Cartels 2023 Comparisons

The statutory basis in Israeli law for challenging cartel behaviour and/or effect is primarily the Israeli Economic Competition Law, 1988 (ECL), which prohibits “restrictive arrangements”: agreements between people conducting business under which at least one of the parties restricts itself in a manner which may prevent or reduce competition. Furthermore, certain agreements between competitors pertaining to prices, quantities, market sharing or profits are irrefutably presumed to reduce competition (see 1.4 Definition of “Cartel Conduct‟). 

In addition, according to the ECL, any act or omission contrary to the provisions of the ECL or decisions and orders thereunder is a tort under the Israeli Tort Ordinance [New Version]. This clause enables civil lawsuits, including class actions.

The Israeli Competition Authority (ICA), headed by the Competition Commissioner (“Commissioner‟), is the Israeli authority responsible for the enforcement of the ECL′s provisions.

• Cartel behaviours are usually enforced through criminal procedures – the ICA staff is authorised by Israel’s Attorney General to file criminal indictments under the ECL. The Competition Commissioner is authorised to impose various kinds of administrative sanctions. “Public statement 1/12: Guidelines on The Use of Financial Sanctions Enforcement Procedures‟ (“Public Statement 1/12‟) explains how cases are routed to criminal or administrative enforcement. According to Public Statement 1/12, as a rule, cartel behaviour will be challenged through criminal procedures. Cartels routed to administrative enforcement are few and far between. 
• The potential criminal penalties – a company that was part of a cartel is exposed to a criminal fine of up to ILS4,520,000. Individuals that would be deemed responsible will be exposed to up to five years of imprisonment or a criminal fine of up to ILS2,260,000. Those penalties are the product of a change in legislation from 2018, which significantly increased the maximum penalties. 
• Officers’ liability – in addition, the ECL′s criminal liability provision set that an officer must supervise and do “everything possible‟ to prevent a breach of the ECL by their company or an employee. A breach of this provision can lead to up to one year of imprisonment or criminal penalties of up to ILS750,300.
• The potential administrative sanctions – the ECL sets maximum monetary sanctions that enable the Commissioner to impose administrative fines on individuals and companies up to ILS1,113,310. For companies with total sales turnover (in Israel) in the year before the violation that exceeded ILS10 million, the maximum administrative fine is up to ILS111,331,200. 

In terms of jurisdiction, generally speaking, as the ECL is territorial, the ICA has the authority to enforce any breach of the ECL that occurred in Israel. However, extraterritorial reach applies in certain circumstances. With regard to foreign entities, the ICA applies the “effect doctrine‟ to acquire extraterritorial jurisdiction over restrictive arrangements, including cartels, performed outside of Israel that limit the competition in Israel.

Any infringement of the ECL, by action or omission, is a tort under the Israeli Tort Ordinance [New Version]. Thus, all chapters of the ECL, including cartels and restrictive arrangements, are also enforceable by private actions. 

Requirement of tort lawsuit: a tort lawsuit requires demonstration of:

• a breach of the law;
• harm; and
• causal connection between them.

In addition to a private claim, where a number of conditions are met, it is possible to submit a class action. The conditions are as follows:

• the lawsuit raises substantial questions of fact or law that are common to the class, and there is a reasonable likelihood that it would be ruled in favour of the class; 
• a class action is the efficient and appropriate means of resolving the dispute under the circumstances; 
• a reasonable basis exists to assume that the interests of all members of the class will be properly represented and managed; and 
• a reasonable basis exists to assume that the interests of all members of the class will be represented and managed in good faith by the representative plaintiff.

The ECL neither directly defines “cartel conduct” nor sets a specific prohibition for cartel conduct. Rather, cartel conduct is treated as a specific case within the broader definition of “restrictive arrangements”. Section 2 of the ECL sets forth the definition of “restrictive arrangements”. 

Subsection (a) states that “a restrictive arrangement is an arrangement made between persons conducting business, under which at least one of the parties restricts itself in a manner which may prevent or reduce business competition between it and the other parties to the arrangement, or some of them or between it and a person who is not a party to the arrangement‟.

There are four cumulative elements to a restrictive arrangement under Section 2(a) of the Competition Law:

• an arrangement;
• between persons who operate businesses;
• a restriction; and
• the likelihood of competition being undermined (“the likelihood test‟). 

