a person’s act or omission – an act or omission that amounts to a tort – and the damage caused to the plaintiff, in respect of which they are claiming compensation. Section 64(2) of the CWO explains that this link is severed where another person was the decisive cause of the damage.
Regarding class actions pursuant to the Competition Law, the tendency that appears to be forming supports the possibility of indirect consumers submitting motions, as decided in the Supreme Court’s recent ruling in the Coca-Cola case.
In the Coca-Cola ruling, the District Court recognised the right of indirect consumers to submit class actions on the grounds of excessive pricing. Coca-Cola did not sell the product directly to consumers, rather through retailers such as retail chains and supermarkets. Therefore, the price that was paid for the product also included a retail margin. Hence, the group of consumers, all plaintiffs in this case, were not direct consumers of the company, and still the court found there was no economic or moral justification for the compensation for charging an excessive price to be given specifically to retailers – after all, they passed on their losses to their customers anyway.
It is important to emphasise that since Coca-Cola did not accommodate this claim in the request for permission to appeal, the Supreme Court did not address this issue in its recent ruling.
Therefore, the question of whether a class action pursuant to the Competition Law can be submitted by indirect consumers has not yet been ruled upon by the Supreme Court.
The Old CPR prescribe that cases are to commence 30 days after the date of submission of the last statement of claim if the court does not intend to set pre-trial proceedings. However, in most cases, pre-trial proceedings do take place, and these take several months after the submission of the final pleadings. Nevertheless, Regulation 34 in the New CPR requires pre-trial proceedings that start with “Preliminary Discussion”, within 30 days after the date of submission of the last statement of claim. Furthermore, the start of the case could also be delayed for some time after the date of commencement of the proceedings, because of court overload. Moreover, it is possible that a number of years might pass between the commencement of proceedings and the handing down of a final judgment.
Civil proceedings can continue at the same time as public enforcement. The ICA does not have the legal option of suspending civil proceedings that are taking place at the same time as enforcement proceedings, but it can submit its position to the court that is hearing the civil proceedings and recommend the suspension thereof.
Furthermore, a party to the civil proceedings can request that the court suspends the civil proceedings during the course of the public enforcement proceedings, but such a verdict is subject to the exclusive discretion of the court.
Class actions exist in the Israeli legal system and are very common, particularly for breaches of the Competition Law. The causes of action in respect of which a class action may be submitted are set out in the Second Schedule to the Class Actions Law, one of which is a cause of action pursuant to the Competition Law.
According to the Third Schedule to the Class Actions Law, a class action on a cause of action under the Competition Law shall be an opt-out claim. Therefore, every person who is part of the class of plaintiffs defined by the court at the time of certification shall be deemed to have consented to the submission of the class action on their behalf. According to Section 11 of this law, a member of the class who does not wish to be included in it must give notice of this within 45 days of the date of publication of the verdict of the court regarding certification, or at a later date if so prescribed by the court.
The question of whether a class action for a cause of action pursuant to the Competition Law can be submitted by indirect consumers has not yet been directly ruled upon by the Supreme Court. This is discussed in more detail in 2.5 Direct and Indirect Purchasers.
Who Can Bring a Class Action?
Section 4(a) of the Class Actions Law sets out the persons who are entitled to submit a motion to certify a class action and who will be the plaintiffs in the proceedings on behalf of all of the members of the class.
A person with a personal cause of action that gives rise to substantial questions (of fact or law) that are common to all of the members of the class to which they belong may submit a class action.
In addition, a public authority may submit a motion to certify a class action so long as the subject of the claim is one of its public purposes. The definition of a public authority in the Law sets out three authorities: the Commission for Equal Rights for Persons with Disabilities, the Israel Nature and Parks Authority and the Commission for Equal Opportunities in the Workplace. Therefore, a public authority cannot submit a cause of action pursuant to the Competition Law since the cause of action would not be one of its public purposes.
A class action can be submitted by any plaintiff for any personal cause of action, and by an organisation where there is a difficulty in finding a lead plaintiff with a personal cause of action. The Israeli Consumer Council may also submit a motion to certify a class action, even if there is no difficulty in locating a plaintiff with a personal cause of action; it does this quite often.
