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09 August 2007
A recent decision issued on May 29 2007 illustrates the broad scope of criminal liability for antitrust offences under Israeli law and the degree of severity attributed to such offences by the Israeli courts. This decision emphasizes the fact that both corporations and individuals conducting business in Israel are exposed to liability for antitrust infringements, as well as the increasing need to understand prohibitions under Israeli law and take the necessary measures to ensure compliance with the law.
Israeli antitrust law regulates three areas of business conduct:
Every infringement of the Antitrust Law constitutes a criminal offence and also has civil and administrative ramifications. Moreover, antitrust criminal liability is personal. When a corporation is being prosecuted (in most cases for engaging in restrictive practices, such as cartels), the individuals involved are also subject to personal criminal liability and are prosecuted on a regular basis.
Under the law, the penalties for antitrust violations range from fines to up to five years' imprisonment, depending on the type of violation and the applicable circumstances.
Furthermore, under Section 48 of the law, the senior officers of a corporation that committed an antitrust violation are subject to criminal liability even where they were not involved in the violation and were unaware of it. Senior officers are subject to criminal liability and criminal penalties (possibly prison sentences), even where they had no knowledge of the facts constituting the offence, unless they can prove that they took all necessary measures to ensure effective compliance with the law by the corporation. Under the Antitrust Authority's policy, this standard can be met only by adopting a full compliance programme according to the authority's guidelines.
Over the past few years the courts have gradually adopted a strict approach to antitrust offences. The courts have interpreted the law so as to extend the scope of personal liability for antitrust violations, while increasing the penalties for such violations. The Supreme Court even stated on several occasions - in the context of restrictive arrangements - that the appropriate sentence for individual antitrust offenders was actual imprisonment (ie, not community service).(1)
The Jerusalem District Court recently convicted an Israeli company, its chief executive officer and a major shareholder for attempting to establish an illegal restrictive arrangement with a competitor in a small segment of the food market. The court fined the company and sentenced the chief executive officer and the shareholder to three months of community service. The case sets a precedent and expands the scope of antitrust criminal liability.
This is the first time that criminal liability has been imposed for a mere attempt to establish a restrictive agreement to fix prices. The defendants were convicted and criminally punished, even though no agreement or arrangement was actually entered into and the attempt consisted of a few telephone calls and one meeting between the defendants and the competitor. In addition, the other party to the attempt was an agent acting on behalf of the Antitrust Authority; therefore, there was no harm to competition or the public.
Moreover, this is the first time that the court has extended the scope of Section 48 of the law (managers' liability) to a major shareholder (who was the chairman of the board of directors) in light of his involvement in the ongoing business of the company. Although the shareholder had minimal involvement in the discussions, the significance of the decision goes beyond the specific circumstances of the case.
The decision sends a clear warning to officers of corporations - and, apparently, to major shareholders - that they should take all necessary measures to comply with the antitrust laws. Otherwise, they might be held personally liable for offences committed by a corporation, even without their active participation or knowledge.
For further information on this topic please contact David Tadmor, Shai Bakal or David Gideoni at Tadmor & Co by telephone (+972 3 684 6000) or by email (email@example.com or firstname.lastname@example.org or email@example.com).
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