June, 2020 – Israel – Granot-Speiser
On June 8th, 2020, the Office of the Attorney General of the State of Israel (the “Attorney General“) submitted its position on the existence of cause of action when monopolies charge high unfair prices for goods, and its application in Israel. The issue arose in a motion to certify a class-action against the Israeli franchisor of Coca Cola (“CCI”).
The class-action against CCI (a declared monopoly in Coca Cola drinks) is part of a trend of applications for certification of class-actions filed against monopolies in Israel over the past few years, claiming their prices are too high. The class-action against CCI was certified in January 2019 by the District Court, who stated that prima facie evidence was presented indicating that CCI had abused its monopolistic position by charging consumers unfairly high prices for 1.5 liter bottles of cola drinks. CCI filed a motion for leave to appeal to the Supreme Court, and the Attorney General’s position was requested in this regard.
In its position, the Attorney General opined that it would be appropriate to recognize the charging of excessive pricing by a monopoly as cause of action under Israeli law.
This determination is based on (1) the interpretation of Section 29A(b)(1) of the Economic Competition Law, which provides for the prohibition of charging an unfair price by a monopoly; (2) the purpose of this Section; (3) the interpretation of European law, on the basis of which this section was enacted in Israel; and (4) the position of the Competition Authority, subject to the necessary adjustments to the field of private enforcement (as opposed to enforcement by the Competition Authority).
However, the Attorney General noted that this cause of action should be applied with caution and restraint. In particular, the Attorney General noted that it should only be applied when there are clear indications that the price charged by the monopoly is both significantly and unfairly high.
The Attorney General claimed that the appropriate legal test in this regard is a cumulative two-stage test, similar to the one prescribed by European law.
In summary, the Attorney General’s position is that (i) Excessive pricing cause of action must be interpreted in a limited manner; (ii) caution should be taken with respect to its enforcement; and (iii) it should only be used in cases where the benefit clearly outweighs the costs and damages associated with its application, in particular in private enforcement. The Supreme Court’s ruling on the matter should shed light on whether or not the Attorney General’s position is the harbinger of a shift in the trend of class actions filled against monopolies on grounds of excessive pricing.