When a class action is submitted, proceedings take place in which the court examines whether to certify submission of the claim as a class action. In the framework of these proceedings, the lead plaintiff must prove the conditions that are set out below.
Firstly, the plaintiff must comply with the threshold conditions and show that they have a personal cause of action. In addition, when one of the elements of the cause of action is damage, the plaintiff must show that they have suffered prima facie damage.
Other conditions that the plaintiff must prove for the purpose of certification of the motion are set out in Section 8(a) of the Class Actions Law, as follows:
If this final condition is not proved but the rest of the conditions (including the threshold conditions) are met, the court may order the addition of a lead plaintiff or lead counsel, or the replacement of the lead plaintiff or lead counsel.
The burden of proof with which the lead plaintiff is required to comply at the stage of certification of the motion is relatively low: they must set out the basic infrastructure of their case. The applicant is not required to set out direct evidence and may make do with circumstantial evidence. As noted above, it is sufficient to prove that prima facie damage has been caused.
Pursuant to Section 18(a) of the Class Actions Law, a settlement must be certified in court. Pursuant to Section 19(a) of the Law, the court shall certify a settlement if it believes that the settlement is appropriate, fair and reasonable, taking into account the interests of the members of the class.
In cases in which the motion to certify a settlement is submitted prior to certification of the class action, the court will only certify the settlement if the action is in compliance with the conditions for certification of it as a class action, and where a settlement is the fairest and most efficient method.
The law provides that, prior to certifying a settlement, the court will obtain the position of the Attorney General or a person acting on their behalf. However, in practice, the courts often certify settlements despite the opposition of the representative of the Attorney General.
Under Israeli law, claims can be set aside in limine in two ways: strike out and dismissal. Dismissals give rise to a res judicata so that the plaintiff is not entitled to submit any other claim for an identical or similar cause of action. Strike out does not constitute a res judicata. A claim may be struck out or dismissed in limine at any stage of the proceedings. By the CPR, claims can be set aside in limine in strike out or dismissal in five different ways, as follows.
Regulation 41 of the CPR sets out the circumstances in which it is possible to set aside a claim in limine by way of strike out:
The court may make the strike out conditional on, among other things, ordering that a hearing of a new claim be continued from the stage at which the present claim was struck out.
Strike Out – Legal Proceedings Abuse
Regulation 42 of the CPR sets out that if the court held that a litigant has abused legal proceedings, said litigant may, for this reason alone, strike out all or part of their statement of claim.
Strike Out – Plaintiff Request
Regulation 44 of the CPR sets out that the court may, at the request of a plaintiff, strike out all or part of their statement of claim.
Administrative Strike Out from Inaction
Regulation 45 of the CPR confers administrative authority on the court secretariat if no action is taken in the claim by the parties for six months without reason. The court secretariat will give at least 20 days' notice before a strike out is effected. If the plaintiff has not given reason in time, the proceeding will be struck out. If the court orders that a plaintiff or applicant seeks to do something within a certain period, and the plaintiff or applicant failed to do so, the relevant statement of claim might be struck out without a judicial decision. A party may submit a request for the cancellation of the administrative strike out to the court within 14 days.
Regulation 43 of the CPR sets out the special circumstances in which it is possible to set aside a claim in limine by way of dismissal:
In Israel, there is one set of laws that applies to the entire country. The Competition Law is a territorial law that applies to the Israeli territory.
Having said that, the District Court has recognised the possibility of adopting the “effect doctrine” and applying the Israeli Competition Law to international cases if they have effect in Israel.
According to the Court, in cases in which the illegal conduct has a substantial, direct and deliberate impact on competition in Israel, the effect doctrine could be used to bring action in Israel.
The Court recently refused to apply the effect doctrine because the effect on competition in Israel was negligible, and the plaintiff did not meet the necessary burden of proof.
The decisions of the ICA have also discussed this issue in the context of the application of Israeli antitrust laws to international restrictive arrangements.
Thus, in a ruling regarding a restrictive arrangement pursuant to Section 43 of the Competition Law, it was held that the purpose of the Law is to protect competition in business in Israel, and for the purposes of achieving this, to also cover actions that were not taken in Israel but that cause harm to competition there. Furthermore, it has been held that Israeli law must be interpreted in the spirit of the effect doctrine, according to which it is possible to apply the Competition Law to actions that harm competition in Israel, even if these actions were taken outside of the boundaries of the state.
