Personal Liability of Directors and Officers for Antitrust Offenses
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Personal Liability of Directors and Officers for Antitrust Offenses

July 9, 2014
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At the beginning of 2014, Justice Moshe Yoad HaCohen convicted a number of senior executives of the “Shufersal” chain of charges of attempting to enter a restrictive arrangement and of violating the terms of a merger between Shufersal and Clubmarket. This merger was considered problematic due to the reduction of competition in the market and for approval the Antitrust Commissioner set several rules for minimizing the damage caused by the merger and its effect on increasing concentration and rising prices in the food industry. This conviction of senior officials in the economy is a reminder of the personal responsibility of directors and officers. Another reminder came by means of the sentence handed down in the affair, including prison sentences against senior chain officials and the former CEO.
The Courts determined that a restrictive arrangement includes any coordinated manner, whether done in an orderly agreement or by “a wink of an eye, by a laugh of understanding, by a coordinator who is foreign to the arrangement, or by statements made to someone who is irrelevant to the matter, so that things will be heard by whoever is interested in the matter or in any other way. ”
Part of the free competition is embodied in conducting campaigns in which certain products are sold for a limited period at very low prices. The holding in the Shufersal case indicates that when it became clear to the chain’s management that large suppliers conducted a series of similar operations on a competing chain, senior executives of the chain formed contact with the same suppliers to clarify the circumstances of the matter. In such discussions, senior chain officials made it clear to the suppliers that if they did not meet their demands to cease working with the competitor chain, their products would be removed from the Shufersal shelves. The verdict convicted the chain’s managers for the offens of a restrictive arrangement – an offense under the Antitrust Law.
The Honorable Justice Moshe Yoad Cohen of the Jerusalem District Court noted in the verdict that he had sentenced the CEO of the chain to imprisonment, although if one checks the result, there was no damage or substantial damage to competition, because the arrangement they tried to promote did not ultimately come through because of the suppliers’ opposition to ceasing operation in competing chains. If one checks the intention, there is no doubt that the chain’s seniors, against whom the indictments were filed, attempted to carry out the actions that constitute a flagrant violation of the terms of the merger signed by the chain. The judge states that there is no doubt that the seniors did all they could to reach the result they sought, at any cost, and when their demands to suppliers at the beginning were not answered, they recontacted them again a few days later trying to threaten them with removing their products from the shelves.
It should be noted that the indictment was filed, inter alia, against the former CEO of the company because, in the opinion of the judge, he was a central figure in the company and certainly in connection with making decisions as to contacting the suppliers’ managers whose products were sold simultaneously in both chains. Appropriate advice might have enabled the economic interests of the chain without breaking the law. Violation of protected social values, and even attempts to harm them, even if unsuccessful, may lead to heavy punishment against the decision makers in the company and it is important to receive ongoing legal advice in order to avoid this.