I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
Extensive attention has been given over the past few years to the legality of excessive pricing by monopolists. In April 2014, the Israel Antitrust Authority (IAA) published a public statement regarding the prohibition on charging excessive prices by a monopolist.2 The public statement elaborates on the legal and economic tests for estimating whether prices charged by a monopolist are excessive under Section 29A(1) of the Antitrust Law, which prohibits a monopolist from abusing its dominant position by charging ‘unfair prices’. Furthermore, the statement details the considerations that will be taken into account by the IAA when deciding to act against a monopolist that charges excessive prices. The statement provides a safe harbour for prices that exceed the production costs by up to 20 per cent. However, it provides no guidance as to the circumstances in which the price will be considered excessive. Interestingly, according to the statement, a monopolist that charges more than 20 per cent over its production costs might be considered to be in breach of the law. Shortly after her nomination in 2016, the new Director General of the IAA, Michal Halperin, expressed her disagreement with this public statement and in April 2016, she announced a public hearing and formal re-evaluation of the IAA’s policy concerning the prohibition on excessive pricing by monopolies, which was designed to examine the merits, enforceability and effectiveness of that policy. The need for re-evaluation arose due to a vigorous public debate that took place following the publication of the public statement. In particular, the public statement raised many questions and controversies regarding the very determination that excessive prices are a violation of the Antitrust Law, as well as practical difficulties in the ability to effectively enforce the prohibition at the implementation level.3 In September 2016, the IAA published a new draft statement regarding the enforcement of the prohibition on excessive pricing by monopolists, replacing the previous public statement. The new draft introduces the main principles of enforcement challenges of unfair prices and suggests that the IAA will act against firms charging excessive unfair prices only where there is no other competitive remedy available for addressing the underlying problem in the specific market. In principle, the IAA would prefer a structural solution to the specific treatment of prices; however, it will act when the prices are significantly higher than the price charged under competitive conditions, and when there are indications that the high price is unfair. Furthermore, according to the new draft statement, the IAA will not enforce the prohibition in a market where there is a designated industry regulator supervising the prices set in the market. The new draft statement also indicates that the safe harbour established in the previous public statement will be repealed due to the theoretical and practical difficulties it raised.
In the private enforcement arena, following the issuance of the previous draft statement in October 2013 several class actions were filed against monopolistic companies, alleging unfair excessive pricing.4 In April 2016, the Central District Court certified a class action against Tnuva, Israel’s largest dairy manufacturer, alleging that Tnuva charged excessive prices for cottage cheese. This decision is precedential to a great extent, as it explicitly recognises, for the first time, excessive pricing as a violation of the Antitrust Law in Israel.5 This decision is discussed in detail in Section VII, infra.
The past few years have been characterised by an increasing number of motions to certify class actions based on alleged global cartels being filed with the Israeli district courts. The plaintiffs in these cases are typically private consumer organisations or Israeli individuals, while the respondents are foreign companies that allegedly were parties to global cartels that affected the Israeli market and consumers.
The trigger for these motions is largely based on proceedings carried out in various jurisdictions worldwide and enforcement measures taken by the authorities there with respect to the alleged global cartels. According to these motions the financial damage suffered by the Israeli consumers was caused by the broad impact of the alleged global cartels on the relevant products’ markets in Israel.6
In December 2016, the District Court issued, on appeal in the LCD cartel case,7 a ruling which – if not reversed by the Supreme Court – may eventually block the possibility of filing class actions based on alleged global cartels concluded by foreign entities, outside Israel – in those cases where the Israeli consumers are merely indirectly injured. This significant ruling, which explicitly discussed the matter of Israeli courts’ jurisdiction over foreign respondents, is discussed in detail in Section III, infra.
II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
Private antitrust enforcement is founded in Section 50 of the Antitrust Law, under which any act (or omission) that contravenes the provisions of the Law, including instructions or conditions imposed by Director General, automatically constitutes a tort actionable in terms of the Torts Ordinance. For example, Section 4 of the Antitrust Law makes it a contravention for any person to be a party to a ‘restrictive arrangement’, which may include both horizontal and vertical agreements, including per se illegal price-fixing or market-allocation agreements. Section 29 and 29A of the Antitrust Law make it illegal for a monopolist to abuse its monopolistic position in the market through, for example, unreasonable refusal to supply or purchase goods or services, price discrimination or charging an unfair price for goods or services. Such contraventions of the Antitrust Law are thus deemed to constitute a tort for purposes of the Torts Ordinance. Section 71 of the Torts Ordinance empowers a civil court to grant compensatory damages or to make other orders, such as injunctions, in favour of a person who has suffered damage or injury as a result of a tort committed against him or her. Thus, in Tower Air,8 for example, the applicants were able to bring their claim for pecuniary damages due to the financial damages suffered by them as a result of the respondents’ anticompetitive behaviour in contravention of the Antitrust Law.
In 2006, the Class Action Law was signed into law. This legislation extracted the provisions regulating class actions from, inter alia, the Antitrust Law, and set out an independent regime regulating class actions. The Class Action Law regulates, inter alia, the legal requirements for the commencement of a class action such as issues of legal standing, the legal requirements to bring a class action and the relief that may be claimed, including the calculation of damages. The Class Action Law also sets out the court’s powers and authority in its hearing and enforcement of class actions, including its authority to recognise the claim as a class action, to grant a settlement order and to issue other orders such as in respect of professional fees and remuneration of the class action representative. The Class Action Law also regulates various other issues, such as prescription and the establishment of a fund in order to finance class actions that are of social or political significance.
Sometimes, claims alleging anticompetitive conduct are brought both under the Antitrust Law and the Unjust Enrichment Law. In Gazgal, the District Court of Tel Aviv ruled that although the Israeli laws do not recognise the general tort of ‘unfair competition’, the applicant may still get a remedy pursuant to the Unjust Enrichment Law, if certain conditions are met.9 This ruling is unusual since the Israeli laws (unlike the US laws) do not contain a general prohibition of unfair competition and the claim was not based on the Antitrust Law. In a decision recently issued by the Central District Court, which involved a claim of abuse of dominant position, the Court awarded the plaintiff a remedy based on the Unjust Enrichment Law. The Court held that misleading the Patents Registrar in order to prolong the pharmaceutical company’s monopoly and delay the entry of a generic competitor in the market entitled the competitor not only to receive compensation under the antitrust laws, but also entitled it to claim all or part of the monopoly profits under the Unjust Enrichment Law.10
During 2013 and 2014, two new laws were enacted aiming to increase competition in the markets generally and in the food sector in particular.
In March 2014, the Law for Enhancement of Competition in the Food Sector, 5774-2014 (the Food Law) was enacted. The objective of this law is to increase competition in the food sector, and consequently to bring to a reduction of prices to consumers. Inter alia, the Food Law prohibits a supplier from dictating, recommending, or interfering in any way in decisions made by a retailer of food and consumption products, regarding the price it charges to consumers for a product of another supplier, or regarding the conditions under which it sells a product supplied by another supplier. Specific prohibitions apply to ‘big retailers’ and to ‘big suppliers’, based on, among other factors, their sales volumes in the preceding year. In general, a ‘big’ supplier is prohibited from interfering in shelves stewardship of a big retailer, from setting prices below cost to the big retailer, from recommending the resale prices of its products and, in the absence of special permission, from subjecting the sale of a product to the acquisition of other products supplied by it. In addition, the law authorises the Director General to publish on the IAA’s website a list of ‘very big suppliers’ (i.e., suppliers the annual sales of which exceed 1 billion shekels), of which products’ placement must not exceed 50 per cent of the total shelf space available in any one of the big retailer’s biggest stores. The Food Law further regulates ‘geographic competition by retailers’. In this respect, the Director General must define, for every ‘big store’ of a big retailer, its ‘competitive geographic area’, in which area the law prohibits the expansion of the big retailer without prior approval of the Director General.
Interestingly, the Food Law also requires a big retailer to publish on the internet full and updated prices of any product sold in any of its stores.
Breach of the Food Law is considered an offence under the Consumer Protection Act and the Director General is in charge of the enforcement thereof. In the absence of a specific reference to private enforcement of this law, private actions may be filed pursuant to the Torts Ordinance [General Version] 1982 (‘breach of statutory duty’).
In addition, in December 2013, the Law for the Promotion of Competition and Reduction of Concentration was enacted, aiming to strengthen competition and break up certain powerful business groups in the Israeli economy. Inter alia, the Law bans groups from owning both financial and non-financial enterprises (any group that owns both types of companies must divest one or the other) and dismantles ‘business pyramids’ by stating that no group may have more than two tiers of publicly listed companies. The Law also deals with competition considerations relating to allocation of rights in state assets and the requirement to consult with the Director General in certain cases.
