Merger Control 2022 Comparisons

In Israel, merger control is regulated under the Economic Competition Law, 5748-1988 (the "Law"), and regulations that are being promulgated accordingly.

The Israeli Competition Authority (ICA) and the Director General that heads the ICA (the "Director-General") have published several additional documents regarding mergers, including the following:

• Guidelines of the Director-General of the Israel Competition Authority for Reporting and Evaluating Mergers Pursuant to the Restrictive Trade Practices Law, 1988 (2008);
• Public statement 2/11 – guidelines Regarding Remedies to Mergers Raising a Reasonable Likelihood of Substantial Harm to the Competition; and
• Public statement 1/11 – The Director-General's Guidelines to a Competitive Assessment of Horizontal Mergers.

The Restrictive Trade Practices Regulations (Registration, Publication and Reporting of Transactions), 5764 – 2004 (the ”Regulations”), regarding merger control, were enacted on 24 March 2022. Among others, the regulations adopted a new merger notification form.

See further developments in 2022 in 9.1 Recent Changes or Impending Legislation.

There is no legislation that is relevant to foreign transactions or investments relating to particular sectors.

The ICA is the agency responsible for enforcing the Competition Law and other regulations promulgated under it. The ICA is an independent governmental agency headed by the Director-General. Since 1 August 2021, the new acting Director-General is Advocate Michal Cohen.

In cases in which a merger notification is filed, and the activity of merging parties falls under the jurisdiction of one of the government ministries, the Director-General shall forward a copy of the application to the Director-General of such ministry.

The Competition Tribunal (the "Tribunal") is an administrative court that hears appeals on the Director-General's merger decisions (for elaboration regarding the appeal process, see 8.1 Access to Appeal and Judicial Review).

Prior to clearing a merger, the Director-General is obliged to consult with the Exemptions and Mergers Committee, comprised of representatives from the government and the public. Although there is no legal duty to consult with the committee prior to blocking a merger, in practice, its advice is also sought when a negative decision is considered.

Since the appointment of DG Cohen, the significance given to the Mergers Committee is considerably higher.

Notification in Israel is compulsory, such that if one of the filing thresholds mentioned in Section 17(a) of the Law is met, notification must be filed. Usually, if one of the filing thresholds is met, there are no available exceptions. The only case where an exception could be applied is when only the monopoly threshold is met (for further elaboration regarding the filing thresholds, see 2.5 Jurisdictional Thresholds).

In such cases, if the monopoly is in a market that is unrelated to the market in which the merger takes place, an exemption from filing could be provided by the ICA (a "waiver"). Obtaining such an exemption requires to file a request to the ICA in which the parties describe the specific circumstances of the transaction and the lack of any linkage to the monopoly. Recent experience shows that the ICA is adopting a much stricter approach to waivers, and it tends to insist on full merger notifications, even in cases in which waivers were previously granted.

According to the Israeli Law, any violation of the Competition Law could be criminal and thus, theoretically, failure to notify may be a criminal offence, punishable by imprisonment and criminal fines. The ICA has once before applied criminal sanctions due to failure to notify. It should be noted, however, that the specific case included a long list of other violations of the Law, including abuse of monopoly status and restrictive arrangements.

In all other cases, however, failure to notify in mergers that do not raise significant competitive concerns will be enforced by administrative fines in lieu of criminal means.

Administrative fines could amount to up to 8% of the company's previous year revenues with a ceiling of approximately USD30.8 million. In addition, personal administrative fines of up to approximately USD300,000 are possible.

If the Tribunal believes that there is a reasonable likelihood that competition in the relevant sector would be significantly harmed or that the public would be injured, as a result of a merger made contrary to the provisions of the Law, it may order to hold separate the merged companies (ie, "unscramble the eggs"). In practice, the Tribunal has applied this authority only once (Prinir/Miloz case, 2009). In addition, private enforcement is available to aggrieve third parties, including by way of injunctions.

Recent Cases

In 2021, the Director-General announced that she is considering imposing financial sanctions of approximately USD1.8 million on Facebook Israel and its parent company, Facebook Inc, for "failure to notify". Facebook did not report its purchases of two Israeli companies, Redkix and Servicefriend, while according to the ICA, this transaction had to be reported under the "monopoly threshold" (see 2.5 Jurisdictional Thresholds). Facebook received a hearing letter from the ICA.

In 2022, Milgam Ltd and Maccabi Entrepreneurship Ltd entered into an agreement according to which Eitan will purchase from Milgam and Maccabi 33.3% of the shares of the subsidiary Maccabi Home Ltd. The merger was not reported to the ICA as required. Two consent decrees were issued to the parties – Milgam Ltd had to pay USD25,000 to the State Treasury, and Maccabi Entrepreneurship Ltd had to pay USD30,000 to the State Treasury.

In addition, in 2022 the ICA published a consent decree with Em Hahita and the Gatnio brothers, requiring a fine of USD90,000 paid separately or together. Em Hahita Ltd is the only producer in Israel of kosher flour during Passover, and the Gatnio Brothers Ltd produces matzah cookies. The parties entered into a merger agreement that was not reported to the ICA as required.

According to the ICA's guidelines, any transaction that creates (or significantly strengthens) a substantial and continuous influence link between the decision-making mechanisms of the companies involved in the transaction, either directly or indirectly, falls within the definition of a “corporate merger”. The definition of a "corporate merger" in Section 1 to the Israeli Competition Law includes the acquisition of the majority of the assets of a company by another company, or the acquisition of shares in a company by another company through which the acquiring company is accorded more than a quarter of the nominal value of the issued share capital, or of the voting power, or the power to appoint more than a quarter of the directors, or participation in more than a quarter of the profits of such company; the acquisition may be direct or indirect or by way of rights accorded by contract.