In a later verdict, the Director General of the ICA addressed the effect doctrine and the question of when Israeli law can be applied to actions that are taken outside of the boundaries of the state. The Director General held that it is necessary to prove a clear relationship between the actions taken overseas and the Israeli market for the purpose of the application of Israeli antitrust laws.
Alongside the substantive test, which relates to the question of when the Law must be applied to actions taken outside of Israel, there is a procedural aspect that relates to the ability and method of service of process outside of the boundaries of the state on foreign defendants.
The relevant statute on the prescription period in civil claims on antitrust matters is the Prescription Law, 5718-1958 (the Prescription Law), Section 5 of which states that the prescription period for a civil claim is seven years.
The prescription period commences on the date on which the cause of action comes into being – ie, the date on which the act or omission grounding the claim occurs. Where the cause of action is damage, the prescription period starts on the date of the occurrence of the damage.
However, if the damage is discovered late, the prescription period will commence on the date on which the damage is discovered, so long as no more than ten years have passed since the date on which the act or omission took place.
Pursuant to Section 3 of the Prescription Law, the defendant must raise the claim of prescription at the first opportunity. “First opportunity” has been interpreted in case law to mean the first opportunity the defendant had to make its arguments, which could even be prior to the submission date of the defence statement. In addition, pursuant to Section 27 of the Prescription Law, the court can dismiss a claim for laches even if the prescription period has not yet passed.
A specific arrangement applies to class actions. Pursuant to Section 26 of the Class Actions Law, when the court certifies a claim as a class action, the prescription period for the members of the relevant class will commence on the date of submission of the claim. If the court dismisses the motion to certify the claim, the prescription period will not end until one year has passed from the date on which the verdict becomes absolute.
Discovery takes place during the preliminary stage of the proceedings. The starting point in civil proceedings is maximum discovery, and the parties operate with an “open hand” in a manner that allows for full evidentiary infrastructure, providing an opportunity to adequately address the arguments of the opposing party, although there are exceptions and restrictions to this rule, which are recognised in case law and statute. Furthermore, the court limits the document discovery stage to a fixed period, so that a late motion for discovery of a document might be dismissed.
While the Old CPR gave the court the power to order the discovery of documentation at the request of a litigant, the New CPR require it from the parties. Regulation 57 of the CPR orders that, 30 days after the last statement of claim is filed, or within a different period ordered by the court, the litigants will exchange affidavits listing all documents relating to the disputed matters that are or were in its possession or control and have been located by it, following due investigation and inquiry.
Thirty days after the litigants have exchanged affidavits of document disclosure, or within a different period ordered by the court, the litigants shall complete the document discovery proceedings and allow each litigant to copy the documents or scan them, at the expense of the litigant.
Specific discovery relates to a situation in which a litigant is aware of a document that is in the possession of the other party, and it requires the discovery thereof in addition to general discovery. A request for a specific discovery should be included in the list of litigant requests according to Regulation 49(c) of the CPR, and up to 20 days before the first pre-trial.
Breach of an order of discovery might give rise to a financial charge against the infringing party, and the court might strike out the pleadings of an infringing party that acts with disdain or intentionally does not perform the provisions of the order. Furthermore, a party cannot submit a document as evidence if it has not declared it during discovery, unless it has a reasonable justification for its omission.
In a class action, before that action has been certified, the right of perusal is relatively limited.
The Competition Commissioner, by virtue of Section 46(b) of the Competition Law, has the authority to request information from any person. This includes documents, notebooks, and other certificates that, in the Commissioner's opinion, could ensure or facilitate the execution of the Competition Law.
The Competition Commissioner' scope of authority is wide, and the courts' have a tendency to avoid interfering with the Competition Commissioner's requests for information.
Recently, the High Court of Justice rejected a petition submitted by 10bis (a Just Eat subsidiary) regarding the scope of a request for information issued by the Israeli Competition Authority to 10bis and Just Eat. The petitioner, 10bis, argued that parts of the request for information were issued without authority, including requests for information concerning Just Eat (which is a foreign entity) and WhatsApp correspondences, especially since 10bis is a third party and the reason for the request for information is an examination as to whether to take enforcement actions against another company.