Where a civil claim for damages is brought under the Antitrust Law, the Prescription Act, 5718-1958 applies. Sections 5(1) and 6 of the Act direct that a claim (not in respect of immoveable property) will prescribe seven years from the date on which the cause of action arose. Under Section 8, however, if the plaintiff was unaware of the facts that constituted the cause of action for reasons that were independent of it, and that, even using reasonable caution, it could not have known, the period of limitation will commence on the day that the facts became known to the plaintiff. Section 89 of the Torts Ordinance directs that the date on which the cause of action arose will be the date on which the relevant act or omission occurred; where the act or omission is a continuing act or omission, then the date on which such act or omission ceased will be the date on which the cause of action arose.11 Specifically, however, where the claim is a claim for damages, including pecuniary damages, caused by a tortious act or omission, then the date on which the claim arose will be the date on which the damage was incurred. However, should such damage only be discovered at a later date, the cause of action arises on this date – subject to a maximum period of 10 years.12 Since damage is one of the elements of a cause of action brought under the Antitrust Law, the latter rule of Section 89(2) should apply to such cases, provided that the plaintiff shows a causal link between the argued action (or omission) and the damage.13
In Straus Group et al v. Carmit Candy Industries Ltd,14 the Supreme Court considered the question of which day the plaintiff became aware of the facts constituting the cause of action. The case involved an action for damages brought by Carmit, the Israeli distributor of Cadbury, against Strauss Group for alleged abuse of dominant position by exclusionary practices aimed at forcing Cadbury chocolates out of the market. The Court ruled that the day on which the plaintiff became aware of the facts constituting the cause of action was not the date on which Carmit became aware of the defendant’s salespeople’s behaviour and threats to the retailers, but later – when Carmit revealed for the first time that this was part of a strategic decision of the defendant’s management to exclude Cadbury from the market. This information was revealed to Carmit only when the investigation of the IAA against the defendant became public.
The inclusion of a person as a claimant in a class action group has the same effect in terms of tolling the statute of limitations as if that person had issued the summons in the matter.15 In addition, should the court deny an application for approval, the prescription period of the claim of a person included in the group deriving from that cause of action does not end prior to one year after the date on which the decision on the application for approval becomes final, provided that person’s claim had not been tolled prior to the date on which the application for approval was filed.16
The Antitrust Law is silent on its extraterritorial reach. In 1999, in accordance with the statutory authority granted under Section 43(a)(1) of the Antitrust Law to declare that an arrangement is a restrictive arrangement, the Director General of the IAA determined that such an arrangement existed in the market for selective fragrances. The Director General’s report addressed the issue of the extraterritorial application of the Israeli antitrust legislation. The subject of the investigation of the IAA was an Australian registered company, James Richardson, which held a licence from the Airports Authority to operate a duty-free shop at the Israeli airport. James Richardson held over 30 per cent of the Israeli market in selective fragrances and entered into restrictive arrangements with foreign selective perfume manufacturers to distort competition for selective fragrances in Israel. James Richardson sought, through its restrictive arrangements with the foreign suppliers, to maintain its 30 per cent markdown on imported selective fragrances.
In addressing the extraterritorial application of the Israeli antitrust legislation, the Director General referred to foreign jurisprudence on the issue, in particular the approach of the US and EU authorities, and referred with approval to the use of the effects doctrine in those jurisdictions. The Director General held that the purpose of the Israeli antitrust legislation was to protect competition in Israel and that such purpose might require the extension of the Israeli legal arm to activities that occur beyond Israel’s borders but have a detrimental effect on competition on the Israeli market. As such, the Director General continued, a restrictive arrangement between foreign parties entered into outside the borders of Israel but the purpose or result of which, in whole or in part, is significant damage to competition on the Israeli market, will fall within the purview of the Israeli Antitrust Law. The Director General found support for this position in the wording of the Antitrust Law itself, which in Section 2(a) defines a ‘restrictive arrangement’ as:
[…] an arrangement entered into by persons conducting business according to which 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 [...]
The Director General held that when any of the elements constituting a restrictive arrangement occurs in Israel, this provides the necessary jurisdiction for the application of the Antitrust Law. Thus, where an arrangement is concluded abroad but may eliminate or reduce business competition in Israel, this is sufficient to establish Israeli Antitrust Law jurisdiction. The Antitrust Tribunal addressed this issue for the first time in 2011, when it adopted the Director General’s position.17
The Director General rendered another interesting decision in September 2013,18 which declared illegal under Section 43(a)(1) of the Antitrust Law an international cartel entered into between foreign companies to coordinate bids submitted in tenders for gas insulated switchgears (GIS) in many countries, including in Israel. In his decision the Director General emphasised that extraterritorial application of antitrust laws can only take place in respect of conduct taking place outside the state borders when there is a clear connection between that conduct and the local market. The Director General indicated that the very fact that bids being submitted in Israel were based on the agreements between the cartel members is an expression of the ‘striking influence’ of the cartel on the Israeli market, thus justifying the enforcement of Israeli law.19 The Director General concluded that:
The restrictive arrangement which is the subject of this declaration was conducted abroad by non-Israeli companies. Nonetheless, its influence over competition in the local market obliges the conclusion according to which the performance of such arrangement breaches the Israeli Antitrust Law.
Private civil proceedings against foreign entities are subject to the rules of service outside the state of Israel as provided in the Civil Procedure Regulations, 5744-1984 (CPR). Particularly, in the case of a foreign defendant who is not personally present in Israel, a plaintiff needs the court’s approval to serve its claim outside the jurisdiction, as a precondition for the court’s jurisdiction over that defendant.20
The court may grant a motion for service outside of the jurisdiction if the claim falls under one of the categories listed in Regulation 500 of the CPR. Regulation 500 stipulates a list of 10 situations in which service outside the jurisdiction will be permitted.21 The common denominator of the factors detailed in the Regulation is the existence of a link between the dispute and Israel. For instance, recognised are matters in which relief is sought against a party domiciled in Israel or that concern real estate located in Israel, and matters that concern a breach of a contract entered into in Israel or breach of a contract that occured in Israel, irrespective of where the contract has been made.
The issue of extraterritoriality in antitrust cases has not yet been firmly decided by the courts in the context of a claim for damages or in a criminal proceeding.
The most pertinent ground for service outside of the jurisdiction in antitrust civil claims is set forth in Regulation 500(7) of the CPR, which requires that the claim be founded on an act or omission, within the state of Israel.
According to the long-standing Israeli case law, Regulation 500(7) requires certain nexus to Israel in addition to the damage: the mere occurrence of damage in Israel does not amount to ‘an act, or omission, within the state of Israel’, and accordingly does not confer on the Israeli court jurisdiction over the foreign defendant.22 However, several rulings of the Israeli district courts given (ex parte) in the past few years in respect of service outside of the jurisdiction to foreign corporations which allegedly engaged in illegal global cartels seemed to apply a different reasoning. For example, in September 2014, the Registrar of the Central District Court approved, ex parte, a motion for service outside of Israel in the LCD cartel class action, stating that the mere sale to Israeli purchasers of flat screen panels, flat screens or products that contain flat screens – of which prices were allegedly fixed by the respondents outside of Israel – falls within the meaning of an ‘act within the State’, as stated in Regulation 500(7).23
However, the ruling of the Registrar was recently reversed on appeal. In December 2016, the Central District Court accepted the appeal of the foreign defendants, rejecting the argument that the damages assessment in antitrust cases should be deemed part of the ‘act within the State’ for Regulation 500(7) purposes. The District Court emphasised that under customary case law ‘an act’ is a separate element that must be distinguished from the ‘damage’ component in antitrust cases, exactly as the case is in other causes of actions, such as in negligence. The Court stated that if the state of Israel wishes to force its laws on foreign parties to facilitate the commencement of lawsuits against foreign parties in Israel, then amendment to the law or regulations is required.24 The significance of the decision – if not reversed by the Supreme Court – is that Israeli plaintiffs might not be able to bring an action against foreign companies that participated in a global cartel which affected the Israeli market and consumers, unless the alleged illegal activity (in full or in part) occurred, de facto, in Israel.
Section 3 of the Torts Ordinance provides that any person who is injured or has suffered damages due to a tort committed in Israel is entitled to a remedy from the infringer, as provided for in the Torts Ordinance. In Tivol Ltd v. Chef of the Sea Ltd,25 a majority of the Supreme Court held that a party to a restrictive arrangement is not prevented from bringing a claim for the cancellation of the agreement under the rubric of the antitrust laws, and many of the first private enforcement claims of the Antitrust Law were brought by parties to restrictive agreements to escape their contractual obligations. Following the Tivol decision, parties to an anticompetitive restrictive agreement should also arguably be entitled to claim damages under the Torts Ordinance.26
Section 4 of the Class Action Law sets out the requirements for standing to bring a class action suit. As regards natural persons, the claimant must have standing to bring a personal claim in the matter in order to have standing to bring a claim on behalf of a class. A public authority or organisation may also bring a class action acting in furtherance of an issue related to the field in which it engages and in which there are significant factual or legal questions common to the group of persons represented in the class action (note that as a condition for approving a class action brought by an organisation, the court must usually be convinced that the claim cannot be brought by a natural person27). Where one of the bases for the class action is damages, then it is sufficient for individuals to show that prima facie they suffered damages. Similarly, a claim that damages were suffered by a member of the group represented by a public authority or an organisation will suffice where the class action is brought by such public authority or organisation on behalf of that group.
