Israel’s Concentration Committee Advises Against Shapir’s Acquisition of Ashdod Refinery

The Concentration Committee in Israel recently recommended rejecting Shapir Engineering’s bid to acquire the Ashdod Oil Refinery (Bazan), a decision now pending final approval by the Government Companies Authority. This committee advises the government on actions affecting economic concentration, aiming to prevent excessive market dominance that could harm competition and financial stability.

Established following a 2010 government initiative to enhance market competition, the committee was formalized by the 2013 Competition Promotion and Concentration Reduction Law. It consists of three members: the Chairperson (currently Michal Cohen, the Antitrust Commissioner), the Director General or senior official from the Finance Ministry (currently Israel Malachi), and the Chair of the National Economic Council (currently Professor Avi Simhon). The committee is tasked with publishing lists of concentrated economic entities and significant financial and real sector players, and providing annual reports to the government and Knesset Finance Committee.

The law mandates regulatory bodies to consult the committee before allocating public assets to dominant market players. The committee’s recommendations focus on three areas: considering overall market concentration and sector competition when allocating rights, limiting control within pyramid company structures, and separating major real sector corporations from significant financial entities.

The committee’s 2019 methodology defines market concentration as a scenario where a few players control many critical assets, potentially gaining disproportionate influence over policymakers. This influence could lead to decisions favoring specific entities at the public’s expense. Evaluation criteria include the essential nature of the entity’s activities, macroeconomic data, and indicators of regulatory or political influence, such as media ownership or policymaker dependence.

The committee’s role is crucial in maintaining competitive balance in Israel’s economy, as highlighted by its recent intervention in the Shapir-Bazan deal, reflecting ongoing efforts to curb economic concentration risks.