Nevertheless, this is not a "closed list". The ICA's guidelines state that the definition of corporate mergers covers "all transactions that give one company a substantial structural link to another company (or which strengthen an existing link, in a not inconsequential manner), whatever the formal structure of such transaction and whatever technique is used to create such link".

Defining the Existence of a Corporate Merger

According to the ICA's guidelines and several of the Director-General's decisions, a corporate merger exists when one company receives a foothold in another company's decision-making mechanism. For instance, in light of this standard, the appointment of a joint CEO could be regarded as a corporate merger.

According to the ICA's policy, any crossing of a 25% threshold will be considered a corporate merger. Thus, a transaction in which a company is holding 20% of the voting rights in a different company acquires an additional 10% will be considered a corporate merger as it crosses the 25% threshold. Similarly, a voting agreement between two shareholders, each holding 15% of the company's shares, in which they agree to use their voting powers jointly would be deemed a corporate merger, since together, these shareholders would exceed the 25% threshold.

With regard to internal restructurings or reorganisations, the ICA's policy is not to demand filing when the rights in all of the involved entities (ie, the transferring and the receiving) are held entirely by the same entity.

Finally, the size of a shareholder’s effective holding of a type of rights in a company can change without any transfer of shares such in shareholder agreements or through the Articles of Association.

Due to the definition of a corporate merger, the definition of control does not play a role in determining which transactions will be caught. As mentioned in 2.3 Types of Transactions, any crossing of the 25% threshold with respect to each of the criteria defined thereto will be considered a merger.

It is possible that in cases in which more than 25% of any of such rights are sold, filing will be required even if each of the purchasers, by itself, did not acquire more than 25% of any such right. The ICA views acquisitions made by different entities as a shared purchase in an array of circumstances, especially when voting agreements exist between such purchasers. It is important to note that in several cases the ICA position was that a transaction in which less than 25% of an interest in a competitor has been acquired does not amount to a merger but might nevertheless be considered a restrictive arrangement.

Finally, under the Law any purchase of the “majority of assets” of another entity is considered as a merger of companies even if there is no change in control in the shareholders.

The jurisdictional thresholds for filing merger notifications apply only if both parties have sufficient presence in Israel (for elaboration, see 2.4 Definition of "Control"). In such cases, filing would be required if any of the following thresholds apply:

• one of the merging companies is a monopoly in any market in Israel (where "monopoly" is defined as "a person that controls more than one half of the total supply or acquisition of an asset or a service within the relevant Israeli market");
• as a consequence of the merger, the market share of the merging companies in the production of a certain asset/service and of similar assets/services, or in the provision of a certain asset/service and of similar assets/services, will exceed one half (thus creating a monopoly under the above-mentioned definition); or
• the total turnover in Israel of the merging companies in the previous financial year exceeds USD110million, and the turnover in Israel of at least two companies that are a party to the merger is not less than USD6 million each.

Both the market share and the turnover thresholds are not limited solely to the merging entity but rather also include any entity that controls it, directly or indirectly, and any entity that is controlled by both the latter and the merging entity.

Turnover Thresholds

The amended Regulation 9(2) sets the minimum sales turnover of at least two of the companies in the transaction that triggers filing in Israel. Following the change, the minimum sales turnover obliging the companies to file notice is USD6 million each for at least two parties to the transaction.

In the case of a merger with an entity that conducts business in and outside Israel, the provisions regarding the jurisdictional thresholds apply only to the entity's turnover, or market share, in Israel.

While there are no clear guidelines regarding the conversion of foreign currency, in practice it is converted according to the official rate published at the time of the transaction. 

Both the market share and turnover thresholds are not limited solely to the merging entity but also to any entity that controls it, directly or indirectly, and any entity that is controlled by the latter or the merging entity.

The sales turnover threshold seeks to identify all the economic entities involved in a merger transaction according to the volume of their activity. Therefore, Regulation 9 of the Antitrust Regulations directs that for the purpose of calculating the sales turnover of the merging company, the sales turnovers of all the entities that it controls or that are controlled by it must be combined. However, in merger transactions in which the seller is completely separated from the business operation that the seller owns, the merger creates a delineated structural connection, between the acquirer and the sold operation.

In such a case, on the assumption that all links between the selling entity and the sold operation have indeed been cut off, there is no need to deal with the sales turnover of the selling entity in its other lines of business that have no part in the structural joinder that is the subject of the merger. This is the ICA’s position only in situations in which all links between the selling entity (including any affiliated entities) and the sold operation have been removed. Moreover, the ICA’s position in this regard also applies as relevant, to the sale by a party with a monopoly position of a company or operational division, to the extent that the transaction leads to a complete de-linkage of the sold operation from the party with a monopoly position.

The Israeli Competition Law is territorial; however, it can apply to foreign-to-foreign mergers if presence in Israel exists. The ICA's position is that a foreign entity has sufficient presence in Israel if one of the following applies:

• the foreign entity has an interest of 25% or more in an Israeli entity; or
• it has a "place of business" in Israel.

According to the ICA's guidelines, a "place of business" in Israel is defined as follows: "A foreign company may be regarded as having a place of business in Israel whenever it has a substantial influence on the activity of a local representative. In this regard, the Authority will examine whether the foreign company has the ability, either through an arrangement or de facto, to determine, with respect to the Israeli representative (be it called an agent, a distributor, a representative, or otherwise), the price level, the level of inventory, the nature of display or any other aspect of the business management. The more a foreign company has powers and rights of this kind – the stronger will be the tendency to regard it as having a presence in Israel and as an entity that operates a business in Israel through a long arm..."

