Israeli Defense Exports Get Antitrust Relief

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An Israel Aerospace Industries Heron 1 UAV, on display at the Singapore Airshow, February, 2014.Credit: Bloomberg

The cutthroat competition among Israeli defense exports, particularly between state-owned Israel Aerospace Industries and publicly traded Elbit Systems, is due to end after the Antitrust Authority gave them a waiver to divide global markets among themselves.

Under the new rules, which were urged by the Defense Ministry and are scheduled to go into effect in 2015, defense companies will no longer have to get regulatory approval from a special antitrust court each time they present joint bids for projects overseas.

Each joint bid will assign one company the role as leader and one or more companies as sub-contractors.

The waiver, which is in force until 2019, according to the Antitrust Authority, includes not only manufacturing and marketing but also research and development, even when they are competing with each other in the Israeli market.

The waiver requires that the overseas operator doesn’t impinge on competition for Israeli defense contractors.

The new rules also put a ceiling on the size of joint bids, which can’t exceed 10% of the annual sales from the previous year of any one company involved. Likewise, R&D spending on a joint bid can’t exceed 10% of a company’s total R&D spending from the previous year.

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