In Auto Line, the Central District Court stated, in obiter dictum, that a person who is not party to a consent decree entered into with the IAA has no standing to sue based on that consent decree.28
V THE PROCESS OF DISCOVERY
The Civil Procedure Regulations, 5744-1984 (the CP Regulations) govern discovery and inspection of documentation in civil proceedings. ‘Laying your cards on the table’, and not surprising the opposing litigant with evidence of which such litigant may not have been aware, is viewed as both efficient and in the interests of determining the truth in respect of the issue in dispute. The emphasis in the discovery process is on the relevance of the documents to be discovered (i.e., relevance being determined by whether such documents may shed light on the dispute).29 The range of documents permitted to be requested in a discovery application is wide and the courts have allowed not only actual documents of the parties to be discovered, but information contained in other forms (e.g., recordings and the transcripts of recordings, video recordings, and information including lists and records contained in magnetic or electronic form).30 Note, however, that the courts have emphasised that a distinction must be made between appropriate discovery applications and ‘fishing expeditions’. Fishing expeditions will not be granted by the courts.31
Usually, litigants (any litigant, not necessarily an opposing one) must disclose by way of affidavit the documents that pertain to the matter at hand or that were under their control or possession.32 The affidavit must describe the documents that are relevant to the matter at hand and that are or were in the possession or under the control of the litigant disclosing them.33 The concept of relevance is interpreted broadly and includes both documents that are damaging to the litigant discovering them as well as documents that may prove useful to the opposing party. The existence of a privileged document must still be declared, though its contents may be claimed (in the affidavit) as privileged. Note that fulfilment of this requirement does not require the litigant to detail the content of the documents.
A litigant may also be required to produce documents for inspection and copying. This may apply to documents that have been mentioned in the pleadings or in the affidavit of that litigant,34 or to documents that have not been mentioned.35 The applicant, however, must show that the documents requested are relevant to the instant matter, and the court may not grant the applicant’s request unless satisfied that the requested documents or category of documents are necessary for the conduct of a fair trial or to lessen expenses.36 The onus of proof is on the party requesting the inspection.37
A litigant may also obtain information through a questionnaire,38 submitted to another litigant. The questionnaire may cover information that is not limited to documents. It may pose a broad range of questions to the other litigant, often aimed at extracting admissions, which questions are limited only by their relevance to the issue at hand. Again, the central concern is that of relevance. Although the questionnaire itself and the answers thereto do not form part of the court file and automatically become admissible as evidence, any party to the proceedings may use the information provided in the answers of the other party, in whole or in part, as part of its evidence. The court may also order the inclusion of further information provided by a litigant in its answers to the questionnaire, should the court find that such further information is closely connected to the information already submitted as evidence.
Failure by a litigant to reply to a questionnaire, to produce documents or to allow inspection of documents contrary to an order granted by the court may justify the dismissal of that litigant’s statement of action or defence39 and could result in judgment being entered against that litigant. Failure to discover a specific document that should have been discovered results in the litigant being unable to use that document as evidence during the course of the trial without the court’s permission.40
Third-party testimony is regulated by the CP Regulations and the Courts Law (combined version) 5744-1984. CP Regulation 178(a) stipulates that litigants may summon third parties to provide testimony before a court on their behalf. Such third parties may also be summoned to present documents to court. The court may not prevent such third-party testimony on the basis that, in its opinion, such testimony will not assist the litigant who summoned the third party in the furtherance of his or her matter.41 As with expert evidence (discussed below), the court may also call on witnesses to testify as to matters before the court or to produce documents that are either in their possession or under their control.42 Testimony may be provided in the form of an affidavit (although it may be required of the witness to later appear in court to provide oral testimony, particularly where the opposing party wishes to question the witness). It is also possible, depending on the particular circumstances of the matter, for testimony from third parties to be given via electronic means, such as videoconferencing, for example, where witnesses are abroad.43 Should a person summoned to testify or produce documents by the court fail to appear or produce such documents, Section 73 and 73A of the Courts Law empowers the court to take measures to compel such witness to appear before it or to produce such documents, including fining, imprisonment or the confiscation of passports.
VI USE OF EXPERTS
Regulation 20 of the Evidence Ordinance [New Version], 5731-1971 (the Evidence Ordinance) entitles the court to receive into evidence the opinion of an expert relating to issues of science, research, art or professional knowledge. Economic assessments to establish antitrust violations and prove competition damages would certainly fall within the scope of expert evidence permitted to be received by a court hearing a civil antitrust claim for damages.
Litigants may choose to present expert evidence to the court to substantiate or prove their arguments.44 In addition, the court also may, on its own initiation and at any stage of proceedings, appoint an expert to give evidence on an issue on which the litigants disagree.45
In practice, as the popularity of civil enforcement of the Antitrust Law increases in Israel, the use of experts to determine damages will also increase. In Tower Air,46 for example, involving a civil claim for damages due to financial injury caused by anticompetitive behaviour, both parties presented expert evidence to the court to substantiate their damages calculations and assessments of the competitive harm that was suffered. In that case, however, while the court did rely on the expert evidence presented to it to determine several aspects of the anticompetitive conduct, such as price discrimination, the court chose to reject both parties’ conclusions regarding the amount of pecuniary damage caused and instead estimated the amount of damages itself based on all the information that had been presented to it.
In recent years, the courts have required class action applicants to support their motions for class action approval with an expert opinion, to satisfy the requirement of providing prima facie evidence by anticompetitive conduct or impact.47 Moreover, courts may even require applicants to base their claim on an expert opinion prepared especially for the purpose of the specific class action. In Johanan v. Partner Tikshoret Ltd,48 the applicants claimed that the cellular companies (the respondents) charged their customers an unfair price for texting services (SMS). The applicants did not support their claims with an independent expert opinion but relied on reports and experts’ opinions that had originally been prepared by and for the Israel Ministry of Communication (the MOC). The court criticised the applicants and rejected their claims, inter alia, since the MOC’s reports had no legal probative weight, being no more than hearsay testimony, and their purpose was to assist the MOC in its decision-making process. Consequently, the court ruled that the applicants had not provided sufficient evidence to support their claim. The Supreme Court took a similar approach in the Tnuva v. Naor class action case.49
In Tnuva-Strauss50 the applicant argued that Tnuva and Strauss, both declared monopolies since 1998, were abusing their monopolistic positions by charging unfair prices for dairy products and by offering different terms and discounts for similar transactions. Additionally, the applicant argued that, according to his examination, the prices of some of the defendants’ products were almost identical in the largest food chains in Israel; hence, Tnuva and Strauss must have entered into a forbidden restrictive arrangement to coordinate prices.
The court determined that since the applicant did not attach an expert opinion to prove its claims, and since it is not possible to rely only on identical prices for a defined period of time to prove price fixing over time, the application should be denied. Furthermore, the court emphasised that an applicant should turn to court only when it possesses sufficient evidence to support its claim, at least prima facie, and cannot use the legal proceedings to obtain the initial support for its claim.
VII CLASS ACTIONS
Standing to bring a class action is discussed in Section IV, supra.
Section 8(a) of the Class Action Law provides that a court may authorise a class action under the following, cumulative, conditions:
a the claim raises significant questions of fact or law that are common to the group purported to be represented in the claim and there is a reasonable possibility that such questions will be answered in favour of the group;
b the class action is the most efficient and fairest method to make a determination in the dispute, in the circumstances of the case; and
c it is reasonable to presume that the interests of the members of the group purported to be represented will be represented and managed in an appropriate manner and in good faith.
Of course, one of the advantages of a class action claim is its efficiency, both in terms of litigation costs saved and in terms of forcing a defendant at fault to compensate those who suffered damages. The flipside, however, is that respondents, some of whom are not necessarily at fault, may be coerced, because of the sheer size and impact of an impending class action suit, to compromise. The class action brought against the banks in Sharnoa Computerised Machines51 exemplifies the massive claims that may be levied against respondents in a class action – the maximum amount of 7 billion shekels could be devastating to the banks and might force them into a settlement with the applicants (for further discussion please refer to Section XII, infra). In this context, the decision by the Supreme Court in Phoenix Insurance Company v. Amusi52 is relevant. In that case the Supreme Court discussed the term ‘reasonable possibility that such questions will be answered in favour of the group’ (from Section 8(a)). The Supreme Court criticised the lower courts’ tendency to set too strict standards for claimants in class action proceedings at the preliminary approval stage. The Supreme Court clarified that at this stage the Class Action Law requires no more than a ‘reasonable possibility’ that the common questions will be ruled in favour of the group and, for that purpose, the courts should refrain from bringing the main hearing of the case into the preliminary approval stage.
In 2012 the Supreme Court ruled on the standard under which applications to approve actions as class actions should be examined. Specifically, in Phoenix Insurance Company v. Amusi53 (which is not an antitrust case), the Supreme Court considered the criterion of showing a ‘reasonable possibility’ that the common questions will be answered in favour of the group.54 The Supreme Court criticised the lower courts’ tendency of setting too strict a standard for claimants in class action proceedings at the preliminary approval stage, clarifying that at the preliminary stage the Class Action Law requires no more than a ‘reasonable possibility’ that the common questions will be ruled in favour of the group, and the courts should refrain from setting stricter proof standards, which are more appropriate during the hearing of the main case.
At the same time, however, the Supreme Court continued to set strict requirements concerning the evidentiary standard at the preliminary stage of a class action. In the Tnuva v. Naor class action,55 for example, the Supreme Court upheld the requirement of including with the application for a class action in an antitrust case an expert’s opinion, prepared specifically for the purpose of the claim, and refused to allow the submission of the expert’s opinion later, unless the applicant shows that the submission thereof together with the claim was impossible.
The use and the evidentiary significance of an expert’s opinion in class action cases are discussed in Section VI, supra.
As discussed below, the amount of damages awarded need not be determined on an individual basis, and may instead be a global award. While a global award may be significant in terms of the payer, the class action members may only receive a token amount as compensation, thus not truly being compensated. Class actions, from this perspective, may be viewed as an efficient deterrent but an inefficient compensatory mechanism.