The mere fact that an entity's products are sold into the Israeli market does not, by itself, establish sufficient presence for it in Israel. Note that, with respect to mergers, neither the Law nor the ICA applies the "effect doctrine" for extraterritorial jurisdiction.

Foreign-to-foreign transactions are frequently reviewed by the ICA and can be approved, blocked or approved subject to remedies (see 5.8 Prohibitions and Remedies for Foreign-to-Foreign Transactions).

If the monopoly threshold is met by either one of the merging firms, filing would be required, even if there is not any overlap whatsoever. However, when notifying duty is based solely on the "monopoly alternative" and under these circumstances there is no horizontal or vertical affinity, the ICA may inform the parties that under these circumstances it will not insist on complying the obligation to file a merger notice, by virtue of the monopoly alternative, and on obtaining the approval of the Director-General.

Such a waiver from the ICA may be decided only based on a separate request from the parties to the merger that will include full disclosure of all the relevant information, and only if the ICA will conclude that the information presented indicates that, under the circumstances, there is no competitive affinity (horizontal, vertical, or other) between the monopoly and the merger.

According to the ICA-published Q&A, if the products of the parties are sold together to the same type of customers, the ICA will not allow a waiver and will insist on filing merger notifications, by virtue of the monopoly threshold.

It should be noted that the ICA does not rule out competitive affiliation easily and might find relatively small affiliations as sufficient enough to require a merger notification request.

There are some circumstances in which joint ventures may be regarded as mergers and are thus subject to the merger control regime. It is essential to draw the line between a joint venture and a merger.

The main guideline is to determine whether one party receives a foothold in the decision-making process with regard to the majority of the assets in a relevant market of the other party, which prior to the agreement acted independently. In such cases, the ICA will consider the transaction to be a corporate merger.

Note that a transaction which will not be viewed as a merger could be categorised as a restrictive arrangement. According to the ICA guidelines with regard to joint ventures, it is important to distinguish between a venture that creates a new type of activity (regarding which the tendency is to categorise it as a restrictive arrangement) and one which involves the granting of a foothold in an existing operation that is already carried out by one of the parties (regarding which the tendency is to categorise it as a corporate merger).

Separating Joint Ventures and Mergers

Drawing the line between a joint venture and a merger is essential since while a merger requires notification to ICA, a joint venture enjoys a broad block exemption. On 13 November 2018, antitrust rules (block exemption for joint ventures) (temporary order) 2006 were amended. Revision of the block exemption rule seeks to expand and apply it on restrictive arrangements which meet two cumulative conditions:

• the arrangement is not "naked restraint", ie, it is not an arrangement whose primary purpose is to reduce competition or to prevent it, and it does not include restrictions that are not necessary to fulfil its principle; and
• the compliance with a material criterion of non-significant injury in the market competition.

However, the block exemption for joint ventures does not allow self-assessment of any joint venture. Joint ventures between competitors regarding marketing will be required for an individual examination by the Commissioner given their competitive concerns.

As long as the jurisdictional thresholds are not met, the authorities have no power to investigate a transaction. The statute of limitations is irrelevant as the ICA is not allowed to investigate such transactions either way.

A merger that requires the ICA's clearance cannot be executed by any means prior to obtaining the Director-General's clearance. Such means include closing, transferring assets or shares, transferring payment or otherwise being involved in the management of the acquired entity. Execution of any of these actions, prior to obtaining the clearance, might be considered as "gun-jumping" and the enforcement will be by means of financial sanctions, even if there was no harm to competition.

If the parties implement the transaction, or any part thereof, before the ICA clearance, they are exposed to administrative and criminal enforcement.

Examples of acts that were viewed as "gun-jumping" are the execution of a loan agreement related to the merger transaction (payment of part of the debt), and the payment of the consideration in the transaction, or part of it. 

Administrative fines have been an important tool in the ICA's toolbox since 2012, and it is likely that future completions of transactions prior to receiving the Director-General's clearance would continue to be treated with such tools. The Competition Law does not separate between "gun-jumping" and "failure to notify". Hence additional examples of penalties imposed can be found in in 2.2 Failure to Notify. Penalties are made public.

An exception to the suspensive effect could be granted following a specific request to the ICA. The ICA may grant such requests in cases of financially distressed companies or public bids and must allow this exception before the parties take any action.

The ICA will not permit closing before clearance or carving out any businesses. Based on a specific request to the ICA, it could allow transfer of funds to the target prior to clearance, if there is a concern to the target’s survival absent the cash.

As mentioned in 2.1 Notification, notification is compulsory and must take place before the merger is consummated. There is no deadline for filing, except for the fact that the merger cannot be completed prior to receiving the clearance.

It is possible to file the merger to the ICA prior to reaching a binding agreement (for example, based on a memorandum of understanding). It is required, however, that the agreement will be concrete and that prior to filing, certain fundamental issues would be agreed upon, such as the amount of rights transferred in the transaction, the price, and the timeframe. In any case, it is within the ICA's discretion to decide that it will not examine transactions in which the probability of their occurrence is low.

The ICA will not examine a transaction without any written agreement. 

There are no filing fees in Israel.

The target and the acquirer are the parties to the merger, and both are responsible for filing. 

The new Regulations were adopted in March 2022 and as of 20 May 2022, merging companies will be required to submit requests to the ICA via a new form and the previous forms will no longer be accepted.

The new form is far more detailed and comprehensive than the previous one.

Merger Notification Form

The merger notification form is modular, so the information provided depends on whether the merger classification is horizontal, vertical or conglomerate and also on the market share of the parties.

