A stationary supplier executed an agreement with a distressed stationary chain, whom such supplier was its main creditor, to transfer the managing of its shops to the supplier for 7 years against monthly payment with an annual minimum payment. The agreement was contingent on the Antitrust Commissioner’s approval as required under law but the first year annual payment was paid promptly as a loan to enable the chain to survive until the approval. Concurrently the supplier also commenced running the ship and receiving the proceeds. The Commissioner approved the merger but fined the supplier for breach of the law due to the actions prior to the approval.
The Court held that in Israel, as in the European Union, parties cannot consummate the merger prior to its approval by the Commissioner. The Commissioner is empowered to set a fine of up to ILS 1 million on an individual and in case of a corporation which turnover in the year prior to the breach was over ILS 10 million, a fine of up to 8% of the turnover but no more than ILS 24 million. The fined can be set even if the merger was finally approved.
In this case indeed urgent measures were required, but the parties did not approach the Commissioner to authorize urgent actions to save the company until the merger approval, as the Commissioner may authorize. The loan was not under market terms and is thus in fact commencement of consummation of the merger, as was the commencement of operation in a manner to that planned after the merger. The Commissioner considered the circumstances and set a fine that is only the twentieth of the fine authorized under law and thus the Court held that the decision of the Commissioner was reasonable.