In May 2014, the Tel Aviv District Court partly approved an application for a class action against Bezeq The Israel Telecommunication Corp Ltd (Bezeq) for collecting payments after ceasing to provide services to its subscribers.56
The applicants argued, inter alia, that by doing so, Bezeq had abused its dominant position. The Court denied the applicant’s argument, stating that since Bezeq acted according to the law (the telecommunications laws) it cannot be said to have abused its dominant position. The Court added that activities that are allowed by law cannot be considered, by themselves, as abuse of dominant position.
In January 2014 the District Court in Tel Aviv denied a class action application against Israel Railways – the national operator of train transportation.57 The applicant alleged that Israel Railways had abused its monopolistic position by ceasing to provide its services to the public due to an employees’ strike. During the strike, so alleged the applicant, Israel Railways reduced the scope of its services, not within the context of fair competitive activity. The applicant pointed to the Court’s decision in the Bezeq case,58 in which it upheld the IAA’s determination that Bezeq had abused its monopolistic position by striking and failing to provide services to its competitors. The Court distinguished between the cases and determined that in contrast to the Bezeq case, Israel Railways’ management had operated quickly and efficiently to bring to an end the employees’ strike and did not harm its competitors. On the contrary, the Court stressed, Israel Railways’ competitors (the bus companies) have gained from the strike.
In April 2016, the Central District Court issued a precedential preliminary decision, explicitly recognising excessive pricing as a ground for claim under the Antitrust Law.59 The Central District Court certified a class action against Tnuva, Israel’s largest dairy manufacturer. According to the plaintiff, Tnuva charged excessive and unfair prices for cottage cheese during the years 2008–2011. In support of its decision the Court stated that the language of Section 29A of the Antitrust Law, which prohibits monopolies imposing unfair pricing, applies not only to predatory pricing, but to excessive pricing as well.
Further, the Court based its decision on the IAA’s previous public statement regarding the prohibition on charging excessive prices by a monopolist, stating that although the IAA’s guidelines are not binding in court, they should be given significant interpretative weight. Finally, the Court supported its ruling in the fact that Article 102 of the Treaty on the Functioning of the European Union (TFEU), upon which Section 29A of the Antitrust Law is based, was interpreted in the European Union ruling as, inter alia, prohibiting charging excessive monopolistic prices. An appeal against this preliminary decision was submitted by Tnuva and is still pending in the Supreme Court.
VIII CALCULATING DAMAGES
A private litigant injured monetarily by contraventions of the Antitrust Law may bring a claim for tortious damages in terms of the Torts Ordinance. The purpose of damages under Israeli law, which derives from the English law, is to place injured parties in the position they were in prior to the commission of the tort. Punitive damages are not usually awarded by the Israeli courts. Note, however, that in February 2013 a legislative memorandum that was published by the IAA proposed, inter alia, the adoption of the American triple-damages model in private enforcement of antitrust (except for cases where the defendant was granted immunity from criminal prosecution under the IAA’s leniency programme).
In class actions, the court may determine various compensatory damage awards. Section 20 of the Class Action Law directs that the court may order compensation to be paid to each member of the group who has proven his or her entitlement thereto or may order that each member of the group prove the actual damages he or she has suffered. The court may also order global compensation to be paid and divided among the members of the group, so long as where global compensation is granted, the amount of damages is capable of precise calculation in accordance with the evidence presented to the court.60 In Dan Reichart v. the Heirs of Moshe Shemesh,61 the Supreme Court discussed the different methods of calculating or proving damages. Where individual damages are awarded to each member of the class, each member must show the amount of damages personally suffered, for example, by way of production of documentary proof such as receipts. On the other hand, various methods exist to determine global damages, such as having regard to the accounts and documents of the respondent, the use of statistics or the use of mathematical models. Of course, the advantage of the class action mechanism is usually that each member of the group is not required to prove his or her personal damages, which in light of the usually relatively small amounts of individual damages suffered, would be inefficient to the point of being prohibitive.62 However, as indicated above, the awarding of global damages and their division among the members of the class may have class action members only receiving a token amount as compensation, thus not truly being compensated for the damages suffered by them.
The Supreme Court in Dan Reichart also approved a third method for determining damages – estimation of the amount of damages based on the information that has been brought before it. In the Court’s opinion, however, this latter method should be reserved for exceptional circumstances.
Professional attorneys’ fees are, in the main, determined between litigants and their attorneys and may be based on a global amount, an hourly charge or a fee based on the percentage of the amount awarded to the litigant. It is possible to request that the court determine the professional fee and in so doing, the court must take account of all the circumstances of the matter before it, including the time devoted by the attorney to the matter at hand, the significance of the matter, the extent and complexity of the matter and the reputation of the attorney.63 Section 23 of the Class Action Law specifies that the court will determine the maximum professional fees of the attorney representing the claimant. The court makes this determination based on several factors, including the benefit of the class action for the members of the class, the complexity of the matter, the risk undertaken by the attorney and the expenses incurred by him or her, the public significance of the class action, the manner in which the attorney conducted the matter and the difference between the requested remedies and those that were granted by the court. The court can also determine partial attorneys’ fees (out of the global attorneys’ fees) to be paid to attorneys during the course of the proceedings. Attorneys may appeal the court’s ruling regarding the attorneys’ fees.64 Nevertheless, this is not common practice.
IX PASS-ON DEFENCES
While attempts have been made to use the pass-on defence in various cases, the courts have not yet explicitly ruled on the issue. While the ‘indirect purchaser’ doctrine was expressly asserted in several matters before the courts, ultimately the cases were settled without the courts ruling on the issue. In Howard Rice,65 the Supreme Court noted that even under the assumption that the plaintiff was able to prove that the fee was excessive or unfair, it will be difficult to approve the class action since the damage was partly passed on to the plaintiffs’ customers and was not suffered by the plaintiff alone.
In November 2013, the Central District Court rejected a motion for dismissal of a class action application, having determined66 that the existence of a conflict of interest between the members of two distinct sub-groups of the class action group (direct and indirect injured members) does not deny the possibility of providing compensation to any of the group’s members. This may be the path for rejecting the ‘pass-on defence’ doctrine in antitrust private actions. Note, however, that this issue was not the core of the debate there and was not the subject of the decision.
X FOLLOW-ON LITIGATION
The Antitrust Law grants the Director General various enforcement measures, either criminal or administrative:
a search and arrest;
b submission of an indictment;
c issuance of an administrative ‘determination’ according to Section 43(a) of the Law;
d a consent decree;
e administrative financial sanctions;
f imposition of instructions on monopolies and concentration groups; and
g application of the Antitrust Tribunal for various orders.
While a consent decree and financial sanctions are measures that could be taken in lieu of criminal proceedings, the other administrative measures may be taken alongside criminal proceedings (in practice, however, when the IAA elects to issue a determination it abandons the criminal venue).
Private enforcement of the Antitrust Law may be carried out alongside the public enforcement, but special evidentiary significance is attributed in law only to the following:
a the findings and conclusions of a final verdict of the court, convicting the defendant in the criminal proceeding, serve as prima facie evidence in a civil proceeding to which the defendant is a party;67 and
b a determination of the Director General of the IAA made in terms of the Antitrust Law shall constitute prima facie evidence in any legal proceedings.68
Inter alia, the Director General may determine that an arrangement or agreement constitutes a restrictive arrangement in contravention of Section 4 of the Antitrust Law or that a monopolist has abused its market position in contravention of the provisions of Section 29A of the Antitrust Law. Indeed, as discussed above, it is possible for criminal investigatory activity by the IAA and civil proceedings to proceed in parallel, as is the case, for example, with the Sharnoa Computerised Machines case and the Bakeries cartel.69
In 2004, the IAA adopted a leniency programme in respect of cartels. Leniency is awarded to the first party to come forward with full information regarding the illegal activity in which such party was involved, unless the party led the illegal activity or has previously been convicted of a cartel offence. Leniency is available to both an individual and a corporation, and where a corporation qualifies for leniency, such leniency extends to all its directors, officers and employees. An agreement of leniency is entered into between the Director General, the District Attorney and the applicant and, after execution, is binding on the state. Note that, as such, civil litigants are not bound by the terms of a leniency agreement, and they may bring a civil action even against those that enjoy the application of the leniency programme’s defence.
The actions against the GIS cartel members exemplify actions for damages. Following the GIS cartel declaration of September 2013 (see Section III, supra), a class action on behalf of electricity consumers, and a private action for damages by the Israel Electricity Company, have been submitted against the cartel members. That declaration, which is an administrative measure, was based on information gathered in the framework of a criminal investigation commenced as a result of an application made by one of the cartel members, to apply the leniency programme. That cartel member is one of the defendants in the claims for damages.