The High Court of Justice rejected 10bis' petition and stated that the Competition Commissioner is the authorised entity to hear such requests, with unique professional expertise to apply Section 46 of the Competition Law. This section gives the Competition Commissioner the authority to request information that is meant to ensure the implementation of the Competition Law. The authority to issue requests for information is an essential tool that helps the Competition Commissioner collect data and materials in order to make informed decisions based on relevant information.
In connection with the Competition Commissioner's request to receive the board protocols of Just Eat, 10bis' foreign parent company, the Supreme Court stated that, without determining as to the Competition Commissioner's authority to request information from a foreign company, the lack of 10bis' board protocols does not grant an immunity from collecting information if it can be obtained by reasonable means that concern the parent company. The Supreme Court emphasised that, although Just Eat's interests might be harmed, it is required to balance between its interests and the public interest, in order to maintain free competition in the economy and enforce competition laws.
Privilege is split into statutory privilege and common law privilege. Some privilege is absolute and the mere classification of evidence under a category of absolute privilege denies the possibility of discovery of the document. On the other hand, some privilege is relative, and in respect of such privilege the court may allow partial disclosure or the disclosure of the substance of a document.
There are only a few kinds of absolute privilege, including for documents exchanged between attorneys and their clients for the purposes of legal proceedings, and the privilege of religious officiants. On the other hand, there are several relative privileges, including privilege for the purpose of state security, privilege covering confidential commercial information, medical privilege, privilege over the relationship between a psychologist and their client, privilege between a social worker and their client, privilege for the benefit of the public and journalistic privilege.
According to the CPR, the court has jurisdiction to peruse a document in respect of which privilege is alleged, in order to determine the status of that privilege, balancing the protected interests of the party requesting privilege against the harm that will be caused to the opposing party if the documents are not disclosed. Furthermore, the court will examine whether there is alternative evidence and whether a requested document helps prove the allegations.
As a rule, the courts tend to take a cautious approach with respect to allegations of privilege, certainly in the case of relative privilege, and their tendency is to allow discovery of a document or at least part of one, though they may require the litigant receiving the document not to use the document for purposes other than the legal proceedings.
In June 2005, a leniency programme was issued for violations of the Competition Law. Since its publication, only a few cartel cases have been registered under the programme, despite several attempts by the ICA to encourage it. One possible reason for this is that the programme does not provide any immunity or protection in civil proceedings, and parties fear exposing themselves to private damages claims.
The leniency programme is similar to turning state's evidence in criminal law and is based on the same rules. As part of the agreement, the witness agrees that the state will disclose to the other defendants every detail concerning them and their actions, in so far as the prosecution's approach is an investigative one, for which there is a duty of disclosure.
Recently, the ICA published a new leniency programme, which is relevant only to cartel cases. Under this new programme, leniency will be given only to the first involved person that approaches the ICA and only when the other terms of the programme are met. These other terms include the following:
The leniency is conditional on full and continuous co-operation with the ICA.
However, a cartel's leader, a person who was formerly convicted in a cartel offence, or a person who has already received leniency from the ICA in the past cannot receive leniency under the programme.
With regard to settlements, the ICA can reach a consent decree with a party that committed an offence under the Competition Law, and request the court to give effect to that order, which may also be without admission of liability on the part of the infringing party, and may include, inter alia, a charge of a sum of money to the State Treasury and a charge to take action in the future, or to refrain from doing so.
The request for a consent decree is submitted to the court, accompanied by reasons for granting it and details of the alternative solutions considered instead of the agreement. At the same time, a public notice is submitted on behalf of the ICA calling on any party who may be harmed by the order to submit their claims to the Director General.
The Israeli legal system is adversarial in nature. Evidence is submitted through the testimony of witnesses, and the allegations of the litigants are proven in civil proceedings. The testimony of witnesses takes place during the evidence stage of the case and is effected by submitting an affidavit of evidence-in-chief, which replaces examination-in-chief. The New CPR give the court discretion to decide that the witness will also testify orally in evidence, on matters to be determined by the court, although to this day the customary practice is to submit an affidavit of evidence. Under Regulation 67 of the New CPR, the court will give priority to oral evidence, with the exception of claims for financial relief in the district courts and suits for compensation for bodily injuries or road accidents, in which it will continue to give priority to affidavits of evidence.