Subsection (b) states that without derogating from the generality of the provisions in subsection (a), an arrangement in which the restriction concerns one of the following matters shall be classified as a restrictive arrangement: 

• the price which shall be demanded, offered or paid; 
• the profit which shall be produced;
• division of all or part of the market, according to the place of business or according to the persons or type of persons whom they shall deal with; and
• the quantity, quality or type of assets or services in the business.

Israeli courts have interpreted this as creating an irrefutable presumption that the arrangement is restrictive and that there is no need to prove the likelihood test. It is, therefore, sufficient to prove the first three elements. Thus, practices like price fixing, limiting quantities, market sharing, boycotting and bid rigging are deemed as restrictive arrangements. In addition, those practices cannot enjoy block exemptions, as elaborated below. 

Some restrictive arrangements may be lawful: according to Section 4 of the ECL, being a party to restrictive arrangements, as defined under Section 2, is prohibited unless the arrangement is covered by a statutory exemption (within the ECL itself) one of the block exemptions enacted by the Commissioner, or if the parties obtained an approval granted by the Competition Tribunal or a specific exemption granted by the Commissioner. 

For example, joint ventures, mutual purchases or joint research and development may all fall outside the scope of the “restrictive arrangement” definition. If they do fall within it, the above may enter under the provision of a specific block exemption, such as a block exemption for joint venture or the general block exemption for vertical arrangements. 

Some sectors and industries have unique exemptions, such as farmers, marine transportation and defence industries that have unique statutory exemptions or block exemptions specifically tailored to the needs and characteristics of the industries, and may sometimes include elements of price fixing, market sharing or quotas.

The basic limitation period for private civil claims is seven years. The period generally commences on the day when the claim first arose.

The claim arises on the day when the relevant act or omission occurred and for an ongoing act or omission, the day it ceased. 

When the claim is based on damage caused by an act or omission, this will be the later of: 

• the day the damage occurred; or
• the day it first became known, but no more than ten years from its occurrence. 

An exception exists where the facts constituting the cause of action were hidden from the plaintiff for reasons unconnected with them, and the plaintiff was unable to prevent them, even by exercising reasonable caution. In such a case, the limitation period will begin on the date the plaintiff became aware of these facts. 

According to the case law of the Supreme Court, the determinative date for Section 8 of the Limitation Law is the date on which there was a “hint‟ or a “suspicion‟ upon which the plaintiff, taking reasonable measures, could follow and discover the cause of action.

The limits on personal jurisdiction over alleged cartel participants vary between criminal and civil proceedings. 

In criminal cases, the basic rule is that the Israeli Panel Law (hence also criminal offences set forth in other laws such as the ECL) shall apply to all “domestic offences”, meaning an offence that the entirety or part thereof was committed within Israeli territory. 

In administrative cases, the Commissioner has been known to apply the “effects doctrine”, which means that for the Commissioner to have jurisdiction over a cartel, suffice that it might have had an effect in Israeli markets. 

In civil cases, on the substantive level, the courts have shown a tendency to apply the effects doctrine, though no Supreme Court ruling has been rendered in this regard. On the procedural level, the acquisition of jurisdiction over a foreign defendant is conditional upon the satisfaction of three cumulative conditions.

The existence of a cause of service pursuant to the alternative categories is provided under Regulation 166 of the Regulations of Civil Procedure. The regulations list 11 categories that may justify service outside the jurisdiction, such as a contract made in Israel, breached in Israel or governed by Israeli law.

The complaint is with respect to conduct within the territory of Israel.

Rule 166(5): The complaint is with respect to damage caused to the plaintiff in Israel from a product, service or conduct of the defendant; as long as:

• the defendant could have expected that damage would be suffered in Israel; and
• the defendant, or someone related to it, deals with international trade or provides international services in a significant scope.

The existence of a cause of action. At the service stage, the burden of proof in this regard is minimal. 

Demonstration that the Israeli court is the forum conveniens to hear the action. Case law has established three main tests for examining the suitability of the forum:

• the test of the majority of contacts and the question of the suitability of the forum;
• the test of the parties’ reasonable expectations; and
• public considerations, primarily which forum has a real interest in hearing the action.

Principle of comity in antitrust cases in Israel: the principle of comity did not play a significant role in previous antitrust cases (in both ICAs and private cases). Considering the increase in litigation of international cartels in Israel, it is plausible that the comity principle will evolve in the future. 