In May 2022, alongside to the amendment of the Restrictive Trade Practices Regulations, the merger notification form has been replaced by a new and more comprehensive merger notification form. The scope of information that is required from the merging parties in the new merger notification form has significantly increased.

In general, the information required includes details concerning the filing entity; highlights of the merger transaction; business and areas of activity; classification of business and areas of activity; the parties' products (substitute, vertical or complementary goods); the scope of activities in the relevant markets (sales and market shares, revenues and quantities); competitors and their market shares (depends on the parties' market shares); and list of suppliers and customers, including their contact details, etc.

In addition, the merging parties are required to provide information regarding the structure of their holdings, such as the identity of the rights-holders in the person filing the merger notification (and some additional information regarding their holdings); the ultimate controlling owner of the person filing the merger notification and its holdings; and the holdings of the person filing the merger notification.

It is acceptable to attach to the notice of merger a cover letter in which the competitive picture is drawn more extensively.

Filing Documents

The filing must include the following documents:

• the binding agreement and its appendices (elaborated in 3.2 Type of Agreement Required Prior to Notification);
• audited financial statements of the last two fiscal years of the entity filing the notification (a foreign company that files a notification may attach audited financial statements of entities through which it operates in Israel, instead of filing its financial statements);
• prospectuses filed by the entity filing notification during the last five fiscal years; and
• a detailed diagram describing the holdings before and after the execution of the merger transaction.

There are no special requirements for the submission of documents (eg, certifications, notarisations or apostilles).

The merger notification form can be in English, but a translation to Hebrew is also needed. All other documents (the agreements, financial statements, and prospectuses) could be filed in English without accompanying translation.

The ICA has emphasised that the Director-General will insist on accurate and meticulous fulfilment of the merger notice. Since a missing merger notice, or a notice filled with inaccurate details, does not meet the requirements of the law, it shall not be considered a merger notice. In such a case, a submission does not start the count of days set for the assessment (see 3.8 Review Process), and it may be returned to the submitter without examination.

Yet, no penalties for incomplete notifications made in goodwill have been given. Nevertheless, as mentioned, in consequence, the ICA will not start (or may discontinue) the review process, and the timeframe for the process will not commence until the complete notification is filed.

The entity filing the notice of merger is obliged to provide full and correct information and must declare that all the information contained in the notice of merger is, indeed, accurate, complete and current; that the documents annexed to the notice of merger are correct and complete, and do not lack any material information or exhibit; and that it is known that the Director-General will use the information contained in the notice and in its exhibits in deciding whether to approve the merger that is the subject of the notice.

A party that files inaccurate or misleading information could be deemed as filing an incomplete notice and thus merging the firms without the ICA's clearance. 

There is no specific penalty concerning inaccurate or misleading information in the Restrictive Trade Practices Law, but there are prohibitions from the general law that could be relevant in such cases.

Misleading Information

This firm does not recognise a case in which the ICA has taken enforcement measures against misleading information in a notice of merger, although it is reasonable to assume that in such cases, the ICA will not "save" any efforts.

In a recent case, the ICA fined the acquirer for not disclosing its part in drafting information submitted by a third party. In the merger between two internet marketing content companies, Taboola and Outbrain, a major customer expressed its negative response to the merger at first, but later sent a letter in which he praised it. During the merger examination, it became clear to ICA that the force behind the letter was Taboola, who did so while it is negotiating to renew the contract with the same customer.

In these exceptional circumstances, the ICA initiated criminal enforcement proceedings, which were eventually closed by an agreed decree of a USD1.5 million fine.

Due to the consent decree, there are no clear guidelines for what is allowed and forbidden regarding communications with third parties.

Under the Israeli Competition Law, within 30 days of submitting notices from all parties to the ICA, the Director-General shall notify whether the merger is approved, approved subject to conditions or blocked. Failure to give such notice according to the timeframe mentioned means the merger is cleared, unless there has been an extension. In practice, however, the ICA will reach a formal decision rather than letting the timeframe end.

The Director-General may extend the time limit for two further 30-day periods (60 days in total). In addition, after consulting the Exemption and Merger Committee, the period could be extended by another 60 days (ie, 150 days in total). The Director-General shall give the parties a reasoned written notice of such extensions.

In practice, the ICA usually requests the parties' consent to extensions and refrains from extending the time period unilaterally.

The Reviewing Process

The first step of the reviewing process is a preliminary assessment by the ICA’s economic department.

Under the regime of the current Director-General, the merger examination process has become more rigid and significantly lengthened. In most cases, the current merger reviewing process takes more than 30 days, regardless of its complexity (namely, even in case of a simple merger that does not raise significant competitive concerns). In the event of a complex merger, the reviewing process might take much longer than 30 days (and might even take up to six months).

In the framework of the current reviewing process, the ICA conducts phone calls to each of the merging parties in order to better understand the transaction structure, the merging parties' activities, and the motivation for the transaction. Then, in most of the cases, the ICA conducts additional phone calls to relevant suppliers, customers and competitors, in order to understand better the relevant markets and the effect of the merger, from their point of view.

In addition, the ICA usually issues requests for information ("RFI") to the merging parties or to third parties (such as customers, suppliers and competitors) in order to obtain additional information that is required for a decision. RFIs can include requests for financial and quantitative information (eg, sales of different products), requests for additional information and explanations, and requests to provide the ICA with documents (such as meetings of the board of directors, business plans). Refusal to provide information required by Section 46(b) of the law constitutes a criminal violation punishable by a year in prison or a high rate fine.

At the end of the ICA's examination process, an economic opinion is provided to the Director-General along with a recommendation to either approve the merger, approve it conditionally, or oppose it. Then, the Director-General consults with the Exemptions and Mergers Committee, which will come to a decision to approve the merger, establish conditions for its approval or oppose it in cases where the merger creates a reasonable risk to harm the competition, which cannot be resolved by imposing appropriate conditions.