At the start of the evidence proceedings, the affidavits of the witnesses for the plaintiff are submitted, after which the affidavits of the witnesses for the defendant are submitted. The court is authorised to order the submission of affidavits at the same time or in some other order it deems to be correct.
A litigant who does not adduce the affidavit of its witness will not be able to adduce the testimony of that witness, unless it sought to summon the witness without an affidavit, for justifiable reasons. In such a case, the witness will first give evidence-in-chief, which will replace the affidavit of evidence-in-chief, and thereafter will be cross-examined.
After the evidence-in-chief, the opposing party may conduct cross-examination, which will be oral. The court may also pose any question that it wishes to the witness, and may summon a witness who has already testified to give additional testimony.
Where a witness is summoned to appear but does not, the court may issue a habeas corpus order requiring them to appear and may impose a fine upon them. If the witness is summoned once again and does not appear, the court may impose a penalty.
In civil claims that are based on breaches of competition law, a party seeking to prove a matter of expertise must support its arguments with an expert opinion. As a rule, an allegation that is economically complex, including the definition of a relevant market, is a matter of expertise. There is usually no need to obtain the leave of the court for the submission of an expert opinion. Pursuant to the CPR, an opinion must be submitted by the date of submission of the affidavit of evidence-in-chief by the relevant party, unless the court rules otherwise. If no verdict is handed down regarding the submission of affidavits of evidence, the opinion can be submitted up to 90 days prior to the date of the first evidence session. Upon the submission of an expert opinion, the opposing party has the right to submit a counter opinion, prior to the date of the submission of its own affidavits; in the absence of a decision regarding such a date, it must submit an opinion up to 30 days prior to the date of the first evidence session. The submission of opinions after the dates set out above requires the leave of the court.
However, in claims based on breaches of competition law, opinions are submitted together with the pleadings. Furthermore, pursuant to the opinion of the opposing party, it is possible to submit a supplementary opinion that addresses the opinion of the opposing party and, in any event, each party has the right to cross-examine the expert of the other party.
The court is authorised to appoint an expert or a team of experts acting on its own behalf.
During the first stage, the damage is estimated by the parties via opinions that are drafted by an economic expert who is familiar with the field of competition. The opinions are usually submitted to the court together with submission of the pleadings, and are usually updated after discovery and perusal proceedings. Sometimes, another opinion is submitted by an objective economic expert who is appointed by the court.
In practice, there are very few tort cases based on causes of action in competition law that have reached the stage of damage quantification by the courts, since most cases end in settlement. It is consequently not possible to point to a particular method in which the damage caused to an injured party is quantified. In general, the plaintiff makes two main arguments with respect to compensation:
What these arguments have in common is an attempt to create an alternative reality in which the breach of the Competition Law did not take place. The plaintiff's damage is the difference between what it would have had, in that alternative reality, and the price that it paid, or the profits that it in fact made, in reality.
It should be noted that, despite the fact that the overarching principle in tort law in Israel is restitutio ad integrum, it is possible that there might also be an opening to sue, in addition, for the damage caused to the plaintiff by the enrichment derived by the tortfeasor due to breach of the Competition Law, via the Unjust Enrichment Law, 5739-1979. The ability to sue for compensation for unjust enrichment has not yet been ruled upon by the Supreme Court, and the rulings of the district courts in this regard are not uniform. However, as mentioned in 1.1 Recent Developments in Antitrust Litigation, the recent Sanofi case of the Supreme Court provided the plaintiff with the ability to claim not only the direct damages it suffered but also the profit generated by the defendant as a result of violating the law, which in many cases can exceed the damage suffered by the plaintiff.
If the courts are required to assess damages in the future, they will probably employ methods of calculation such as “before-during-after”, which compare the plaintiff's condition in the market before, during and after the perpetration of the tort, or by using criteria through which a comparison may be drawn between different markets in which there was no tort, in order to estimate the damage.