Policy change resulting from the COVID-19 pandemic: at the outset of the COVID-19 pandemic, the Commissioner published a document of clarifications regarding “dealing with the Corona Virus in Israel‟. Nevertheless, this document does not refer to cartel conduct in its classic sense. To the best of the authors’ knowledge, this document has not been widely used and COVID-19 did not result in any meaningful changes to antitrust and competition policy or practices. 

At the end of 2022, a new Competition Commissioner was appointed, promising to present a stricter and more active approach towards competition law enforcement. Even when serving as Acting Commissioner, prior to her official appointment, the new Commissioner opened a major investigation of price co-ordination allegations against two dominant food companies, also signalling that the food sector will be an area where the new Commissioner wants to focus and increase enforcement.

Even in the initial inquiry stages, the ICA has significant investigative means that includes the following.

• An investigation by the ICA usually starts with a covert investigation, which often includes wiretapping. 
• If the covert investigation raises suspicions of violating the ECL, the covert investigation may be followed by dawn raids on both the company office and the homes of the principal individuals. Individuals are detained for investigation in the ICA’s offices, which serve, for this matter, as a police station. 
• The ICA may continue the investigation by additional raids and detainments, summoning suspects and witnesses for questioning, and sending out compulsory requests for information. 
• Once the ICA’s investigations department concludes its investigation, the legal department reviews the case and may ask for supplemental investigations.
• After the ICA concludes its investigation, it will conduct a hearing for individuals and corporations before submitting an indictment to the courts.

Dawn Raids Are a Significant Part of the ICA′s Collection of Evidence

The dawn raids are subject to all the rules pertaining to the police investigation, except that the ICA representatives may raid business premises without a court warrant. However, seizing companies′ computers and other electronic media requires a court order, and therefore, the ICA often obtains one. Business computers must be returned within 48 hours. This period may be extended by court order.

Questioning During and After Dawn Raids

Normally, during a dawn raid, relevant officers and suspects are taken to the ICA′s offices for investigation. Additional summons for suspects and witnesses may follow. The relevant individuals must respond to the ICA’s questions. Exceptions are the right to remain silent, available to suspects with regard to all questions, and the immunity from self-incrimination, available to all interviewees. 

The ICA also has the power to issue compulsory requests for information (RFIs), to which individuals or corporations must respond. Failing to respond to a compulsory RFI or providing incorrect or misleading responses is a criminal offence.

According to Israel′s Penal Law, if a person does anything with the intention to prevent, foil or cause a miscarriage of justice, then they are liable to up to three years’ imprisonment. 

When the police or the ICA interrogate a person, they are normally warned not to speak of the interrogation with any other person except a lawyer who represents them. 

It is also essential to refrain from any act that may influence the ICA′s collection of evidence. For example, it is important to refrain from any attempt to foil the discovery of emails or WhatsApp messages. In addition to its being a criminal offence, the ICA has a highly advanced ability to locate and recover any information sent using electronic devices.

Right to Counsel in Israeli Law

Suspects have the right to legal counsel before and during an interrogation by the police or the ICA. However, the lawyer cannot be present during the interrogation.

Requirement of Obtaining Different Counsel

The general rule is that one attorney cannot represent two parties, or more, that have a conflict of interests. For example, where a company and its employees are suspected of breaching the ECL, the company may finance its employees′ counsel. Nevertheless, should a company and its employee have conflicting interests, the two parties have to be separately represented. In addition, many times, when the ICA thinks there is a conflict of interests between two suspects, it will require separation of representation. 

In the authors’ experience, in the initial steps of the enforcement effort, the following actions by external legal counsel may be advisable: 

• make sure that the clients understand their rights and privileges;
• provide the clients with clear guidance as to the risks involved in spoliation of information; and
• provide guidance as to how the interrogation is expected to be conducted. 

Counsel should be available to the clients, should any questions or clarifications be needed, as the clients are often allowed to contact their counsel even during the investigation.

Section 46(b) of the ECL provides the ICA with extensive authority to request from any person all information and documents that would ensure or facilitate the implementation of the law. The ICA interprets this authority broadly, and the courts tend to uphold such interpretation. 

A key component of the ICA′s collection of evidence is wiretapping. In order to do so, the ICA is required to receive a court warrant, having presented sufficient evidence indicating a suspected offence. 

Another key component is searching computers, mobiles and other electronic devices. This also requires a court warrant.