Eventually, the Director-General will notify the parties of their decision regarding the transaction and publish it in the Official Records, in two daily newspapers, and on the ICA’s website.

Before the ICA notifies the parties of blocking a merger, it conducts a hearing, in which the parties can present their arguments.

Parties can engage in formal or informal pre-notification discussions with the ICA. A formal process of pre-ruling exists and theoretically could be relevant in cases in which there is a substantial question of whether clearance would be granted. Additionally, the parties can approach the ICA in an informal procedure to discuss the merger.

Both formal and informal pre-notification discussions are not frequent and are recommended only when the specific circumstances of the transaction justify such discussions. The parties may ask the Director-General to keep confidential the fact of the submission of the pre-ruling, the contents of the application, or any portion of its details. If the parties make such a request, the Director-General shall not publish the details for which confidentiality is requested.

However, it shall not preclude the Director-General from refusing to discuss the pre-ruling if it is convinced that it is essential to examine the contents of the application with other parties in order to form the pre-ruling.

Requests for information during the review process are very common and can be quite burdensome; such requests, however, do not stop the clock or suspend the review.

It is important to note that a request for information can be sent not only to the merging parties but also to third parties, additional competitors, suppliers, customers and more.

As part of the amendment to the regulations and the new merger notification form, the accelerated procedures were cancelled (before the amendment, under certain circumstances the parties could file abbreviated merger notifications or file a notification by way of cross-reference to a previous merger filing).

There is a fast-track for the approval of mergers that clearly do not harm competition (called the "Ultra Green Merger Procedure"). The merging parties can request from the Director-General to review their merger under the fast-track; however, under the current merger regime, only in rare cases a merger will be reviewed under this fast-track.

The substantive test for reviewing a merger in Israel is quite similar to the substantive test practices worldwide. The Israeli substantive test examines whether there is a reasonable likelihood that competition in the relevant sector would be significantly harmed or the public would be harmed as a result of the merger.

If the merger does not raise such a reasonable likelihood, the Director-General will clear the merger. If the Director-General believes that there is a reasonable likelihood that as a result of the merger, competition in the relevant sector would be significantly harmed or that the public would be injured, it will subject the merger to remedies that fully restore any harm to competition. If no such remedies apply, the Director-General will block the merger.

The ICA has rich experience in determining which markets may be affected by the transaction. The starting point is the notice of merger of the parties, although if the ICA finds that there may be other relevant markets that may be affected by the merger, they will also be examined. Markets, as mentioned, could be both horizontal and vertical.

Where parties’ activities overlap, the ICA would examine their market shares (as well as additional details such as entry and expansion barriers). Although there is no fixed overlap below which competitive concerns are deemed unlikely, if the aggregate market share is low, any competitive concern will be deemed unlikely.

In general, the ICA examines market definitions (as well as other examinations) on their own, without relying on case law from other jurisdictions. However, if there are no indications for unique consumer behaviour in Israel, case law from different jurisdictions may be at least a good starting point.

The ICA routinely investigates a wide array of competitive concerns. Such concerns include unilateral effects, co-ordinated effects, foreclosure concerns and portfolio effects. In conglomerate mergers, the ICA has investigated only concerns relating to the elimination of potential competition.

In the context of economic efficiencies, in practice, there are two stages. Before the ICA considers the economic efficiencies of the merger, it starts with determining whether the merger raises competitive concerns. If the merger does, indeed, raise the ICA's concern, it will only then move to the next stage and consider efficiency factors. However, as we have reached this stage, the chances of approving the merger are not in our favour.

The discussion about economic efficiencies consideration is secondary to the competitive concerns. The ICA will examine efficiencies to decide whether they can counteract the adverse effects on competition that the merger might otherwise have. The ICA will consider efficiency claims that substantially benefit consumers (such as lower prices due to cost efficiencies).

The ICA will only consider merger-specific efficiency claims and would ignore efficiencies that could be achieved by less anti-competitive alternatives.

It should be noted that the above-mentioned ICA guidelines regard only to horizontal mergers (there are no guidelines regarding non-horizontal mergers). Nevertheless, in practice, the ICA will consider efficiency considerations in vertical mergers.

The ICA does not take into consideration non-competitive issues during the review process.

There are no special considerations for the review of joint ventures that amount to a merger. While reviewing the merger, the ICA would examine, among other concerns, possible co-ordination effects between the joint venture's parent companies. Joint ventures that do not amount to a merger enjoy a block exemption (see 2.10 Joint Ventures).

As noted, the substantive test for reviewing a merger is whether there is a reasonable likelihood that as a result of the merger as proposed, competition in the relevant sector would be significantly harmed or that the public would be injured (see 4.1 Substantive Test).

If such concerns apply, the ICA could clear the merger subject to remedies, given that such remedies would sufficiently mitigate the competitive concerns the merger raises. If no such remedies exist, the ICA will block the merger. In any case, the ICA would issue a formal decision regarding the merger.

The Law provides that the Director-General may approve a merger subject to conditions, and this process is generally negotiated with the parties. Both the initiative and the discretion to set remedies belong to the Director-General. The power to impose remedies does not subject to the parties' willingness to accept them.

From the ICA's perspective, parties' acceptance of the remedies is preferable. These remedies could be structural (such as divestiture) and/or behavioural, but there is an obvious preference for structural conditions.

The purpose of the remedy is to restore the competitive situation that prevailed in the market or would have prevailed in the market, prior the merger. The selected remedy, or combination of remedies, adopted is to provide a full and complete response to the competitive concern, such that competition level after the merger will not be less than it had been previously. This is the standard by which the ICA operates.