It is a fundamental rule in Israeli tort law that a person does not owe compensation other than for the damage that they cause, with the basis in awarding compensation being restitution of the injured party to the situation in which they would have been but for the breach. Therefore, although the case law recognises the power of the courts to award punitive or deterrent damages, these will only be awarded in exceptional cases, in circumstances in which the tortfeasor’s conduct is particularly outrageous and nefarious, is intentional and not merely negligent, and where punitive sanctions cannot be imposed in criminal or disciplinary law. To date, punitive damages have never been awarded with respect to tortious claims on the grounds of competition law.
The courts in Israel have not yet ruled directly with regard to the pass-on defence. Prima facie, there is an opening for this defence in cases in which the tortious plaintiff is directly injured by the breach. It is a fundamental rule in tort law that a tortfeasor is not required to pay more than the damage caused or more than is necessary for restitution of the situation to its prior state; this means that, prima facie, a person injured by a breach of the Competition Law may sue the party breaching the Law for their share only, and not for the portion that was passed on to another party. However, it is important to remember the option that has just been added, as mentioned in 1.1 Recent Developments in Antitrust Litigation, to sue for unjust enrichment.
Alongside this, as set out in 2.5 Direct and Indirect Purchasers, despite the fact that the question of the indirect consumer has not yet been ruled upon by the Supreme Court in Israel, the tendency in the District Court in tort claims based on competition causes of action has been that the indirect consumer also has a right to sue. The existence of the pass-on defence depends, to a considerable extent, on the existence of an independent right to sue that obtains to the indirect consumer. If an indirect customer has this right and the pass-on defence is not employed, the tortfeasor might have to pay full damages to both the direct plaintiff and the indirect plaintiff. There is, consequently, a significant opening for the application of the pass-on defence in the future.
In Israel, interest is regulated by law. The Adjudication of Interest and Linkage Law, 5721-1961 provides that a court awarding a sum of money to a litigant may, at its discretion, also award interest on such sum or part thereof. According to the Adjudication of Interest and Linkage Law, the interest period commences on the date of submission of the claim and ends on the date on which the judgment is handed down, or the date prescribed for payment of the sum awarded in the judgment, whichever is later. Accordingly, there are judgments in which the court has awarded compensation from the date of submission of the claim and there are judgments in which compensation has been awarded for the entire period in which the tort has been in place (subject to prescription).
The interest rate is prescribed in accordance with the provisions of the Adjudication of Interest and Linkage Law and the regulations made thereunder, and it varies in accordance with the parameters that are set out in that law.
Section 11 of the CWO provides that, if more than two persons are liable for a tort, they will be jointly liable for the action and it will be possible to sue them jointly and severally. The class of joint tortfeasors can be divided into three categories:
With respect to the first two, joint and several liability will be set for the entire damage, whilst in the third, each tortfeasor will be held separately liable for the damage that they caused.
The division of liability between the tortfeasors is not relevant to the injured party itself, but influences the internal division between the tortfeasors themselves, and this is a finding that is made by the court. Furthermore, the burden of proving that the damage can be divided and separated falls on the tortfeasors, and a tortfeasor who wishes to say that some of the damage was not caused by it must prove this.
In the case of a difficulty in obtaining compensation from one of the tortfeasors, Israeli law has, in principle, recognised that it is better that the other tortfeasors bear the damage than the plaintiff have to bear the tortfeasor’s inability.
As set out above, breach of the Competition Law constitutes a tort. Pursuant to the CWO, a defendant may submit a third-party notice in order to transfer the liability, in whole or in part, for the claim submitted against it, to a third party. A third-party notice is in fact a conditional claim, because if no liability is imposed on the defendant, the third party will be exempt from indemnifying it. The third-party notice is based on the primary cause of action, while liability towards the third party only arises via the judgment that is handed down against the defendant.
A third-party notice can also be submitted against one of the defendants in the principal claim and, in the absence of a third-party notice, it is possible to deduce that the defendant has no claim for indemnity against any of the other defendants. However, in most cases, and in the case of a tort claim, there is no need for a third-party notice between two defendants who are both liable for the tort, since the court will in any event determine the level of participation of each defendant in payment for the damage. If one of the defendants is struck out of the claim (for instance, if the plaintiff asks to strike them out), the defendant has the right to join the struck-out defendant as a third party.