There is no case law that the authors are aware of with regard to information available in the “cloud” or on remote servers. Courts have been known to issue search warrants that include cloud services such as Gmail. The Israeli Supreme Court commented, in the matter of Orich in January 2022, that the legislature would do well to regulate the subject.

Application of Attorney-Client Privilege

Israeli law includes a number of evidentiary privilege rules, the source of which is either statutory (namely the Evidence Ordinance [New Version], 5731-1971 (the “Evidence Ordinance‟)) or judicial, as a matter of “common law‟. 

Generally speaking, the attorney-client privilege applies to any communication between an attorney and their client and/or any document exchanged between them, which are substantively connected to the professional legal services rendered by the attorney to the client.

Attorney-client privilege is a statutory privilege

Neither the attorney nor the client is obligated to produce things and documents they have exchanged and substantively related to the service provided by the lawyer to the client. The attorney may not produce such materials without the client’s consent. Privileged material cannot be used as evidence before the courts or any authority, body or person competent under law to take evidence. Thus, attorney-client privilege applies in procedures handled by the ICA as well as in private lawsuits. 

Applicability to in-house lawyers

The authors are not aware of any Supreme Court decision in this regard. There are a number of district court cases which establish the principle by which the communication between in-house legal counsel and their employer is indeed subject to attorney-client privilege. 

However, it should be emphasised that attorney-client privilege will only apply to legal communications substantively connected to the professional legal services that the in-house legal counsel is providing. If the in-house counsel has other roles within the company, correspondence with regard to these roles will not necessarily be privileged. 

Privilege against self-incrimination

The privilege applies to oral communications and the delivery of documents. However, the privilege does not prevent the ICA from conducting its own search and seizing documents. In addition, the defendant′s decision to use this privilege has an evidentiary weight against it in court.

The ICA has extensive power to request RFI and the ICA attaches great importance to this power. Therefore, failure to comply or co-operate with an RFI probably leads to criminal or administrative enforcement measures.

According to Section 50D(b) to the ECL, when a corporate entity fails to comply with an RFI, the Commissioner may impose administrative fines up to 3% of a company’s total sales turnover (in Israel) in the year prior to the violation, but not more than ILS8,906,500 million. 

For individuals and companies in the year prior to the violation with a sales turnover of less than ILS10 million (in Israel), the maximum fine is ILS333,990.       

Relevant considerations for calculating a fine may be the amount of information allegedly withheld from the ICA, its importance to the case, former breaches, steps taken by the RFI′s addressee to avoid the offence, etc. In addition, the ICA may consider the prominence of the RFI′s addressee, the magnitude of the main case and whether the RFI′s addressee was the entity under investigation. 

According to Section 47(b) of the ECL, the ICA can also choose a criminal route with maximum sanctions of up to one year’s imprisonment and fines. According to Public Statement 1/12, criminal sanctions will be preferred only where the information available to the ICA indicates the intention to prevent the ICA from receiving information or intention to influence the result of the investigation or the ICA’s decision.

Protection of Confidential/Proprietary Information Collected by the ICA

Generally speaking, the Israeli Freedom of Information Law, 1998, allows disclosure of information held by governmental bodies, including the ICA.

Nevertheless, the law states that it is possible to withhold disclosure regarding an authority’s investigation, meaning that the law does not apply to criminal procedures handled by the ICA. In addition, according to a decision of the Administrative Court, the provisions of the Freedom of Information Law do not apply to information collected or created for the purposes of an investigation, or investigations as part of an administrative enforcement proceeding. 

In addition, the Freedom of Information Law also includes a provision that states that authorities do not have to provide information which is a trade secret. It should be noted that the ICA refers to its authority to collect information as one of its most important authorities. Thus, in the authors’ experience, the ICA appreciates companies′ concerns regarding the protection of information, and it frequently refrains from providing and disclosing trade secrets. Additionally, the ICA sometimes will offer a mechanism to reduce the harm, such as disclosure only for attorneys.

The proper time for the defence counsel to formally raise arguments to persuade the ICA to forgo taking action or modify its prospective action is at the hearing stage.

Hearings in Criminal Procedures

In criminal procedures, the ICA is subject to the Israeli criminal law system, and in accordance therewith, the ICA is required, among other things, to allow the suspect a proper hearing before indictment. The hearing will be held within 30 days of the ICA sending a letter informing the suspect that it has evidence that the suspect committed a crime. The ICA often provides the suspect with a draft of the indictment before the hearing.

