The Israel Competition Authority is Initiating Steps to Ease Parallel Import to Israel
- (by June 17, 2023).
Block exemptions are a European competition law mechanism that has been adopted in Israel. They set rules by virtue of the Competition Law, that exempt parties, in various types of agreements, which meet certain criteria, from the need to receive a permit in advance, and thus make it possible to proceed with common and legitimate collaborations without waiting for specific permits from the Director General of the ICA.
The current block exemption for exclusive distribution agreement, before the contemplated amendment, makes is possible, in principle, for a foreign supplier (for example, a German supplier) to sign a distribution agreement with the foreign distributor (for example, a Polish distributor) and to prescribe in the agreement that the distributor is not permitted to sell the merchandise to distributors in Israel, even in the event that an Israeli importer (a parallel importer) approaches it at its own initiative and requests to purchase the products for distribution in Israel.
According to the contemplated amendment, such an agreement between a foreign supplier and distributor is not covered by the block exemption and therefore could be deemed a forbidden restrictive arrangement. This should remove an obstacle that parallel importers currently face when importing products to Israel.
2. In 2018 a temporary provision was promulgated for a 3-year period which equipped the ICA with tools for handling a “direct importer” (exclusive importer) that adversely affects parallel importing or personal importing, and thus prejudices competition in the field, even if it is not defined as a monopoly.
According to the tools by virtue of the said temporary provision, in July, 2020, the ICA reached a settlement with the Schestowitz company, which imposed restrictions on the reports Schestowitz was permitted to deliver to the Colgate-Palmolive Co. multinational company regarding parallel import of its toothpastes to Israel.
However, upon the lapse of 3 years, the said temporary provision expired and was not extended.
Upon the expiration of the temporary provision, the Ministry of Economy and the ICA initiated an amendment to the law that allows the Director General of the ICA to fine official importers that prevented parallel importing, by up to 100 million shekels. The law underwent initial legislative proceedings, however due to the dispersal of the Israeli parliament, until recently no further legislative progress had been made.
The Israeli parliament’s Economic Affairs Committee is now discussing a bill for a permanent legislative amendment that will forbid direct importers from harming personal or parallel importing, and consequently adversely affecting competition. According to the bill, the ICA will be able to impose a monetary sanction of up to 8% of the sales turnover, up to an amount of 100 million NIS, upon an importer who shall breach the legislative provision. The bill is pending final approval by the Israeli parliament.
For more information: https://www.gov.il/en/departments/news/schestowitzs
Antitrust and Competition practice
This update is provided as general information only and may not be relied upon in any individual case without additional legal advice.
