Israeli Economy and Industry Minister Eli Cohen is expected to propose legislation that would broaden the definition of a monopoly and impose higher penalties on violators, a move that could affect Israel’s biggest banks, insurers and food markers, TheMarker has learned.
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They key proposal would change the definition of a monopoly business from a company that controls more than 50% of a particular market to a looser definition of “market power.” The result is that a business with less than a 50% market share could find itself designated a monopoly and subject to legal restrictions.
The proposed amendment to the antitrust law would automatically designate any company with a 50% market share as a monopoly with no right of appeal. Ceilings on penalties, now limited to 8% of a violator’s annual turnover up to 24 million shekels ($6.85 million), would now be subject to just an 8% ceiling.
The proposed changes, which are backed by Antitrust Commissioner Michal Halperin and will subject to public hearings in the next few weeks, have aroused both praise and worry in the business sector.
“The move to the test of market power will put an end to the game of ‘More than 50% or nothing,’” said Dror Strum, a former antitrust commissioner. “There are companies today with 49% or less that face no restrictions even though it’s clear to the Antitrust Authority and people in the market that they have control.”
But others were warier about the looser definition of monopoly that Cohen is proposing.
“If the legislator determines that market power is the relevant parameter for applying monopoly laws, how will the law prevent a company with a market share exceeding 50% from claiming that it is not a monopoly because it lacks market power?” asked Ravit Arbel, who heads the antitrust practice at the Tel Aviv law firm Amit, Pollak, Matalon.
The changes could lead to Israel’s two biggest banks – Hapoalim and Leumi – being declared monopolies as could the food makers Osem, Unilever Israel, Strauss Group and importer Neto. Insurance companies Clal and Phoenix could likewise win the designation as could certain pension and provident fund managers.
The proposed legislation would also allow ordinary courts to hear suits on antitrust issues brought by companies alleging their business is being hurt by a monopoly. The practice today is that because antitrust cases are so complicated, ordinary courts shouldn’t try them.
Another change would raise the bar for mergers that are automatically subject to antitrust scrutiny, from a minimum combined turnover of the two merging companies of 150 million shekels to 360 million — on condition that neither company has been declared a monopoly.