Hearings in Administrative Procedures

If the Commissioner sends a notice of intention to impose administrative sanctions within 60 days of the date the ICA has given such notice, a proper hearing should be held. The Commissioner may extend the time by which a hearing is to be held by not more than 90 days for reasons which shall be recorded. The usual practice is to have both a written and an oral hearing held within the hearing period. The ICA usually must receive the written submission a week to ten days before the oral hearing.

ICA′s Leniency Programme

In 2019, the ICA published guidance regarding its leniency programme with regard to criminal indictment, which can apply to both individuals and companies (the programme does not apply to administrative procedures). 

The leniency programme has many conditions, and it is part of the reason why it has only been applied in very rare cases:

• it only applies to cartel cases;
• it applies only to the first person or company that approaches the ICA regarding the cartel;
• the leniency programme will only apply in cases where an investigation has not yet started regarding the same cartel;
• the programme only applies to companies where the company has taken a formal decision to apply for the programme, as opposed to individuals approaching the ICA; and
• the leniency programme will not apply to a “clear leader of the cartel‟.

In any event, the leniency programme cannot protect from civil lawsuits, including class actions.

The Israeli president has the authority to grant amnesty and ease the punishment of offenders. The authors are not aware of a case where amnesty was provided with regard to cartel cases.

Obtaining Information From Employees

In criminal cases, the ICA can seek information directly from companies′ employees using different provisions in the criminal law system, such as searching the company and the employees’ premises (with a search warrant) and summoning and interrogating the employees. 

In Administrative Procedures

The ICA′s main tool to gather such information is the authority set forth in Section 46(b) of the ECL, which grants the ICA the authority to seek information from “any person‟ that would ensure or facilitate the implementation of the law. The usual practice with regard to Section 46(b) is that the ICA obtains the information from the company and not directly from its employees. Nevertheless, in a draft public statement published in September 2022, the ICA mentioned that in “appropriate cases” the request for information may be addressed directly to a company’s employee.

See 3.1 Obtaining Information Directly From Employees. 

A supreme court case from 11 January 2022 dealt with the question of the ICA′s jurisdiction and authority to require documents from a foreign parent company of an Israeli company. The Supreme Court specifically stated that it would not set a precedent regarding this question, but it did mention the ICA′s broad discretion in applying the power to require documents. The authors thus estimate that whether the ICA can request documents from a specific entity outside Israel mostly depends on the specific circumstances of the case and the connection and nexus of the foreign entity to Israel. 

A draft consent decree issued on 4 January 2023, seems to follow the Supreme Court decision. The consent decree involved a UK pharmaceutical company in respect of which the ICA accused its distributor in Israel of excessively pricing one of its medicines. As part of the investigation, the UK company received a request for information from the ICA, but the foreign company claimed that the ICA had no jurisdiction over the company. Following the company’s refusal to respond to the request and after negotiations between the parties, the UK company responded to the ICA’s requests for information and agreed to pay ILS110,000 to the state treasury.

In cartel cases, the ICA usually conducts the investigation by itself. Other agencies and governmental bodies can provide the ICA with early information about certain cartel behaviours. In addition, sometimes, the ICA co-operates with special units of the police that also investigate white-collar offences. 

The ICA usually enforces cartel cases by itself. 

Procedure for Issuing Indictments in Criminal Cases

The ICA require by law to allow a suspect a proper hearing before the submission of indictment (see further explanation regarding the hearing process in criminal proceedings in 2.10 Procedure for Defence Counsel to Raise Arguments Against Enforcement). 

Disclosing of Evidence by the ICA

Before the hearing, the ICA provide the suspect with the main evidence the ICA holds. After the submission of the indictment, the suspect will be provided with all the evidence held by the ICA unless there is a legal impediment to disclosing it. 

Court’s Jurisdiction in Criminal Cases of the ICA

The court that has jurisdiction in criminal cases involving charges according to the ECL in the central District Court located in the city of Lod.

Procedure for Filing a Civil Lawsuit

In civil lawsuits, the plaintiff needs to file the case in accordance with the jurisdiction’s rules depending on the value of the requested remedy (see further details regarding jurisdiction in civil lawsuits in 5.1 Private Right of Action). Submission of civil lawsuits requires paying a claim fee to the court that also depends on the requested remedy. 