While immunity from criminal prosecution under the leniency programme does not preclude private enforcement, such immunity may assist the immunised wrongdoer in gaining exemption from administrative monetary sanctions in those cases where the Director General elects to take this measure.70
Section 48 of the Evidence Ordinance provides for legal privilege for documents and information exchanged between attorneys and their clients. The privilege extends solely to documents exchanged in the context of the professional services provided by the attorney to the client. Importantly, the right and duty of non-disclosure attaches to the attorney. The information itself is not privileged and the client is not exempted from disclosing it in the framework of an investigation or court proceedings. Section 48 provides that unless the client has waived his or her right to claim legal privilege, an attorney is not obliged to produce for evidence documents or information that were exchanged with his or her client and related to the professional services provided by the attorney to the client. This obligation is reinforced by the confidentiality obligations of attorneys, as set out in the Bar Association Law, 5721-1961. Note that the courts have held that legal privilege may be invoked in respect of documents prepared for purposes of obtaining legal advice in connection with legal proceedings, which proceedings are either then currently under way or are expected. This privilege applies even where such documents have not yet been exchanged between the attorney and the client or where such documents were prepared by a third party in accordance with the request of either the client or the attorney.71 Recently, the Supreme Court explicitly ruled that privilege for documents exchanged between an attorney and client related to the professional services provided by the attorney may apply regardless of ‘the geographical location’ of those documents. Therefore, privilege may apply also to documents such as emails and text messages that are held by the client or saved in the client’s computer.72
Section 23 of the Law of Commercial Wrongs, 5759-1999 directs that a court, an authority, a person or a body with judicial or quasi-judicial authority may grant an order, at its own initiative or on the request of a person, ensuring the confidentiality of a ‘commercial secret’ disclosed in proceedings before it. Thus, a party may claim confidentiality in a document or information submitted to a government authority on the basis of its containing ‘commercial secrets’. The submission of a document or information containing ‘commercial secrets’ to a government authority does not alter the status of such document as a ‘commercial secret’. Similarly, the Privacy Law, 5741-1981 protects private information of parties. Thus, any such information or documentation, with a few exceptions, submitted to a government authority remains protected under this law.
A request for access to information submitted to government authorities may be made under the Freedom of Information Law, 5758-1998. Section 9 of the Freedom of Information Law, however, sets out the circumstances in which the government authority may not disclose the information provided to it, including where the information constitutes commercial or professional secrets or has an economic value, which would be seriously damaged by such disclosure; the information is commercial or business information relating to the business of a person, the disclosure of which information would significantly damage the business, commercial or economic interests of such person; the information was provided to the authority on condition of confidentiality; disclosure of the information would jeopardise future receipt of information; or disclosure of the information would result in the disclosure of the existence or identity of a privileged source. Note, however, that Section 11 of the Freedom of Information Law provides that, where the concerns addressed in Section 9 may be alleviated by omitting or altering the details contained in the information or providing the information subject to conditions, then, unless it proves too burdensome on the authority concerned, these steps should be taken, and the remaining information, subject to the necessary amendments, must be provided to the person requesting access.73
XII SETTLEMENT PROCEDURES
Section 79A of the Courts Law provides that parties to a civil proceeding may reach a settlement agreement, either of their own accord or proposed to them by the court, and the court may, with the consent of the parties, enforce such settlement agreement. A court-enforced settlement agreement has the effect of a judgment.
Sections 18 and 19 of the Class Action Law specifically address the possibility of settlement agreements in detail. The parties to a class action may request that the court approve a settlement that was agreed to by the parties. A member of the group represented in the class action, however, may elect to be excluded from the settlement. The court may not approve a settlement agreement in a class action unless it determines that the terms of the agreement are fair and reasonable as concerns the interests of all the members of the class and that the termination of proceedings by means of settlement is the most efficient manner in settling the dispute between the parties.74 Further protection to the members of a class is provided by the requirement that the court, prior to granting a settlement agreement, hear the opinion of a court-appointed expert in the relevant field. The court may dispense with this requirement, however, if it determines that such evidence is unnecessary.75 The court must substantiate its decision regarding approval of a settlement agreement by addressing the following issues: the delineation of the group subject to the settlement agreement; the legal claims, the significant questions of fact or law common to the class and the remedies requested; the main aspects of the settlement agreement; the difference between the remedies requested in the claim than those agreed to in the settlement agreement; any opposition entered to the settlement agreement; the stage of the proceedings; the recommendations contained in the expert opinion; and the risks and likelihood of success in the class action in comparison to the settlement agreement.
As part of the settlement agreement in the class action, the court will determine the professional attorneys’ fees and any remuneration due to the claimant, and in so doing, may take into account any recommendation of the parties proposed in terms of the settlement agreement.76 Finally, the Class Action Law provides that should the settlement agreement not be approved by the court or should the court’s approval thereof be subsequently annulled by the court, any determinations made in terms of the settlement agreement and any statements made in the framework of the settlement proceedings will not be admissible as evidence in civil proceedings.77
Several antitrust class actions were settled with coupons arrangements. In February 2008, the class action Morad et Goldberg Ltd v. Aloni Group Ltd,78 which concerned a cartel in the tile market, was settled. The court approved this settlement after a long dispute over the appropriate compensation, which eventually was in the form of coupons for future purchases from the cartel members.
In December 2010, the class action Adv. Nachum Oren v. Kolnoa Hadash Ltd and follow-on procedures,79 which concerned the dictation of fixed retail prices by the importer of Crocs shoes, was settled pursuant to the Class Action Law. The court approved the settlement, with minor changes to the original settlement submitted by the parties. Notably, the court did not adopt Attorney General’s position that the settlement was unreasonable, as it would not benefit the group represented in the class action. Also the parties requested that the court forgo the examination of the settlement agreement by an external expert (as required by law), inter alia, due to the parties’ refraining from providing agreed recommendations as to the attorneys’ fees. The court rejected this request, stating that refraining from recommending attorneys’ fees does not indicate that the agreement is reasonable; therefore the appointment of an expert was required.
In October 2012 the District Court of Beer-Sheva approved a settlement agreement between the Central Bottling Company (Coca-Cola Israel) and 300 individuals and soft drink companies, upholding Coca-Cola Israel’s expert’s opinion and rejecting the opinion of the objective examiner appointed by the court.80
According to the application to approve the action as a class action, Coca-Cola Israel allegedly abused its dominant position in the carbonated cola beverages market by charging excessive, unfair prices to vending machine operators, thus discriminating against them and enabling Coca-Cola Israel’s subsidiary Mashkar to monopolise the vending machines business.
In the settlement agreement Coca-Cola Israel undertook to give the vending machines operators a 2 per cent discount for the next three years on soft drinks cans purchased from it. Coca-Cola Israel also committed not to give higher discounts to Mashkar. In addition, any operators that exited the market before 2007 as a result of Coca-Cola Israel’s alleged abusive behaviour would be able to re-enter the market and receive a 10 per cent discount for up to 5,200 cans of soft drinks per year.
The expert (examiner) appointed by the court determined that between 1998 and 2007, the vending machines operators paid an extra amount of 34 million shekels, reflecting overcharges of 8 to 30 per cent compared with the prices charged to Mashkar. The examiner therefore argued that the settlement agreement was unreasonable, inter alia, since it did not compensate (1) for the overcharging during a whole decade; (2) the dozens of operators that had exited the market as a result of Coca-Cola Israel’s behaviour; and (3) for the competitive advantage gained by the respondents as a result of the abusive price and discounts policy. Nevertheless, the Court approved the settlement agreement, upholding Coca-Cola Israel’s expert’s opinion concerning the legitimacy of Coca-Cola Israel’s pricing method and rejecting the opinion of the objective expert appointed by the court.
In September 2012, the District Court of Beer-Sheva rejected a settlement agreement between Dor Alon Energy in Israel (1988) Ltd (Dor Alon), one of the leading distributors of oil distillates in Israel, and an operator of a fuel station, that contained an exclusive purchasing clause for an unlimited period of time.81 The parties had reached the settlement in the context of a lawsuit brought by Dor Alon against the operator, for alleged breach of contract by the latter.
Dor Alon argued that the fuel station operator breached his commitment to exclusively purchase fuels and oil from it for 98 years. The fuel station operator argued that the Court should not enforce the agreement – or at least the exclusivity clause – since it amounted to an illegal restrictive arrangement. As the case reached its final stage, the parties submitted a settlement agreement for the Court’s approval, which contained an exclusive purchasing clause for an unlimited period of time.
While rejecting the settlement agreement, the Court stated that the original exclusivity clause for 98 years was a restrictive arrangement and, therefore, it could not approve it. Furthermore, the Court determined that an exclusivity clause between fuel companies and operators of fuel stations may harm competition in the retail market for fuel and foreclose the market to new fuel suppliers, to the detriment of consumers. In such circumstances, the Court stated that the public’s interest requires judicial review of restrictive arrangements that are being concealed from the public by bilateral settlement agreements. The settlement agreement was eventually approved, subject to the reduction of the exclusivity term to three years.
