Amendment to Israeli Antitrust Law – Cancellation of the Blanket Exemption for Reciprocal Distribution Agreements

August 4, 2015

The Israeli Restrictive Trade Practices Act, 1988, is designed to prevent businesses from placing “obstacles” on the normal course of competition in the market. Inter alia, the Act prohibits the existence of a cartel (or, "restrictive agreement"). The Act defines a restrictive agreement in a very wide way to include any “Arrangement entered into by persons conducting business, according to which at least one of the parties restricts itself in a manner liable to eliminate or reduce the business competition between it and the other parties to the arrangement, or any of them, or between it and a person not party to the arrangement”. A restrictive arrangement may be, for example, a restriction on the price demanded, offered or paid, profit to be obtained or market allocation (by type of goods or by territories, including exclusivity agreements). A restrictive arrangement that does not meet the requirements of the law and was not preapproved by the Antitrust Authority may constitutes a criminal offense, and in the case of a corporation, the law imposes personal liability on directors and officers of the corporation, except where such director or officer proves that the offense was committed without his knowledge and he took all reasonable steps to ensure that the corporation does not violate the law. A restrictive arrangement, as an illegal agreement, is also unenforceable under law.

The law includes a list of arrangements specifically defined as not constituting a restrictive arrangement. Until recently, the law exempted all reciprocal exclusive distribution agreement. A recent amendment stipulates that as of the end of August, 2015, this exemption is canceled and exclusive distribution agreements will be subject to the general provisions of the Israeli Antitrust Law. As we noted in our previous publication on this subject (Issue 171) the short time left until the entry of this amendment into force should be used to adjust the existing exclusivity agreements to the requirements of the law and drafting of new agreements to comply with the law, where necessary.

Our firm, which, inter alia, deals with distribution and antitrust issues, will be happy to answer any queries or required clarification and will be happy to expand on any issue described above.