Disclosing of Evidence

In civil lawsuits in Israel, after the last statement of defence or counterplea has been submitted to the court, the discovery phase begins. In this stage, each party must reveal any document relevant to the lawsuit, including sensitive information, unless there is a legal impediment to disclosing it. The court may take measures to protect the information, such as partial disclosure or to the parties′ counsels. 

Access to Information Held by the Third Parties

According to case law, access to information in possession of the third party should be held by summons to testify. There are some exceptions, like where the third party is, in fact, a company controlled by one of the parties to the trial. 

Access to Information Held by the ICA

As mentioned, the ICA is subject to the Israeli Freedom of Information Law. The ICA will not expose information gathered during criminal or administrative procedures (see further details in this regard in 2.9 Protection of Confidential/Proprietary Information).

Enforcement actions involving cartels are typically brought against multiple parties in a single proceeding. There are some cases where the ICA will submit two indictments in the same cartel case. One case is where one of the parties to the cartel pleaded guilty to actions before or during the trial, and the ICA wants to summon them to testify at the trial. It is also the case if two or more defendants are either husband and wife or parents and their children.

The burden of proof depends on the type of procedure the ICA choose to take. Usually, and in accordance with the ICA′s guidance, most cartel cases will be enforced through a criminal procedure. The burden of proof the ICA needs to satisfy would be beyond a reasonable doubt.

In administrative procedures, a balance of probabilities of over 50% is required. While according to the ICA′s approach, the proper burden is the “administrative evidence‟, which requires a reasonability test.

In criminal cases handled by the ICA, the ICA serves as a prosecutor before a district court, where a professional judge serves as the finder of facts after an adversary procedure. 

In administrative procedures, the Commissioner determines the facts that serve as the basis for determining breach or financial sanction. The Commissioner’s decision can be appealed to the Competition Tribunal, which, in turn, reviews the Commissioner’s decision de novo, including all the facts disputed between the Commissioner and the alleged breaching party.

There is no precedent regarding non-Israeli competition authorities′ decisions, and the admissibility of documents from foreign proceedings has been defined by an Israeli District Court as “a difficult question‟. In administrative cases, the ICA has been known to request documents from proceedings in other jurisdictions, but the evidentiary status of these documents has yet to be determined by Israeli courts. 

In criminal cases, the full rules of evidence apply, including rules such as a rule against hearsay and rules pertaining to opinion evidence. 

In administrative cases, the applicable rule is “administrative evidence”, which means any evidence that might convince a reasonable regulator to make the relevant decision. While the exact scope of what may or may not constitute administrative evidence in administrative sanction cases has yet to be determined by the Israeli courts, the ICA has been known to use at least some hearsay, and the Competition Tribunal has heard the testimony of ICA representatives even when such representatives might not meet all the requirements of an expert witness.

In most cases, the ICA has not used experts in criminal litigation. However, it is common for defendants to use experts in establishing their defence. For example, the defendants may use an expert to prove that no harm has been caused to the competition or with regard to the exact market definition. The ICA may or may not bring forth expert witnesses for rebuttal of expert evidence presented by the defendants.   

Different privileges may be argued in certain circumstances, such as attorney-client privilege, trade secrets, privacy, medical privilege, source protection, etc. Attorney-client privilege is unique because it is considered an absolute privilege that, as a rule, cannot be revoked by the court.

As the ICA is a monopoly in competition and antitrust enforcement, it is highly unlikely to have multiple or simultaneous enforcement proceedings involving the same or related facts. 

Administrative Sanctions

The Commissioner, after consultation with the Advisory Committee for Exemptions and Mergers, may impose administrative fines (monetary sanctions) directly on companies and individuals involved in a breach. She may also issue a determination of breach, used as prima facie evidence in any legal proceedings. 

The Competition Tribunal may, at the Commissioner’s request, order the parties to cease an arrangement. Such order shall have the force of a court order, and its breach carries criminal and civil sanctions. 

Criminal Sanctions

These are imposed in an ordinary criminal procedure by the district court, where the ICA serves as a prosecutor.

In criminal cases, the plea bargain mechanism works like a plea bargain in any criminal procedure. The ICA (as criminal prosecutor) reaches an agreement with the defendant, which is then brought for the approval of the court. The plea bargain may include the removal of indictment clauses, an agreement on the sentence requested by the state or other commitments such as a commitment to testify. 