In June 2014 the Antitrust Tribunal approved a consent decree between the IAA and the five largest banks in Israel, which was reached during an appeal submitted by the banks against a determination of the Director General stating that the banks engaged in a restrictive arrangement by repeated exchange of information regarding their fees. In the framework of the consent decree the banks undertook to pay to the State Treasury the sum of 70 million shekels. It was also agreed that if eventually the class actions brought against the banks regarding the alleged coordination of fees come to an end by way of a settlement, this amount of money will be directly passed on to the consumers. This unusual solution creates, for the first time, a link between administrative and private enforcement measures. In April 2015 a revised motion to certify a class action was submitted against the banks regarding the alleged coordination of fees. In May 2015 the Tel Aviv District Court approved a settlement agreement between the parties which implemented the provision of the consent decree after finding that it was a proper, fair and reasonable arrangement.82
In April 2016, the Central District Court approved a settlement agreement between the Dead Sea Works Ltd, a governmental company which constitutes one of the world’s largest manufacturers of potassium, and an individual farmer who purchased potassium from the company for fertilisation purposes, on behalf of all consumers of potassium in Israel.83 According to the application to approve the action as a class action, the Dead Sea Works allegedly abused its dominant position in the potassium market by charging excessive, unfair prices. Specifically, it was argued that the company exploited the elimination of price supervision in the potassium market in order to raise the price of potassium by hundreds of per cent. The parties reached a settlement agreement after taking into account the Court’s recommendation in this matter, and after considering the risks and chances inherent in the claim, including holding a lengthy legal procedure and paying significant costs, as well as in order to save time. According to the settlement agreement, the Dead Sea Works will compensate the class action’s group members in the amount of 20 million shekels. Moreover, it was agreed that over the next seven years the company will sell potassium in Israel at prices not exceeding the average of the three cheapest prices in which it will sell potassium to any of its customers worldwide, or at a price not exceeding US$400, whichever is the lowest. The settlement agreement was approved in January 2017, after being revised and amended according to the Court’s suggestions and comments.84 The Court recognised excessive pricing as a ground for claim under the Antitrust Law in Israel, based on the wording of Section 29A(a)(1) thereof, on the TFEU from which it originated, and the purpose of the Antitrust Law. The Court even went further and considered excessive pricing as a specific case of exploitation from the field of contract laws and the consumer protection laws. The Court viewed the settlement agreement as a suitable deterrent since, on the one hand, the prohibition on charging excessive prices was not enforced before, and on the other hand, it will demonstrate the possibility of private enforcement.
In general, in accordance with Section 79B of the Courts Law, a court, with the consent of the parties, may order that a civil matter before it be referred, in whole or in part, to arbitration. In addition, the parties themselves may have agreed or may agree to proceed to arbitration, and may agree on the appointment of an arbitrator. Failing agreement between the parties in respect of the arbitrator’s identity, the court may appoint the arbitrator.85 Section 13(a) of the Arbitration Law directs that an arbitrator will have the same powers as a court in respect of the summoning of witnesses to appear or to produce documentation. The decision of an arbitrator has the effect of a court judgment for the litigants.86
Arbitration in antitrust cases is not a common practice in Israel; nevertheless, this seems to be changing. The arbitration mechanism was used in an antitrust matter for the first time by several food suppliers, following a consent decree they entered into relating to anticompetitive conduct in the supply of various foodstuffs. The consent decree included stewarding arrangements between suppliers and food chains. Apart from the compensation agreed to and the possibility of criminal charges in the case of breach of the consent decree, the concerned suppliers undertook to engage in a special agreement, in which the dominant suppliers must compensate each other and non-dominant suppliers should they breach the provisions in the consent decree that relate to stewarding. The consent provided that any disagreement between the parties concerning the terms of the consent decree would be referred to arbitration. Note, however, that the arbitration mechanism was not used to determine the substantive antitrust issues in that case.
Section 3 of the Arbitration Law directs that an arbitration agreement will have no validity in matters that cannot be a proper subject for arbitration between the parties. Some academics suggest that antitrust matters may not be a proper subject for arbitration because anticompetitive injury may affect a broad range of persons who may not be the direct parties to the specific court or arbitration proceeding.87 We see no reason, however, why antitrust-related disputes may not be resolved in an arbitration proceeding, particularly given that the public or the public interest can still be safeguarded by the IAA. Nor does arbitration prevent claimants from suing for damages.
The Tel Aviv District Court considered the legitimacy of a ruling given by an arbitrator involving a non-competition provision. In 2009, the Court ruled on an application to annul an arbitrator’s ruling concerning a restrictive arrangement in Novosty Neidly et al v. Ma’ariv Modi’in Publishing Ltd.88 The applicant, a private firm engaged in the publication of a Russian language newspaper, Novosty, and the owner thereof, entered into a contract with the respondent, the second-largest publisher of newspapers in Israel at that time, whereby the applicant purchased from the respondent the right to publish another newspaper in Russian. In return, the applicant undertook to pay the respondent monthly royalties. After six years the applicant ceased to pay royalties and the parties turned to arbitration. The arbitrator ruled that the applicant had to pay the balance to the respondent. The applicant subsequently applied to the Tel Aviv District Court, requesting an annulment of the arbitrator’s ruling. The applicant argued that the contract, in which the respondent undertook not to compete with the applicant in the publishing of newspapers in Russian, was a restrictive arrangement and as such was illegal and unenforceable. Thus, the applicant argued, the arbitrator’s ruling to enforce the contract was against public policy and should be annulled in accordance with the Arbitration Law.
Emphasising that this argument had not been raised in the arbitration proceeding, the Court adopted the opinion expressed by one of the Supreme Court judges in an earlier case,89 according to which such an argument, when brought following many years of performance of the contract by the parties, is unfair. Further, the District Court ruled that the applicant could not, on the one hand, claim damages based on the non-compete provision and, on the other hand, seek to rely on the alleged illegality of such provision, as an illegal restrictive arrangement, to annul the arbitration ruling. The Court also noted that the causes for annulling an arbitration ruling, set out in the Arbitration Law, have been interpreted narrowly and that according to the Arbitration Law, a court may in any event reject an application for annulment of an arbitrator’s ruling if no distortion of justice is caused as a consequence.
In light of the above, the Court ruled that after many years of adherence to the contract, the parties were stopped from raising a claim of illegality in respect of the non-compete provision.
In December 2011, the Tel Aviv District Court annulled an arbitration award90 stating that the arbitration award in effect enforced a memorandum of understanding (MOU) that was illegal according to the Antitrust Law. The Court determined that the MOU was an agreement between two competitors in the cement industry and its purpose was to prevent the respondent from competing with the applicant and to allocate the market, thus amounting to an unenforceable restrictive arrangement.
In February 2015, the District Court rejected a motion to partially void an arbitration award after ruling on substantial antitrust-related matters.91 The arbitrator rejected a petition for declaratory relief finding a non-competition clause in a partnership agreement between lawyers was unreasonable and constituted an illegal restrictive arrangement.
Specifically, the arbitrator ruled that not all non-competition clauses that limit the freedom of occupation are unreasonable and contrary to public policy, and that in this specific case the non-competition clause was reasonable in light of its limited scope. Further, the arbitrator stated that the non-competition clause was set in accordance with reasonable and acceptable practices, and therefore was not considered a restrictive arrangement according to Section 3(8) of the Antitrust Law (Section 3(8), which states that an obligation by the seller of a business sold in its entirety towards the purchaser of the business not to engage in the same type of business, provided such obligation is not contrary to reasonable and accepted practices, shall not be deemed a restrictive arrangement). Moreover, even if the non-competition clause constituted a restrictive arrangement, it falls within the application of the Block Exemption for Agreements of Minor Importance (de minimis).
The District Court upheld the arbitrator’s ruling, without analysing in detail the application of Section 3(8) of the Law and the said block exemption. The Court added that even if the arbitrator erred in the application of the substantive law, such error does not establish grounds for the revocation of the arbitration award.
This new ruling further strengthens the tendency to recognise the authority of arbitrators to rule on antitrust-related questions of substance.
XIV INDEMNIFICATION AND CONTRIBUTION
Parties may be found liable jointly as joint wrongdoers in a civil action for damages. In these circumstances, the court may rule on the amount of damages for which each co-respondent is liable (i.e., liability for damages may be apportioned among the co-respondents).92 Where a party has not been cited as a co-respondent, he or she may be joined by the respondent as a co-respondent by submission of a third-party notice, such that that party contributes to or indemnifies the respondent against the damages claimed.93 To date there does not appear to be a civil antitrust damages ruling in which this procedure has been used.
XV FUTURE DEVELOPMENTS AND OUTLOOK
In recent years, there has been increasing criticism against the concentrated structure of the markets in Israel and against the skyrocketing cost of living. Consequently, several laws were enacted and some were amended, aiming at improving the competitiveness of markets, and expanding substantially the (already wide) powers of the IAA’s Director General. Further legislation of this type is yet to come. Some of the new laws and guidelines are expected to lead to many private claims, for example claims for abuse of dominant position by charging excessive prices and claims based on the new Food Law (see Section II, supra).
Since 2013, several applications to approve actions as class actions have been submitted against alleged members of international cartels (with or without the participation of a company based in Israel): the International Air Freight Forwarding cartel, the LCD cartel, the GIS cartel, the CRT cartel, the LiB cartel, the Trucks cartel and the ODD cartel. To date, no decision has been made as to whether or not to certify any of these applications. As stated above, the recent ruling in the LCD cartel case states that the Israeli court has no jurisdiction over foreign defendants in cases where the engagement in, and performance of, the alleged cartel took place outside Israel. If this ruling is not reversed by the Supreme Court on appeal, it is likely that other class action applications related to international cartels will be rejected as well. It will therefore be interesting to see what the developments will be regarding Israeli courts’ jurisdiction.
1 Eytan Epstein is a senior partner at M Firon & Co, Tamar Dolev-Green is a partner and co-head of the firm’s antitrust team and Eti Portook is an associate in the firm’s antitrust team. The authors also wish to thank advocates Michelle Morrison-Trau and Shiran Shabtai, who assisted in writing previous editions of this chapter.
