gilo - David Bachcar - June 13 2011
David Gilo is unlikely to try to change the bill in any substantive way. Photo by David Bachar
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Ofer Vaknin
Dror Strum: 'The bill creates an especially bad precedent of immunity.' Photo by Ofer Vaknin

The bill governing "concentration groups" - groups of related companies that operate in specific sectors of the economy in which there is little competition - is slated for discussion by the Knesset Economic Affairs Committee tomorrow. Ahead of the crucial debate, experts on antitrust issues are divided.

The proposed law empowers the antitrust commissioner to declare a group of companies a concentration group, under certain conditions, including a paucity of competition in the relevant sector. But after fierce opposition and lobbying by the companies, the bill was softened to grant veto power over such declarations by other regulators - namely the supervisor of banks (at the Bank of Israel ) and the insurance commissioner (at the Finance Ministry ).

The antitrust commissioner may feel that a given business entity is a concentration group; but the other regulators may say it is not, and their word will carry.

The Antitrust Authority fondly expects full cooperation from the central bank and the Finance Ministry, which, it trusts, will understand the needs of competition and consumers.

Opponents of the bill say, however, that granting the supervisor of banks and insurance commissioner veto power will weaken the status of the Antitrust Authority. Since the government has already set up a committee to discuss competition in the economy, the opponents urge waiting for its conclusions before finalizing the concentration-groups bill.

Checks and balances

Supporters of the bill counter that despite constraints on the Antitrust Authority, the law would empower that very authority, for the first time, to promote competition in highly uncompetitive sectors such as banking, insurance, communications, infrastructure and energy.

Why give the supervisor of banks and insurance commissioner veto power, anyway? To protect groups that could be destabilized by a ruling from the antitrust commissioner.

Last month, the Antitrust Authority changed commissioners, giving rise to an opportunity to revisit the formulation of the bill. Officials at the Antitrust Authority were surprised to learn that the supervisor of banks and insurance commissioner had been given veto power over the very declaration of a business entity to be a concentration group. However, the new antitrust commissioner, David Gilo, is unlikely to try to change the bill in any substantive way.

After meetings held in recent weeks with the other regulators, the antitrust officials feel that once the law takes effect (if it is enacted as is ), the other sector-specific regulators will encourage competition in their areas, with the help of checks and balances to preserve the strength of the companies, while promoting the interests of consumers.

Stripping the regulator of enforcement powers

Dror Strum, a former antitrust commissioner himself, argues, however, that the proposal will weaken the Antitrust Authority as an enforcer. Strum was the first to voice opposition to the bill in its current form, and to call for amendments. The very power of the Antitrust Authority lies in its ability to make decisions and enforce the law without challenge to its authority, Strum explains. But the bill reduces it to making recommendations, thus stripping it of its power to enforce in areas controlled by other regulators that can veto its decisions.

"Granting a veto right to various regulators, to decide when the Antitrust Authority may act, creates a very bad precedent," Strum argues, charging that the authority isn't even being asked to consult and is simply handing over the power.

Strum says he has the greatest respect for the offices of the supervisor of banks and the insurance commissioner, but adds that granting absolute veto power to the people in charge of the areas with the worst record on competition is a bad idea.

Beyond the question of whether other regulators should get veto rights in the future, this opens the door to torpedoing the Antitrust Authority's position on competition, and subjugating competition to stability. Not only that; it opens the door to exempting the banks and insurance companies from antitrust rules. There is no precedent for this anywhere in the world, says Strum.

"The moment veto rights in the name of stability are brought into competition law, it won't end with concentration groups," warns the former trustbuster. "Say the Antitrust Authority is asked to rule on the merger of two banks, say Bank Leumi or Bank Hapoalim with the Bank of Jerusalem; and say the supervisor of banks likes the idea. Can the Antitrust Authority ignore the banks regulator's opinion?

"Since when does a nation prevent competition for the sake of a specific rival?" asks Strum rhetorically. "The bill creates an especially bad precedent of immunity from what should be central to antitrust law."