An amendment to the Merger Regulations (Anti-Trust Regulations (Register, Publication and Reporting of Transactions) 2004) was adopted by the Knesset – Israel’s parliament – on January 13, 2022.
The amendment includes two material changes that are expected to have a significant impact on merger notification procedures.
First, the threshold for notifying merger transactions (as defined in the Economic Competition Law, 1988) to the General Director of the Competition Authority has been increased.
According to the amended regulations, merger notification will be required when the combined revenues of the merging parties in Israel exceeds an updated total of NIS 367 million (approximately $117 million), and the revenues of at least two of the merging parties exceeds NIS 20 million (approximately $6.4 million) each, instead of NIS 10 million each, as was the case prior to the amendment.
Raising the minimum notification threshold is expected to streamline the work of the Competition Authority and facilitate transactions in which one of the parties has low revenues in Israel.
The amendment does not derogate from the obligation to report merger transactions in which one of the parties is a monopoly (i.e., holds a market share exceeding 50% in any market) or where the merger itself creates a monopoly.
Such transactions should be reported to the General Director even if the parties’ revenues do not meet the updated threshold.
Second, the new regulations include a new merger notification form which replaces the two currently existing forms (a full notification and an abbreviated notification).
According to the Competition Authority’s statement, the new and unified notification form will contribute to a more efficient and expeditious merger examination procedure.
In this context, the use of an abbreviated merger notification form, which had allowed parties with low market shares to report the transaction using a short and concise form, was cancelled.
The new notification form requires the parties to report more comprehensive and detailed information compared to information included in the previous forms.
We expect that the level and breadth of details required in the new notification form will create difficulties for the parties when preparing their merger notifications.
According to the Authority’s statement, the use of the new notification form will be obligatory two months following the formal publication of the new regulations.
Draft Opinion Regarding Vertical Resale Price Maintenance (RPM) Arrangements
On January 10, 2022 the Israel Competition Authority released a draft opinion regarding vertical price maintenance arrangements for comment by the public.
Such arrangements deal with agreements between firms at different stages of the supply chain (e.g., manufacturer and distributer or wholesaler) whereby the manufacturer imposes a resale price at which the distributor is required to sell the product to its customers (“Resale Price Maintenance” or “RPM”).
The Draft Opinion constitutes an update to a previous opinion published by the General Director of the Competition Authority (Public Opinion No. 2/17).
The Draft Opinion was published in connection with the recent amendment to the “Vertical Block Exemption” (the Rules of Economic Competition (Block Exemption for Non-Horizontal Arrangements), 2013), providing that the Block Exemption will apply to all forms of RPM arrangements, and not only to RPM arrangements imposing a maximum price, as was the situation prior to the amendment.
Following this amendment, parties to an RPM arrangement may self-assess whether the arrangement significantly impedes competition in the market and conclude, in the appropriate case where, that the Block Exemption applies to the arrangement, exempting them from the requirement to obtain the General Director’s approval.
In the Draft Opinion, the Competition Authority takes a cautious and narrow approach to RPM arrangements and sets even stricter conditions than before for recognizing an RPM arrangement as not creating significant harm to competition, in a way that would allow for the Block Exemption be applied.
Among other things, according to the Draft Opinion, in order to apply the Block Exemption on an RPM arrangement, the pro-competitive benefits created by the arrangement must be demonstrated, in order to negate any concern of competitive harm caused by the arrangements.
In addition, the Draft Opinion suggests a cautious approach by the Authority towards price recommendations, requiring these to be examined similarly to other forms of RPM arrangements, even if they are non-binding.