Where structural conditions are imposed, the ICA firmly insists on carrying them out before the merger is implemented – a "Fix It First" approach.

According to the ICA guidelines, the ICA clearly prefers structural remedies over behavioural ones. In practice, during the previous year, the majority of the mergers that have been cleared subject to remedies were subject to structural remedies.

The ICA has no authority to subject the merger to remedies for non-competitive concerns and in practice, it does not do so.

Structural remedies come mainly in the form of divestitures, under the "fix-it-first" approach. For example, in 2021 the ICA approved subject to remedies the acquisition of a commercial centre owned by Yishparo Center Ltd by Big Shopping Centers Ltd. As part of the fix-it-first approach, Big had to sell all its rights in another commercial property to a competitor that would be approved by the ICA, before it would acquire Yishpro's commercial centre.

In 2022, the ICA approved subject to remedies the Cellcom/Xphone/Clear transaction. This case involves two merger transactions as part of a debt settlement procedure. The Director-General approved the merger between Cellcom Israel Ltd and Xphone, subject to a behavioural condition that prohibits granting credit between the parties without prior written approval from the ICA. As mentioned above, although the ICA subjected the merger to a behavioural remedy in this case, the majority of the remedies are structural.

The negotiation of remedies starts after the ICA reaches its preliminary decision that the merger raises competition concerns, and the ICA is considering blocking the merger or approving it subject to remedies. When competitive concerns arise, and remedies are being negotiated, it is highly likely that the 30-day period would need to be extended.

The ICA can, and often does, offer remedies at its initiative. There is no formal procedure regarding remedies, but the common practice is as follows:

• the ICA orally informs the parties of its competitive concerns that need to be mitigated; and
• following this notification, negotiations commence between the sides.

Down the road, the ICA would present a written draft of remedies, after which a discussion will be held based on that document. According to case law, the possibility of approving the merger under conditions must be exhausted before deciding on an objection.

The merger's approval is conditional to the fulfilment of the terms by the parties to the merger, and thereby raises – as they decide to execute the merger – the obligation to comply with the conditions, ie, the ICA does not impose the remedies, but the parties have two options: to fulfil the conditions, or renounce the merger. Yet, as part of the examination of the possibility to approve a conditional merger, the ICA sees fit to discuss it with the parties in order to consider various alternatives, and the ICA even encourages the parties to propose possible solutions.

According to its guidelines, the ICA will tend to require divestiture to an extent large enough to enable long-term competition. Preferably the ICA will order the selling of independent economic entities over selling specific assets.

The ICA's clear preference is a "fix-it-first" approach in which the divestiture must be completed prior to the merger (see 5.4 Typical Remedies). According to the public statement 2/11: Guidelines Regarding Remedies for Mergers that Raise Reasonable Concerns of Significant Harm to Competition, if the divestiture is not completed until the time of the merger, the time period for the divestiture would be within few months to a year after the merger.

While this is the ICA's formal position, in practice, when there are compelling arguments as to why the "fix-it-first" approach is impractical in the circumstances of the specific case, the ICA is willing to forgo this demand.

Compliance

Compliance with the ICA's remedies is crucial; the ICA's stated policy is to seek criminal proceedings for violations of merger remedies. The violation of remedies is held as one of the hardcore violations of the law and is considered to be only one step ahead of an explicit cartel. A few years ago, the Supreme Court (the highest court in Israel) sentenced the CEO of a major retail chain store to imprisonment for violation of merger remedies (CA 5823/14 Shufersal et al v State of Israel (10.8.2015)).

In 2016, the ICA cleared, subject to remedies, a merger between two major food chain retailers, Mega Retail Ltd and Yeinot Bitan Ltd. Due to geographical concerns, the ICA found that the acquirer ought to sell stores in eight locations. The ICA's position, which is coherent with its Merger Guidelines, was that the parties must apply a "fix-it-first" approach, thus selling these eight stores prior to performing the merger.

Nevertheless, the parties approached the ICA and asked for a longer time period, allowing the acquirer 80 days to sell one of two stores in a specific location. The parties approached the ICA to reconsider its position due to a substantial change in the circumstances, but the ICA upheld its preliminary position. An appeal was filed, and the Competition Tribunal rejected the appeal, stating the clear preference of a "fix-it-first" approach to mergers.

Under Section 5 of the Regulations, when the Director-General's decision has been granted, a merger file shall be opened, and will be available to the public. The merger file contains documents relating to the merger.

The ICA's decision whether to approve or to block a merger is formally issued to the parties, and decisions are made publicly available. An approval or an approval subject to remedies is rarely, if ever, explained, while the Director-General must always reason a decision to block a merger. 

Nevertheless, parties are allowed to withdraw their filing prior to the Director-General's formal decision. In this case, no formal decision would be made, and no information regarding the merger would become public. Therefore, if the ICA intends to block a merger, in many cases the parties would decide to withdraw their filing prior to a formal decision. However, if the parties intend to appeal the ICA's decision, they would insist that the ICA issue a reasoned decision.

In general, the ICA does not require remedies frequently; according to the ICA's yearly statement in 2020, only 1.67% % of all merger notifications filed were cleared subject to remedies. It should be noted that the data above may be misleading since, in cases in which the parties receive negative signalling from the ICA, they tend to withdraw their filing. Prohibitions and remedies for foreign-to-foreign transactions are even fewer than transactions with local linkage.