The proceedings against the third party take place in the framework of the principal claim, so that all of the litigation might be co-ordinated, saving considerable costs to the parties and the legal system.
In Israeli law, the court may issue injunctions and mandamus orders, either as a final remedy in a claim or as an interlocutory remedy.
Conditions for Granting Injunctive Relief
With respect to an interlocutory injunction or mandamus order, the law sets out the considerations that guide the court in awarding an interlocutory order. Firstly, the applicant must prove the cause of action on the basis of prima facie reliable evidence. Additional considerations that the court will take into account include:
A technical condition for the award of an interlocutory remedy is the provision of a guarantee and an independent undertaking. In addition to these, the court may order the deposit of a guarantee.
Injunctive Relief Procedure
In general, an interlocutory remedy will be granted in the presence of both of the parties. The court can award an interlocutory remedy at any time, but relief in the grant of interlocutory remedies varies in accordance with the timing of the motion. Thus, when a motion is submitted for grant of an interlocutory remedy prior to submission of the claim itself, the interlocutory remedy will only be awarded if the court is persuaded that doing so is justified. This kind of order will expire within seven days unless the court sets some other date, in special circumstances.
Pursuant to Regulation 97(a) of the CPR, the court may grant an ex parte order if it is persuaded, on the basis of prima facie reliable evidence, that there is a reasonable concern that a hearing in the presence of both of the parties will give rise to frustration of the award of the order or will cause serious damage to the applicant. However, there are three classes of interlocutory remedies in respect of which the default is an ex parte hearing, but which are not, in general, suitable for proceedings relating to competition claims (interlocutory attachment order, injunction restricting the use of an asset, or an order for the seizure of assets). Pursuant to Regulation 97(e) of the CPR, when an ex parte order is awarded, the court will conduct a hearing in the presence of both of the parties no later than 14 days after the date of grant of the order (except for a motion for an interlocutory attachment order).
Injunctive Relief and Antitrust
Pursuant to the case law handed down by the Supreme Court, interlocutory remedies will not be granted on causes of action in antitrust cases. The rationale behind this rule is that claims on the grounds of competition law require in-depth factual analysis of matters such as the definition of the market, the quantification and estimation of the market share or market power, and an examination of the probable outcome of the arrangement on competition or on the public, and they are not, by their nature, suited to interlocutory remedy. The exception to this rule is when there is a ruling by the Commissioner that states that the arrangement is a prohibited restrictive arrangement. The Commissioner’s ruling, which constitutes prima facie evidence in civil proceedings, is based on an in-depth analysis of the arrangement as well as an analysis of the market and its competitive impacts. Given this state of affairs, the court will give weight to the ruling and will not itself resort to engaging in a complex factual clarification.
There are three types of alternative proceedings for dispute resolution: arbitration, mediation and settlement. These proceedings are not obligatory, and parties to legal proceedings can be referred to them by consent. The New CPR require a Preliminary Discussion outside of the court, within 30 days of the date of issuance of the last statement of claim. The purposes of the Preliminary Discussion are first to delineate and focus the dispute, and secondly to examine the possibility of resolving the dispute through alternative dispute resolution proceedings. As a rule, the courts in Israel quite often tend to refer parties to alternative proceedings and can be aggressive in terms of the pressure that they impose on the parties to resolve their disputes out of court.
Referral to arbitration proceedings can be affected in three ways:
Pursuant to Section 79C(b) of the Courts Law, the courts may, with the consent of the parties, transfer the proceedings in a claim to mediation. In addition, in certain claims, pre-mediation proceedings take place, the purpose of which is to verify the possibility of resolving the dispute by way of mediation prior to the conducting of a hearing on the essence of the claim before the court.
Pursuant to Section 79A of the Courts Law, a court hearing a civil matter may, with the consent of the litigants, rule on the matter before it by way of a settlement with the consent of the parties. The court may propose a settlement to the parties or may give the force of a judgment to a settlement that the parties have reached.
In Israel, external funding of civil proceedings by third parties is evolving and an increasing number of external financiers are emerging. There are private and public funds, which may be used for the funding of both private claims and class actions.