2 Draft Opinion on the General Director’s Considerations on the Enforcement of the Prohibition on Charging Excessive Prices by a monopolist, 2016, publication 501055, available in Hebrew on the IAA’s website; Public Statement 1/14 The Prohibition on Charging Excessive Prices by a monopolist, 2014, publication 5006035, available in Hebrew on the IAA’s website.
3 Press Release, The IAA re-examines its policy concerning charging excessive prices by monopolists, 2016, publication 500967, available in Hebrew on the IAA’s website.
4 For example: Class Action 57534-02-14 Zelicha v. Tnuva Cooperative Center for Marketing of Agricultural Produce in Israel Ltd, submitted on 27 February, 2014; Class Action 35507-06-14 Nizri v. Nobel Energy Mediterranean Ltd. et al, submitted on 17 June 2014; Class Action 18298-11-14 Israeli Consumer Council v. Tnuva Cooperative Center for Marketing of Agricultural Produce in Israel Ltd, submitted on 10 November 2014.
5 Class Action (Center) 46010-07-11 Ophir Naor v. Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel (5 April 2016, published in Nevo).
6 In November 2013, a motion to certify a class action with respect to an alleged global cartel in the market of LCD panels for flat screens was filed against five foreign companies (the LCD cartel class action. See: Central District Court, Class Action 53990-11-13 Hatzlacha consumer movement for the promotion of equitable economic society (RA) v. AU Optronic Corporation and others, 27 November 2013, published in Nevo). The motion is based on proceedings in various jurisdictions worldwide, inter alia, in the United States and Europe. In November 2014, a motion to certify a class action was submitted in Israel against six foreign companies – allegedly members of a global cartel in the cathode ray tubes (CRT) and CRT-based products industry (the CRT cartel class action. See Central District Court, Class Action 10812-11-14 David Merom v. LG ELECTRONIC INC. et al, 5 November 2014, published in Nevo). The motion is largely based on criminal and civil proceedings against the companies that took place in the United States, as well as on the European Commission’s decision of December 2012, and the fines that were imposed by it. In May 2015, a motion to certify a class action with respect to an alleged global cartel in the market of lithium batteries was filed against six foreign companies who allegedly were members of the cartel (the LiB cartel class action. See Central District Court, Class Action 54288-05-15 Shlomi Talmor v. Samsung SDI Co. ltd. et al, 28 May 2015, published in Nevo). The factual basis of this motion is the criminal and civil proceedings that are pending in the United States in connection with the alleged cartel. In May 2016, a motion to certify a class action with respect to an alleged global cartel in the market for optical disc drives was submitted against eight foreign companies, who allegedly participated in price fixing, bid rigging and market allocation (the ODD cartel class action. See Central District Court, Class Action 23139-05-16 Itai Lanuel v. Sony Corporation. et al, 10 May 2016, published in Nevo). This motion is based on proceedings taking place in the United States, Europe and other jurisdictions. In September 2016, a motion to certify a class action with respect to an alleged global cartel in the market of truck manufacturing was filed against six foreign companies, who allegedly were members of the cartel (the Truck cartel class action. See Central District Court, Class Action 31367-09-16 RALFI Agriculture Ltd. v. MAN Truck & Bus AG et al, 13 September 2016, published in Nevo). The factual basis of this motion relies on a settlement decision, in which the European Commission has imposed a record fine of €2.3 billion on the truck manufacturers, after they acknowledged their involvement in price fixing and passing on the costs of compliance with environmental standards to consumers.
7 Central District Court, Class Action 53990-11-13 Hatzlacha consumer movement for the promotion of equitable economic society (RA) v. AU Optronic Corporation and others, 29 December 2016, published in Nevo.
8 Haifa District Court, Civil Cases 1118, 1117, 1114/99 Tower Air et al v. Aviation Services Ltd et al, 6 May 2007, published in Nevo.
9 CA (Tel Aviv) 1462/08 Gazgal Hashron (1992) Ltd. v. Pazgas (1993) Ltd., 3 August 2010, published in Nevo.
10 Central District Court, Civil Case 33666-07-11 Unipharm v. Sanofi, 8 October 2015, published in Nevo.
11 Section 89(1) of the Torts Ordinance.
12 Section 89(2) of the Torts Ordinance.
13 CA (District – Centre) 27911-09-11 Marom Golan Kibbutz v. Yoram Fradkin, 4 June 2013, published in Nevo.
14 CAP 1153/11 Strauss Group Ltd. v. Carmit Candy Industries Ltd, 27 February 2011, published in Nevo.
15 Section 26(a) of the Class Action Law.
16 Section 26(b) of the Class Action Law.
17 Restrictive Arrangement 513-04 ACUM Ltd – the Society of Israeli Music Composers, Authors and Publishers v. the Director General et al, 2011, paragraph 26.
18 The Director General’s declaration under Section 43(a)(1) regarding a restrictive arrangement between GIS manufacturers, 16 September 2013, published in the IAA’s website (No. 500473).
19 The Director General decided not to include in the Determination the worldwide cartel members who had never submitted bids in GIS tenders in Israel. The Director General determined that considering (1) the agreement applied to many countries (not just Israel); and (2) there is a satisfactory explanation and competitive reason for these specific companies to refrain from activities in Israel during the period of the cartel (the geopolitical situation during the relevant period), it is difficult to attribute the participation of these companies in the global cartel to an impact on the Israeli market. Therefore, and in light of the terms of the effects doctrine, it cannot be determined that they were a party to a cartel in Israel. Ibid., paragraph 140.
20 Additional methods for serving a foreign defendant under the Civil Procedure Rules are through personal service when a representative of the corporation is present in Israel, or via an ‘agent’ of the foreign defendant that is located in Israel. An individual or a corporation is deemed to be an ‘agent’ if it is proved to have strong ties with the foreign defendant.
21 Fulfilment of one of the grounds for the service out of the jurisdiction under Regulation 500 will allow the court to properly exercise jurisdiction over foreign entities, subject to compliance with the forum non conveniens doctrine.
22 CA 565/77 Mizrahi v. Nobel’s Explosives Co. Ltd., 16 March 1978, published in Nevo.
23 Central District Court, Class Action 53990-11-13 Hatzlacha consumer movement for the promotion of equitable economic society (RA) v. AU Optronic Corporation and others, 5 September 2014, published in Nevo. Also see the CRT cartel class action: in January 2015, the Registrar of the Central District Court approved, ex parte, a motion for service outside of Israel against the alleged foreign respondents. The Court determined that the grounds for approval of service outside of the jurisdiction were satisfied, after accepting the petitioners’ argument that the mere sale of products in Israel that contained CRT – of which prices were allegedly fixed by the respondents – falls within the meaning of an ‘act within the State’ as stated in Regulation 500(7) [Central District Court, RA 15317-12-14 Merom and others v. LG ELECTRONIC INC and others, 5 January 2015, published in Nevo]; The Registrars of the Central District Court in the LiB cartel class action and in the ODD cartel class action granted the plaintiffs, ex parte, approvals of service outside of the jurisdiction, based on the same reasoning. It will be interesting to follow these cases and see how they develop in light of the new ruling in the LCD cartel class action.
24 Central District Court, Class Action 53990-11-13 Hatzlacha consumer movement for the promotion of equitable economic society (RA) v. AU Optronic Corporation and others, 29 December 2016, published in Nevo.
25 Supreme Court, Civil Appeal 6222/97 Tivol Ltd v. Chef of the Sea Ltd, 29 June 1998, published in Nevo.
26 Yizchak Yagur, The Israeli Antitrust Law, 3rd edition, 2001.
27 Recently, the District Court in Tel Aviv ruled on what is the correct interpretation of the class action laws requirement to prove that under the circumstances of the case, it would be difficult to bring the petition in the name of a natural person. Class Action 2484-09-12 Hatzlacha The Consumers’ Movement for the Promotion of a Fair Society and Economy v. Cohen et al., 18 February 2013, published in Nevo. See also Supreme Court, PCA 6897/14 Kol Barama Radio v. Kolech- Religious women Forum, 9 December 2015, published in Nevo.
28 Central District Court, Civil Case 13427-02-10 Auto Line Ltd v. Universal Motors Israel Ltd (UMI), 19 June 2012, published in Nevo.
In June 2012, the District Court denied a 20 million shekel lawsuit submitted by Auto Line Ltd, an importer and marketer of automotive spare parts for vehicles manufactured by General Motors and Isuzu, against UMI, a General Motors importer and Auto Line’s main competitor in Israel, alleging restrictive arrangements and violation of a consent decree UMI signed with the IAA in 2003.
As part of its business, UMI engaged in several types of maintenance agreements with automobile fleets, under which UMI is responsible for any repair needed. The repair services are done by garages that are UMI’s subcontractors, which are required under their contracts with UMI to use only UMI’s original spare parts.
Inter alia, Auto Line argued that the 2003 consent decree with the IAA prohibits importers of vehicles from restricting garages in any way, and that the obligations UMI imposed on the garages violated the consent decree. The District Court rejected Auto Line’s argument. First, the Court indicated that Auto Line itself had admitted that the consent decree violation was not an independent cause. In addition, in obiter dictum the Court stated that since Auto Line was not a party to the decree, it could not sue on its basis and, in any case, the IAA references to the maintenance agreements in the consent decree were not conclusive. An appeal against this ruling was denied in December 2013 by the Supreme Court. See Civil Appeal 7490/12 Auto Line Ltd v. Universal Motors Israel Ltd, 26 December 2013, published in Nevo.