In many cases, when the effect of the merger on the Israeli economy is minor (eg, when the parties activities in Israel are minor), the ICA would align with other competition authorities' decisions. In order to review the merger, the ICA might request from the parties a waiver of confidentiality to receive and share information regarding the transaction with the other relevant competition authorities.

An example of a foreign-to-foreign transaction that was approved subject to remedies is the acquisition of Cemex, a cement plant located in Spain, by Çimsa, located in Turkey. The ICA determined that the merger is relevant to the Israeli economy because Çimsa is a significant supplier of white cement in Israel, and Cemex also supplies white cement in Israel through its subsidiary Readymix.

The Director-General decided to approve the merger subject to remedies that would remove the activities in Israel from the acquisition agreement. The remedies require Cemex to contractually associate with a new white cement supplier, which is not affiliated with the merging companies and which has the resources and skills required to import a similar or greater amount of white cement than Cemex imported into Israel prior to the merger. The merger will not come into effect until Cemex sells an initial quantity of white cement purchased from the new supplier (“fix-it-first”).

Another recent example of a foreign-to-foreign merger relates to the merger between Cargotec Corporation and Konecranes Plc. The merger has been approved by the ICA subject to remedies, mainly the fulfilment of the commitments set forth by the European Commission in Case M.10078.

In 2018, the Block Exemption for Restraints Ancillary to a merger was updated. Prior to the amendment, only restraints that met certain technical conditions were exempted. Parties that wished to agree upon restraints that did not meet these technical requirements had to file separate requests for exemption to the ICA, even if the arrangement did not raise a concern of harm to competition.

The amendment to the block exemption transfers the examination to a material examination of the predicted influence on competition and allows the parties to self-assess whether the arrangement is likely to harm competition. Thus, in cases in which self-assessment leads to the conclusion that the ancillary restraints are not expected to harm competition, and provided that these are not "naked restraints", the parties can perform the agreements without filing additional requests to the ICA. An example would be "non-compete" clauses, which in the past had to meet technical conditions to be exempt. Today, non-competition clauses ancillary to a merger will be self-assessed.

These amendments are currently valid up until November 2023.

Under the new Director-General's regime, it has become common that during the review process, the ICA approaches clients, suppliers and competitors of the merging parties, requests information and ask for their view regarding the merger. The ICA is experienced and well-aware of the commercial interests of such third parties, and any complaints regarding the merger that have no real merit do not usually play a significant role in the Director-General's final decision.

The ICA will hear third parties that, on their initiative, wish to object to the merger. If the ICA believes that a meeting is required, such third parties will be able to meet with the ICA to raise their objections.

Under the new Director-General's regime, it is highly likely that the ICA would contact third parties, usually by phone call first. It also may deliver a request for information (the notice of merger includes questions regarding competitors and, if necessary, details of suppliers and consumers). In contrast to other jurisdictions, the parties could not offer possible remedies.

The remedies, if needed, will be set according to the ICA's discretion only. However, the ICA may examine the appropriateness of the remedies it is considering with third parties.

See 3.6 Penalties/Consequences of Incomplete Notification on the ambiguity regarding communications between the merging parties and third parties.

The fact that merger notifications were filed does not make the merger public. The information regarding the transaction is not public until the ICA decides whether to approve or block the merger. After the ICA's decision is made, the ICA's formal decision and some parts of the merger notification become public and are published on the ICA's website.

The parts of the merger notification form that become public include general information concerning the person filing the notice of merger; the reason for filing the merger notification; the purchased activities; and the highlights of the merger transaction, its motivation and consideration. The other parts of the merger notification will remain confidential, unless the ICA or a court decides to disclose them. Such details include, for example:

• the holdings structure of the parties and their holders;
• sales turnovers;
• the parties' competitive linkage;
• the merging parties' shares of activities;
• general information about the competition and competitors in the market;
• arrangements with related parties;
• names of customers and suppliers;
• barriers in the markets for the parties' products; and
• information relevant to the analysis of the impact of the merger on competition.

Although in the period of post-filing and pre-ICA's decision, the filing is not public (until the ICA's decision is published); therefore, the information regarding the filing remains confidential and the filing could be made public as a result of the ICA's RFI's and the ICA's conversations with third parties (such as customers, suppliers and competitors).

Freedom of Information

Additionally, the Freedom of Information Law, 5758-1998, allows disclosure of information relating to governmental bodies, including the ICA, after submitting a formal request following the procedure set out under the Law. The Freedom of Information Law provides a list of circumstances in which the relevant governmental authority has discretion as to whether to refrain from transferring certain kinds of information, such as the protection of business secrets.

The ICA must receive the permission of the entity that provided the information prior to revealing it to third parties. If the ICA is convinced that the information does, indeed, include business secrets, it will not transfer such information (or transferred subject to blackening). The ICA's decision is subject to the courts' review.

Third-Party Appeal

In case of an appeal made by a third party concerning the Director-General's decision to clear a merger, the appellant is entitled to review the information in the ICA's files. Similarly, the procedure under the Freedom of Information Law, protection of trade secrets, is a possible valid ground for restricting the review rights of the appellant.

In practice, procedural arrangements that balance the appellant review rights and the information provider interest are agreed upon.

General policy discussions are mostly conducted within the framework of the Organisation for Economic Co-operation and Development's Competition Committee (of which the ICA is a member).

It is unusual for the ICA to approach other competition authorities concerning specific cases. Nevertheless, there are cases in which the ICA would ask for assistance regarding another competition authority's policy on certain kinds of transactions. Recently, the ICA requested information on the OFT's and the Swedish competition authority's general policy concerning network-sharing agreements between cellular providers.

The ICA is not required to supply information regarding a specific case to other competition authorities. If the ICA were to consider supplying such information, it is likely that it will first receive the information provider's position.