There is a designated fund for class actions in cases of social and public significance. With respect to claims on issues of competition, a representative of the ICA sits on the advisory committee of the public fund and has, to date, funded a number of class actions on competition-related causes of action. Since the inception of the fund in 2011, a number of applications for the funding of class actions in the field of competition law have been submitted (5% of the total applications). In 2020, funding was given for two claims in the field of competition law, and four claims in 2021. The applicant might be an organisation or a private individual and they must comply with the conditions that are set out in the CPR.
The starting point is that the party that loses the legal proceedings will bear the costs of the other party. While the Old CPR gave the Israeli courts the discretion to oblige a litigant to pay the costs and attorneys' fees, the New CPR require the court to rule on reasonable and fair costs recovery in any hearing by default, except in cases where special reasons are found not to oblige any litigant. The amount of costs is determined by the court, after considering the value of the disputed remedy and the final remedy that was ruled by the court. In addition, the court may consider how the parties conducted the legal proceedings. The New CPR require the parties to make an explicit claim regarding the costs and to attach references; they also require the court to detail the considerations that guided it in determining the expenses.
The costs that are awarded do not cover actual costs and, in many cases, do not cover even a small portion of the costs.
Regulation 157(a) of the CPR provides that: “The court or the registrar may, if they see fit, order a plaintiff to give a guarantee for payment of all of the defendant’s costs”. In most cases in the trial court, the plaintiff is not required to deposit a guarantee for the assurance of the defendant’s costs, other than in exceptional cases, and the court is required to make cautious and sparing use of the power granted to it in Regulation 157.
Requiring a plaintiff to submit a guarantee for costs, which is subject to the discretion of the court, is designed, according to case law, to prevent empty claims and to ensure payment of the defendant’s costs if the claim fails. This requirement might, however, impede plaintiffs and may even restrict or prevent access to the courts by plaintiffs without means. The Regulation does not set out the considerations that the court must take into account when hearing a motion to require a plaintiff to deposit a guarantee, and it leaves the court with broad discretion in this regard. Therefore, the law that has been set out in the rulings of the Supreme Court is that this matter must be dealt with in moderation and that the plaintiff must not be required to deposit a guarantee for costs other than in exceptional cases in which the chances of success of the claim are weak and there is a real concern that if the claim is dismissed the defendant will have difficulty collecting the costs that might be awarded in its favour from the plaintiff; therefore, when balancing the plaintiff’s right of access to the courts and the defendant’s right not to be out of pocket, the plaintiff’s right prevails. Case law has further held that the poverty of a plaintiff is not, in and of itself, sufficient grounds for requiring it to deposit a guarantee for costs.
As a rule, there is a right to appeal every judgment, once, to a higher court. Thus, for instance, if a judgment is handed down in the Magistrate’s Court, a right is granted to submit an appeal against the judgment to a District Court. Furthermore, if a judgment is handed down in a District Court, a right is granted to submit an appeal against the judgment to the Supreme Court.
After the verdict is handed down in the appellate court, there is no vested right to appeal it as well. Where the appellate court is a District Court, leave may be sought from the Supreme Court to submit an additional appeal against the judgment of the appellate court. The Supreme Court is the highest court, so there is no technical possibility of appealing its judgment. However, it is possible to request a further hearing of a judgment handed down by the Supreme Court, but those proceedings take place sparingly and only in very exceptional circumstances.
The vested right to appeal only applies after the final judgment has been obtained, but it is impossible to appeal on interlocutory proceedings by right so long as the proceedings are taking place in the court. The court may order various steps to be taken during the course of proceedings, before the final verdict is handed down, but the litigants have no vested right to appeal those. Therefore, if a litigant feels that some injustice has been caused to it in interlocutory proceedings, it must wait for the final judgment and then appeal against it.
However, a litigant may request a leave of the court to appeal a verdict in interlocutory proceedings. If the court gives the litigant leave to do so, it may submit an appeal against the interlocutory proceedings that are in dispute, immediately.
In general, the appellate court does not discuss the findings of fact made by the trial court and the New CPR further limit the exceptional circumstances in which new findings of facts will be discussed in the appellate court. The function of the appellate court is therefore to examine the legal rulings of the trial court, based on the factual findings of the trial court.