Competition Authority's Price Reduction Push May Backfire
Translated & summarized from Calcalist by baba
Israel's Competition Authority is under fire for potentially overreaching its enforcement powers in a case against an importer of Originales footwear. The authority initiated action based on a new law meant to lower prices, but the importer's act of providing an Israeli website address to the brand owner may not constitute a violation. Legal experts argue this ambiguity creates uncertainty for importers, potentially discouraging legitimate business practices and even harming parallel imports, the very competition the law aims to foster.
The story in 6 lines · by baba
- Israel's Competition Authority faces criticism for its enforcement actions against Originales footwear importer.
- The authority's case hinges on whether providing an Israeli website address constitutes a legal violation.
- A recent law amendment aims to lower prices by preventing practices that harm parallel imports.
- Legal experts argue the authority has not clarified which specific prohibited act was committed.
- Ambiguity in enforcement may deter direct importers and negatively impact parallel imports.
- The authority is urged to clarify its enforcement boundaries to ensure legal certainty.
Israel's Competition Authority is facing scrutiny over its enforcement actions, particularly concerning a case involving the importer of Originales footwear. The authority initiated an enforcement process, potentially leading to fines exceeding 100 million shekels, based on a recent amendment to the Economic Competition Law aimed at reducing prices by curbing practices that harm parallel or individual imports. However, the core issue is whether the importer's actions actually constitute a violation under the law.
In September, the authority announced an agreed order with the Originales importer. According to the authority, the importer contacted the international brand owner about price disparities between Israel and the U.S. as part of negotiations for better commercial terms. The brand owner then offered to block Israeli users from its U.S. website and redirect them to the Israeli site. The importer provided the Israeli website's address to facilitate this redirection, despite believing the proposed solution was unsuitable for their negotiation topic.
While blocking consumers from foreign websites raises competitive concerns, the article argues there's a significant legal distinction between blocking access and merely providing the address of an existing Israeli website, which is easily found online. The 2023 amendment to the law specified seven defined actions that constitute a violation. In the Originales case, the authority has not clarified which of these seven prohibited acts was committed. The provision concerning providing information to a foreign manufacturer typically relates to data enabling tracing of parallel imports, such as a product's serial number, which an Israeli website address is not.
The ambiguity leaves importers uncertain about what actions are permissible. The article suggests that if an importer's legitimate commercial negotiations with a manufacturer lead to actions by the manufacturer that reduce parallel imports, the importer risks facing enforcement measures for actions beyond their control and without committing a prohibited act. This legal uncertainty could discourage direct importers, who invest in bringing brands to Israel, meeting standards, and creating demand, potentially harming parallel imports that often benefit from this infrastructure.
Lawyer Ori Porat, a partner at Goldfarb Gross Seligman, argues that while determined enforcement against high prices is necessary, legal certainty is equally crucial. He suggests the Competition Authority needs to clarify its boundaries and specify which of the seven prohibited acts have been violated. Otherwise, in its effort to promote competition, the authority might inadvertently deter those who actually advance it.