In administrative cases, and sometimes in lieu of a criminal indictment, the Commissioner may request the Competition Tribunal to grant the force of a court order to an agreement between the Commissioner and another entity or person by way of a consent decree. A consent decree may or may not include an admission of liability by the breaching party, and it may include a monetary component to be paid to the Israeli state treasury. In theory, a consent decree can be reached at any stage of criminal or administrative proceedings. However, while a criminal investigation may end with a consent decree, the authors are not aware of any case where a consent decree was reached after an indictment has been filed with the court.

The collateral effects of establishing liability in an ICA′s procedure are as follows. 

• Liability established in a criminal procedure: the court’s findings and conclusions in the conclusive incriminating verdict will be admissible as prima facie evidence against the convicted offender or anyone whose liability stems from that of the convicted offender. The convicted offender will not be permitted to present contradicting evidence, except with the civil court’s permission. In addition, a civil follow-on action following a conclusive incriminating verdict may be brought before the same judge of the same court where the incriminating verdict was rendered, and criminal procedure’s findings will be deemed as findings that were established at the civil procedure.
• Liability established in an administrative procedure: an administrative determination of breach issued by the Commissioner serves as prima facie evidence in any legal proceedings. Nonetheless, the defendant in a follow-on civil litigation will be entitled to submit contradictory evidence. 
• Possible debarment of the company and its officers from governmental bidding processes: certain government bidding processes may prohibit the participation of entities with certain criminal records, including competition law breaches.
• These effects can only partly be avoided or mitigated by a consent decree: a consent decree can be without admission of liability. However, if the consent decree includes admission of liability, such admission can be used in other actions.

See 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards for the sanctions and penalties in criminal and administrative procedures. 

The actual criminal sanction will be given by a judge and is a product of an adversary proceeding: the sanctions mentioned above are the maximum sanctions set forth at the ECL. After a criminal judgment determines whether a breach was conducted, the phase of sentencing argument begins. At this stage, both sides will make their arguments and the court will make a decision. The highest prison sentence to date was 11 months.

The main sanction available in civil proceedings is compensation for the damage caused, often monetary compensation, applicable to both companies and individuals. 

Compensation in civil proceedings is applied by the presiding judge and is the product of adversary proceedings requiring proving the extent of the damage. Most proceedings end with settlements. In class actions, Israel’s Attorney General may be involved and opine on the settlement.

The part of a compliance programme in the sentencing or administrative fines has yet to be regulated by law or ICA guidance, but it may be considered a mitigating factor when management was not actually involved in the breaches. 

In 1998, the ICA published some recommendations regarding the desired format of compliance programmes. The recommendations noted that an effective compliance programme could be a defence under the officer criminal liability of provision of the ECL. There is no clear and more recent guidance from the ICA regarding the meaning of an “effective compliance programme‟. It is clear, however, that an effective programme should include, among other things, some form of written guidance, routine inspections, training employees on relevant specific issues in competition law and clear sanctions within the organisation in case of a breach.

Sanctions in governmental proceedings usually do not include mandatory consumer redress, as this is not part of the ICA′s enforcement measures. However, they may be included in a consent decree. 

Both criminal and administrative ICA′s procedures can be appealed to the Supreme Court. An appeal can be submitted without requesting approval. Thus, appeals in antitrust cases are quite common. 

According to the ECL, any act or omission contrary to its provisions is a tort under the Israeli Tort Ordinance [New Version]. Therefore, both private firms and individuals harmed by a breach of the ECL may bring forth an action. Tort lawsuits require demonstration of a breach of the law, damage and causal connection between the breach and the damage that occurred. 

Private Actions Brought Before the Regular Civil Courts System

Private antitrust actions, as well as class actions, are brought before the regular civil court system and, therefore, the jurisdiction depending on the value of the action. 

Common Reliefs and Remedies

Generally speaking, the Israeli tort law grants compensatory damages, and it is common for both private and class action claimants to seek financial compensation for their actual damage. Having said that, since most private antitrust claims end in settlements, there is little precedent regarding the calculation of antitrust damages. 

The required burden of proof for damages is a preponderance of the evidence. See 3.8 Enforcement Against Multiple Parties regarding the burden of proof in administrative procedures.

As mentioned, tort lawsuits can be brought as class actions if they meet the conditions mentioned earlier. Class actions may be brought by any person that suffered damage, including competitors and organisations representing specific interest groups, or by consumer groups that have been approved by the Minister of Justice. See 1.3 Private Challenges of Cartel Behaviour/Effects regarding the conditions for certifying a class action. 