29 Rishon LeZion Magistrate Court, Civil Case 18673-05-14 Hizkiyahu company Ltd. (CIC) et al v. Netzer Israel Torah, grace and education institutions et al, 15 November 2015, published in Nevo.
30 Supreme Court, Permission for Civil Appeal 4249/98 Swissa v. Hachsharat Hayishuv Insurance Company Ltd, 19 December 1999, published in Nevo.
31 Tel Aviv District Court, Civil Case 2487/04 STA Industries and Technologies Ltd v. Pennsylvania Investments Ltd et al, 9 December 2007, published in Nevo; Nazareth District Court, Civil Case 1140/98 Tzadik Chazan v. Mitzpeh Hayamim Ltd, 5 May 1998, published in Nevo.
32 CP Regulation 112.
33 Haifa District Court, Civil Case 11147-10-13 D.B.S. Satellite Services (1998) Ltd. v. Hamuda et al, 27 December 2014, published in Nevo.
34 CP Regulation 114.
35 CP Regulation 117.
36 CP Regulation 120(b).
37 Tel Aviv District Court, Civil Case 3006/00 Danoosh Dani v. Chrysler Corporation, 24 October 2004, published in Nevo.
38 CP Regulations 109 to 111.
39 CP Regulation 122.
40 CP Regulation 114.
41 Uri Goren, Issues in the Law of Civil Procedure, 9th edition, 2007.
42 CP Regulation 167.
43 Supreme Court, Civil Appeal 3005/02 SmithKline Beecham PLC v. Unipharm Ltd, 30 June 2002, published in Nevo.
44 CP Regulation 129.
45 CP Regulation 130.
46 Tower Air, supra, footnote 8.
47 Supreme Court, Permission for Civil Appeal 2616/03 Isracard Ltd v. Haward Rice, 14 March 2005, published in Nevo; Central District Court, Civil Case 1817-08-07 Johanan and others v. Partner Tikshoret Ltd, Cellcom Israel Ltd, Pelephone Tikshoret Ltd, 19 January 2011, published in Nevo.
48 Civil Case 1817-08-07, ibid.
49 PCA 4778/12 Tnuva Cooperative Center for Marketing of Agricultural Produce in Israel Ltd v. Advocate Ophir Naor, 19 July 2010, published in Nevo.
50 Central District Court, Class Action 3947-09-11 Amir Jossef Brot v. Tnuva Cooperative Center for Marketing of Agricultural Produce in Israel Ltd, 11 March 2012, published in Nevo.
51 Tel Aviv District Court, Civil Case 19230/06 Sharnoa Computerised Machines Tel Aviv Ltd v. Bank Hapoalim Ltd, Bank Leumi Israel Ltd and Bank Discount Ltd, 21 January 2008, published in Nevo.
52 PCA 2128/09 Phoenix Insurance Company v. Amusi, 5 July 2012, published in Nevo.
54 Section 8(a)(1) of the Class Action Law 5366-2006 (the Class Action Law).
55 PCA 4778/12 Tnuva Cooperative Center for Marketing of Agricultural Produce in Israel Ltd v. Advocate Ophir Naor, 19 July 2010, published in Nevo.
56 Tel Aviv District Court, 2519-06 Eyal Goldenberg v. Bezeq The Israel Telecommunication Corp. Ltd., 15 May 2014, published in Nevo.
57 Class Action 49580-05-11 Elgezi v. Israel Railways Ltd, 12 January 2014, published in Nevo.
58 Antitrust case 801/08 Bezeq the Israeli company for communication v. the general director of the IAA.
59 Class Action (Center) 46010-07-11 Ophir Naor v. Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel (5 April 2016, published in Nevo).
60 Labor Dispute Class Action 9403-08 Meir v. Reshef Securities (1993) Ltd, 2 August 2015, published in Nevo.
61 Supreme Court, Civil Appeal, 345/03 Dan Reichart v. The Heirs of Moshe Shemesh, 7 June 2007, published in Nevo.
63 Uri Goren, Issues in the Law of Civil Procedure, 9th edition, 2007.
64 In practice, such an appeal was submitted to the Supreme Court in February 2011 by the plaintiff’s attorneys in the Crocs class action (Supreme Court, Civil Appeal 959/11 Adv. Nachum Oren v. Kolnoa Hadash Ltd and subsequent procedures). The appellants argued that the attorneys’ fees awarded by the district court in the class action (493,000 shekels) were remarkably low, and reflected an average hourly rate of 150 shekels instead of the appropriate rate of approximately 930 shekels per hour. In September 2011, the appeal was annulled by the Supreme Court with the respondents’ consent to pay up to 45,000 shekels to the appellants in order to cover their expenses in the class action proceedings.
65 Supreme Court, Permission for Civil Appeal 2616/03 Isracard Ltd. v. Howard Rice, 14 March 2005, published in Nevo.
66 Class Action 10538-02-13 Hatzlacha The Consumers’ Movement for the Promotion of a Fair Society and Economy v. Elal Israeli Airways, 12 November 2013, published in Nevo.
67 Section 42A of the Evidence Act.
68 Section 43(e) of the Antitrust Law.
69 See supra, footnote 38; also see Jerusalem District Court, Class Action 41272-05-10 Nazar Tanus v. Angel Bakery Ltd, 16 June 2011, published in Nevo (the motion was dismissed in June 2011 following the plaintiff’s application to withdraw the class action); Tel Aviv District Court, Class Action 41418-05-10 Mia Edry v. Shlomo Angel Ltd (this motion was dismissed as well on 8 June 2011, following the applicants’ application to withdraw the class action due to lack of grounds. Notably, the District Court denied the parties’ withdrawal agreement according to which the respondents were supposed to pay the applicants and their representatives 10,000 shekels each. The Court emphasised that such payment in the circumstances of withdrawing due to lack of grounds is an incentive for the submission of ungrounded class actions, therefore should not be allowed. Interestingly, the Court stated that in the future it may consider sanctioning applicants who file ungrounded an class action and later ask for its withdrawal).
70 Director General’s Guidelines 2/12: The Director General’s considerations in setting the level of financial sanctions.
71 Supreme Court, Civil Appeal 327/68 Zinger v. Beinon, 11 October 1968, published in Nevo.
72 Supreme Court, Permission for Criminal Appeal 10573/08 The State of Israel v. Heinz Israel Ltd, 2 January 2011, published in Nevo.
73 Administrative Appeal, Haifa District Court 11259-08-15 Hatzlacha Consumer Movement for the Promotion of Equitable Economic Society v. Haifa Municipality, 10 November 2015, published in Nevo.
74 Class Action 42756-06-13 Nasser v. Amusement City Company Ltd, 15 December 2015, published in Nevo.
75 Section 19(b)(1) of the Class Action Law.
76 The terms of the settlement agreement may not contain agreement as to professional attorneys’ fees and remuneration for the claimant but may contain a recommendation as to these amounts.
77 Section 19(g) of the Class Action Law.
78 Tel Aviv District Court, 2020/02, 2021/02 Morad et Goldberg Ltd v. Aloni Group Ltd, 6 February 2008, published in Nevo.
79 Jerusalem District Court, Class Action 9227-07 Adv. Nachum Oren v. Kolnoa Hadash Ltd and follow-on procedures, 20 December 2012, published in Nevo. In February 2011, an appeal was submitted to the Supreme Court by the appellants regarding the attorneys’ fees granted by the District Court in the case. In September 2011, however, the appeal was rejected by the Supreme Court under the respondents’ consent to pay up to 45,000 shekels to the appellants insofar as to cover their expenses in the class action proceedings and under the appellants’ onus to introduce receipts of those expenses.
80 CA (Beer-Sheva) 3249-04 S Ofir Investments Ltd v. Central Bottling Company Ltd, published in Nevo.
81 CA (Beer-Sheva) 3202/09 Dor Alon Energy in Israel (1988) Ltd v. Dahan et al, published in Nevo.
82 Tel Aviv District Court, Class Action 1714/08 Einav Kaplan Basharis v. Bank Leumi, 31 May 2015, published in Nevo.
83 Central District Court, Class Action 41838-09-14 Weinstein v. Dead Sea Works, 5 April 2016, published in Nevo.
84 Central District Court, Class Action 41838-09-14 Weinstein v. Dead Sea Works, 29 January 2017, published in Nevo.
85 Section 8(a) of the Arbitration Law, 5728-1968.
86 Section 21 of the Arbitration Law.
87 Yagur, supra, footnote 26.
88 Tel Aviv District Court Application 474/07, 316/07 Novosty Neidly et al v. Ma’ariv Modi’in Publishing Ltd, 15 March 2009, published in Nevo.
89 Permission for Civil Appeal 6233/02 Extel Ltd v. Kalma Vi Industries, 4 February 2004, Official Rulings of the Supreme Court 58(2) 635. One of the questions discussed in that case was whether an arbitrator is authorised to sit in judgment when the dispute involves an illegal restrictive arrangement. Since each one of the three judges held a different opinion, no decisive ruling was given by the Supreme Court in respect of this question.
90 Tel Aviv District Court, Originating Summons of Arbitration 1039-08 Ardan – Cement Industries Ltd v. Dan Tmir, published in Nevo.
91 Central District Court, Originating Motion Arbitration 34150-09-14 Rubin v. Hazel, 12 February 2015, published in Nevo.
92 Section 84 of the Torts Ordinance.
93 CP Regulation 216.