The Central Company for Beverage Distribution Ltd., which is a monopoly in its field, included in its agreements with its customers an option to cancel the agreement in the event of a reduction in the customer's purchases and the Director General of the Competition Authority imposed a fine thereupon.
The Supreme Court held that the company abused its monopoly power. The Israeli Economic Competition Law prohibits a monopoly from abusing its status as a monopoly. The Law establishes a three-part test: It must be determined that the alleged violator is a "monopoly holder";it indeed engaged in a practice constituting an abuse of its position; and finally, that said practice may reduce competition or harm the public (the "likelihood element"). The test for satisfying the likelihood element is the existence of a reasonable possibility of substantial harm to competition alone, without the need to prove actual harm. Here, a contractual clause entitles a monopoly to terminate an engagement with its customer due to a reduction in the customer's purchase volume, including a reduction resulting from diverting demand to a competitor. It is clear that this clause constitutes an abuse of the monopoly's power and may to harm competition, and hence prohibited.