There is no binding precedent from the Israeli Supreme Court with regard to the passing-on defence. However, district court decisions tend to uphold indirect purchasers’ claims, at least in some cases. This is also the position of Israel’s Attorney General. Therefore, if the Supreme Court turns the district courts’ tendency into binding precedent, it will also give rise to a pass-on claim by defendants. 

See 4.3 Collateral Effects of Establishing Liability/Responsibility.

Most private antitrust claims end in a settlement. In a class action, the approval of the settlement is subject to the district court’s review, including a settlement in which the plaintiff withdraws from the claim.

In class actions, the court is obligated, by law, to receive a written opinion from a “settlement examiner‟ with expertise in the relevant field before approving the settlement. The court may decide that an examiner is not required for special reasons, which shall be documented.

Under Israeli law, the Attorney General may choose, at her own discretion, to join every civil litigation if she deems that important public interests are at issue or if an important policy question is at issue. If the Attorney General chooses to do so, she can file pleadings regarding the position and participate in hearings. Generally speaking, other regulators (such as the Israeli Competition Authority or the Bank of Israel) will not join the proceedings independently. If they wish to present their position in a specific proceeding, they will likely do so through the Attorney General. Eventually, the court may or may not accept the Attorney General’s position. However, courts do tend to take such positions very seriously. In the review, the court has to approve the attorney fees, considering the benefit and public value of the procedure, its complexity, etc. 

In ordinary civil actions, the court may force certain changes in the settlement to grant it the force of a court verdict.

A civil lawsuit may take years from inception to completion; sometimes as many as ten years and even more.

The winning party in civil lawsuits may be awarded with attorney fees depending on the judge’s decision. The sum is decided by the judge and needs to be calculated in accordance with some considerations set by law, such as the remedy’s sum ruled by the judge and compared to the initially requested remedy, the complexity of the case at hand, the efforts invested at the proceeding, etc. 

In any case, the sums are bound by the rules of the Israeli Bar association that set the minimum fees for attorneys. For example, in cases where the requested remedy is more than approximately ILS1 million, the minimum attorney fee is approximately ILS50K. The authors note that usually, the compensation is around 10 to 15% of the remedy.

The Obligation of Unsuccessful Claimants to Pay Costs/Fees

In civil lawsuits, including in the event of a dismissal of the lawsuit, the court may award expenses and the payment of attorneys’ fees to the defendant against the plaintiff. However, the awarded sums usually do not cover the actual expenses. 

Determination of Expenses and the Payment of Attorneys’ Fees in Class Actions

Both expenses and attorney fees in class actions are regulated by the law. The court is authorised to rule the sums of both expenses and attorney fees according to certain considerations such as the importance of the public interest, the benefit the class action brought to the class, the efforts invested in the class, etc. 

As a rule, Israeli law grants a single appeal to a higher judicial court. A second appeal can only be filed with permission. 

In cases heard at the Magistrate Court, the appeal will be filed to the district court. A second appeal, if granted, will be filed to the Supreme Court. If the hearing court is the district court, the appeal will be filed to the Supreme Court, and further appeals are not possible. 

Most civil cartel cases end in settlements, so appeals are very rare. In any case, an appeal should be based on errors of law rather than arguments regarding factual findings under the jurisdiction of the hearing court.

While the Israel Competition Authority attributes the highest severity to agreements between competitors (“horizontal” agreements) such as cartels, vertical agreements (agreements between different links along the chain of production and distribution) have also been cause for criminal investigation and sanctions in rare cases.

The ICA does not have specific guidance regarding Cartel conduct and behaviour. However, certain public statements refer to different aspects of cartel enforcement, such as the following.

• Public statement 1\12: Guidelines on The Use of Financial Sanctions Enforcement Procedures. This public statement details the ICA′s considerations for navigation of different procedures between criminal and administrative procedure.
• Public statement 1\16: Considerations of the Competition Commissioner in Determining The Amount of a Monetary Sanction. This public statement outlines in detail the method of calculating administrative fines.

It stems from both of these public statements that the default enforcement procedure for cartel behaviour is the criminal route. In the rare cases where administrative fines might theoretically be imposed for cartel behaviour, such fines shall be on the higher side to reflect the severity of the offence.