Israeli Home-gas Companies Raided, Three Arrested in Antitrust Probe

Investigators suspect three market leaders colluded not to poach the others’ customers, and to deter smaller rivals from competing.

Illustration: A man unloads a gas bottle.
Moti Kimchi

Antitrust investigators raided the offices of Supergas on Tuesday as they expanded their probe of collusion among Israel’s three big providers of home heating and cooking gas to deter competition by smaller rivals.

The move came a day after investigators raided the offices of Supergas’ two big rivals – Amisragas and Pazgas – as well as the homes of managers suspected of running the cartel. A court has ordered that the three be kept in custody.

“We have an instance of another cartel in the home gas market that divided up the market for a basic consumer good found in every home,” Ariel Yustman, an attorney for the Antitrust Authority, told a court during the detention hearings. “This is a market with many competitive faults, and government ministries are addressing it.”

Yustman was referring to two investigations from 2004 and 2005. In the first, three companies now under investigation plus Dor Gas, as well as 15 of their executives, were accused of divvying up contracts for new customers based on existing market shares. In the second investigation, Pazgas and Yigal Gas were indicted for agreeing not to take customers from each other.

“The companies here [today] and some of the suspects here were convicted in the past of antitrust violations and it did nothing to deter them,” Yustman said.

Customers and smaller gas companies have lodged complaints in the years since, and now the three companies are suspected of agreeing not to take customers from one another, and of sharing information to deter smaller competitors from winning contracts, forcing them out of the market. In addition to the antitrust violations, they are also suspected of destroying evidence and obstructing justice.

Israel’s home gas market is worth about 800 million shekels ($211 million) annually. In the key segment of centralized gas supplies, where apartment buildings contract for gas for all their residents, the big three account for three quarters of sales, while the rest is shared among 20 smaller suppliers, none of which have a market share above 5%.

One indication of alleged big-three collusion is an Antitrust Authority study finding that customer loss in the market between 2011 and 2014 was just 1%. The market shares of the big three for centralized gas supplies were unchanged over the years, which investigators said pointed to collusion.

Investigators said their probe showed that when a customer buying for an apartment building sought to change providers, he or she would face delays and other obstructions. Tactics included challenging the authenticity of signatures of residents who had agreed to the change, or falsely asserting that the building’s system was connected to others nearby, making it more difficult to change providers, investigators alleged.

On Monday, Pazgaz and Amisagas declined to respond to the allegations.