The parties to the merger may appeal the ICA's decision to block the merger or to approve it subject to remedies to the Competition Tribunal. The Tribunal, once hearing the appeal, applies an "error in the decision" standard of review and can reaffirm the Director-General's decision, revoke it, or amend it.

The timeline requires to file the appeal within 30 days from the Director-General's decision. However, it is possible to extend the period by the parties' consent, and this is done as a matter of routine. The Tribunal decision is usually rendered within a year or so from the appeal. 

In practice, there are very few successes in appeals against the Director-General's decisions regarding mergers. In recent years, the few times that an appeal was accepted, the Supreme Court (the highest instance in Israel) revoked the appeal decision, thus reaffirming the ICA's original view.

Any person, including third parties, who might be harmed by the merger, as well as industry associations and consumers' organisations, may appeal to the Tribunal against the Director-General's decision to approve or conditionally approve a merger. Case law has held that the harm to the plaintiff must be a competitive injury of the type that the Law seeks to prevent, ie, an antitrust injury.

Even though third parties have appealed a clearance decision made by the ICA to the Tribunal in the past, this has never been done successfully.

In 2022, The Restrictive Trade Practices Regulations have been amended, as well as regulation 9(2) regarding the turnover threshold.

The two main changes in the Regulations are: (1) raising the turnover threshold for filing in Israel – the minimum annual turnover of each of the two merging companies has to exceed USD6 million (it should be noted, that even if the parties do not meet the minimum turnover threshold, other thresholds might obligate filing a merger notification, see 2.5 Jurisdictional Thresholds); and (2) the Regulations adopted a new merger notification form, which is more detailed and comprehensive. Accordingly, the scope of information required is more comprehensive.

Alongside the regulatory changes, there were personnel changes in the ICA. The merger regime under the current ICA's officials is stricter, and this has an impact on the merger reviewing process, in terms of its length and the requirements from the parties.

In 2021, the Director-General announced that she is considering imposing financial sanctions of approximately USD1.8 million on Facebook Israel and its parent company, Facebook Inc, for "failure to notify". See 2.2 Failure to Notify.

Imposing Fines

The majority of the fines in relation to merger transactions are related to "failure to notify". Except for the Facebook case mentioned above, in 2022 the ICA published two consent decrees, both of them as a result of "failure to notify".

See 2.2 Failure to Notify.

Remedies

During 2019, the ICA approved a merger between Mercantile Bank, Discount Bank and Dexia Israel, subject to remedies that require the merging companies to sell the credit portfolio in full and irrevocably to the purchaser prior to the merger. The purchaser must not be one of the merging companies and/or related to them and/or an officer thereof.

Also during 2019, the ICA approved a merger between Reshet Media Ltd and the 10 New Channel Ltd, subject to conditions that will obligate the merging companies not to perform any act that constitutes a full or partial merger before sale and transfer in a final and irrevocable manner of all its holdings and rights in the new company to an independent body whose identity will be approved by the Director-General in advance.

Recent Record

The ICA’s recent record regarding the outcome of the review process is as follows:

• 2018 – 97.9% of mergers cleared, 2.1% of mergers blocked, 0.5% of mergers cleared subject to remedies.
• 2019 – 98.53 of mergers cleared, 0% of mergers blocked, 1.47% of mergers cleared subject to remedies.
• 2020 – 98.33% of mergers cleared, 0% of mergers blocked, 1.67% of mergers cleared subject to remedies.

Conglomerate Mergers

The ICA is reviewing conglomerate mergers more closely than before, particularly when big companies are involved in the merger. The ICA has recently published a call for public comments with respect to the manner of examining conglomerate mergers and the competitive considerations to be taken into account when examining such mergers. Therefore, an updated policy with regard to the reviewing process of conglomerate mergers may be published.

"Killer Acquisitions" Phenomenon

The ICA recently participated in the OECD’s discussion on the acquisition of start-ups by large technology companies. Because start-ups are sometimes acquired in the early stages of development or activity, they lack indications to guide competition authorities concerning their competitive potential. Therefore, competition authorities are concerned that large technology companies are acquiring start-ups to prevent, eliminate or remove from the market products or technological developments that may compete with them in the future – a phenomenon known as "killer acquisitions".

Following this discussion, the ICA conducted an examination of acquisitions of Israeli start-ups between the years 2014-19 by the five major high-tech companies – Google, Apple, Facebook, Amazon and Microsoft. The results, which were submitted to the OECD, found no indication for the removal of the purchased product from the market. However, the ICA noted that the test itself does not necessarily rule out the need to increase the control of acquisitions of start-ups by large technology companies and the need to re-examine the traditional way of examining mergers.

In this context, it should be noted that ICA's interest in the "killer acquisitions" phenomenon is inseparable from the enforcement proceedings it has recently initiated against Facebook (see 2.2 Failure to Notify).

Recent Decisions

Strauss/Weiler – merger prohibition

The ICA blocked a merger between the companies Strauss and Weiler. Strauss is a public company that manufactures, sells and distributes a wide range of food products. Weiler is engaged in the production of fresh tofu products and plant beverages products. Struss is a distributer of Weiler's tofu products. Strauss and Weiler entered into an agreement according to which Strauss would purchase the control of Weiler. The ICA blocked the merger due to the fact the Weiler is the largest tofu manufacturer, and the likelihood of the entry of competitors is low. Therefore, the merger raises competitive concerns of rising prices and reducing the range of options offered to consumers.

Cellcom/Xphone – clearance subject to structural remedies

See 5.4 Typical Remedies.

Yishparo Center Ltd/Big Shopping Centres – clearance subject to behavioural remedies

See 5.4 Typical Remedies.