Good self-assessment is an asset. This is the case not only in the field of psychology, but also in the legal and economic world of Antitrust. Recently, new subordinate legislation, entitled “Block Exemption” was enacted. This new legislation significantly changes the Israeli restrictive arrangement regime.
According to the new Block Exemption, all forms of restrictive arrangements – except for restrictive arrangements between competitors, and restrictive arrangements between a supplier and a customer regarding the resale price in the supply chain – will not require prior approval from the Israeli Antitrust Tribunal or a specific exemption from the General Director of the Israeli Antitrust Authority (“IAA”), if the arrangement does not restrict the competition in a substantial part of a relevant market or does not significantly harm competition; and if the restraints in the arrangement, are essential for its execution.
According to the new regime, such restrictive arrangements could be implemented without waiting for a prior approval or exemption, and it would be sufficient, for instance, to rely on a reasoned professional opinion that examines the potential impact of the arrangement on the relevant market (i.e., “self-assessment” of the arrangement).
The IAA clarifies, however, in the explanatory notes to the new Block Exemption – that in the event that the arrangement does not meet the conditions set forth in the new Block Exemption, the IAA could challenge the arrangement retrospectively, for example, by imposing administrative fines.
It should be noted that a self-assessment regime exists in Europe and the United States, and is suitable for Israel as well. Currently, the broad definition of a “restrictive arrangement” in the Israeli Law covers a wide range of arrangements, including arrangements that prima facie do not necessarily harm competition. Thus, prior to the introduction of the new Block Exemption, if such arrangements did not satisfy a list of strict and precise conditions set forth in other specific exemptions, the arrangement had to be cleared by the Antitrust Tribunal or the IAA, before it could be implemented. This regulatory regime demanded many resources (i.e., investments of time and money) from the parties to the arrangement, as well as from the IAA, and in some cases prevented the implementation of beneficial transactions.
The new Block Exemption, however, provides a different approach to arrangements which are not necessarily harmful to the competition or the public. For example, arrangements that could be beneficial, such as Most Favored Customer (MFC) clauses, or Maximum Resale Price Maintenance (RPM Max) clauses, which previously would have usually required a prior exemption from the IAA, do not require such an exemption anymore. That is, provided that these arrangements are between parties who are not competitors; they are essential; and their competitive effect on a relevant market meets the conditions of the new Block Exemption.
In addition, it appears that the new Block Exemption does not require competitors to obtain a prior exemption from the IAA, or approval from the Antitrust Tribunal, if the arrangement concerns goods or services that are not the subject of the competition between them (a matter that in the past required a prior exemption or approval, in certain circumstances).
In conclusion, the transition to a “self-assessment” regime, which sets a substantial analysis test (as opposed to a technical examination), is a better approach for both the IAA and the private sector. However, there are also some problematic aspects. The conditions of the new Block Exemption raise some difficulties: for example, they define “competitors” more broadly than the regular definition used in other Block Exemption (by, inter alia, using the term “overlap” for the parties’ goods or services, instead of the standard substitutability test for the market definition). Thus, the new Block Exemption is likely to exclude many arrangements.
In addition, the shift of the burden of the competitive analysis to the parties (and their expert consultants) – and the risk inherit in it- that the IAA could take, a different approach – ex post facto, augments the need of parties to consult with professional experts in the field, and provide them with all the relevant facts. Furthermore, even after the parties obtain an expert opinion according to which the relevant arrangement falls within the new Block Exemption, they are required to update the expert of any relevant changes that apply to a given market during the period of the arrangement in order to ensure that the opinion is still valid. A “self-assessment” regime that transfers the risk to the private sector, coupled with the possibility that the IAA may challenge the arrangement and may impose an administrative fine, emphasizes the need for a professional competitive analysis. Indeed, self-assessment is a valuable asset, although the responsibility that comes with it – comes at a price.
***
This communication is distributed with the understanding that the author, publisher and distributor of this communication are not rendering legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assume no liability whatsoever in connection with its use.
