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The shop owners filed the petition against the municipality and the supermarket chains Tiv Taam and AM:PM, whose branches are open on Saturdays, claiming that they were losing customers to the large chains.
The shop owners' petition was filed after the District Court rejected an administrative petition, saying that this was a political question, not only a legal one.
The Supreme Court panel, headed by the court's president, Asher Grunis, overturned the ruling, determining that the municipality and the chains violate the municipal bylaw, and that the purpose of the law - to keep businesses closed on Saturday - should be observed.
However, the justices stressed, the municipality can change the bylaw and allow shops to open on Saturdays, if it sees fit.
In their report, the justices suggested that the Tel Aviv municipality's failure to effectively enforce the law was motivated by its interest in receiving financial gains from fines paid by businesses that violate the law.
Currently, businesses caught opening their doors to customers on Saturdays are fined NIS 730. The Supreme Court determined that fines do not serve to enforce the by-laws in regard to large businesses such as Tiv Taam and AM:PM.
The justices said the Tel Aviv municipality could take more severe actions to better enforce the law, like shutting down the supermarkets. It could also serve an order to the Court of Local Affairs, prohibiting businesses from opening on Shabbat, but has refrained from using its authority to do so, said the report.
The justices stressed that the matter had nothing to do with religious or secular freedoms, stating that "the law, including bylaws, must be observed."
Still, the justices added that "If the nature of Tel Aviv-Jaffa necessitates, in the municipality's opinion, that businesses should not close [on Shabbat], it can change the bylaw, but as long as the law stands, it should be observed."
The Supreme Court came out against the current conduct of the Tel Aviv municipality, saying that shops shouldn't be forced to pay fines in order to be open on Saturdays. "If the municipality believes that shops should be open on Saturday, the fines are not the right way to do it: there is no reason to force business owners to pay fines for opening on Saturdays."
The justices added that the municipality, in effect, is allowing the long term violation of the bylaws, raising the suspicion that its financial gains from the fines make it all too convenient to continue to fail to enforce the law.