Leniency Regimes

Israel

Goldfarb, Levy, Eran, Meiri & Co Ido Zemach and Ravit Arbel*

BACKGROUND

1. What is the relevant legislation containing the leniency policy and what is the enforcing body?

In order to promote one of its main goals, detection of cartels and indictment of their members, the Israel Antitrust Authority (the ‘IAA’) launched a leniency programme (the ‘Leniency Programme’) on 18 June 2005. The Leniency Programme, which was adopted within the context of the Israeli Restrictive Trade Practices Law 1988 (the ‘Antitrust Law’), encourages the disclosure of information by persons engaged in unlawful cartel activities by granting them full immunity from criminal prosecution. The immunity from prosecution is granted by the IAA, subject to confirmation from the Commissioner of the IAA and the Jerusalem District Attorney (the ‘District Attorney’) that all the conditions for immunity under the Leniency Programme have been met.

2. What are the basic tenets of a leniency/immunity programme?

The Leniency Programme sets forth the terms and conditions pursuant to which a person, including a corporation, a director or an employee of a corporation, will be eligible for full immunity from criminal prosecution for participating in cartel conduct, if he or she is the first to approach the IAA and provides them with all information known to him or her on the matter. The key components of the Leniency Programme are as follows:

The immunity granted is only against criminal prosecution for cartel-type ‘restrictive arrangements,’ and such term is defined in Section 2 of the Antitrust Law. These restrictive arrangements include arrangements between competitors to fix prices, set quotas or divide the market. Such collusion can be either directly between the competitors themselves or via a third party, such as a supplier who supplies his products to the competitors.
The main goal of the Leniency Programme is to encourage self-reporting of cartel-type conduct prior to the IAA’s initiation of its own investigation. Immunity is therefore limited to the applicant who approaches the IAA before an overt investigation has begun. In addition, immunity is only granted to the first applicant, from among the cartel members, who comes forward to the IAA.
Immunity will be granted only if the applicant provides the IAA with all the information known to him and all substantial information and evidence that is within his reach, relating to the cartel. Immunity is also conditioned upon providing full and continuing cooperation with the IAA.
Immunity may be granted to a corporation as well as to its directors and employees, when the application to the IAA is as a result of a clear and binding decision taken by the corporation to come forward to the IAA and provide full and complete information, as opposed to an application of an isolated director or employee of the corporation. Directors or employees who do not fully cooperate with the IAA will not be granted immunity. The degree of cooperation of a corporation will be measured by the position, significance and the part in the cartel of the cooperating officers and employees of the corporation.

When there is no such application from a corporation to the IAA, a director or an employee of the corporation may come forward to the IAA and provide full and complete information without the consent of the corporation and receive personal immunity.
Immunity will only be granted to a person who has terminated participation in the cartel. The manner in which the applicant should terminate its participation should be coordinated with the IAA.
The IAA’s policy is not to grant immunity if the applicant is the clear leader in the cartel, has been convicted of a cartel offence, or received immunity according to this programme in the past.

*The authors thank Beverley Zabow who assisted in the preparation of this chapter

3. How many cartels have been unveiled and punished since the adoption of the leniency policy?

Since the Leniency Programme was introduced in 2005, the IAA has only commenced a few criminal proceedings. However, there is no publicly available information on whether any of these criminal proceedings are as a result of application under the Leniency Programme.

4. What is needed to be a successful leniency applicant? Is documentary evidence required or is testimonial evidence sufficient?

As described above, immunity will be granted only if the applicant provides the IAA with all information within his reach, which includes, but is not limited to, the identity of the cartel’s members and documents relating to the cartel. However, testimonial evidence will be sufficient if documentary evidence is not within the applicant’s reach.

TIMING

5. What are the benefits of being ‘first in’ to cooperate?

According to the Leniency Programme, only the first one to come forward is eligible for immunity.

6. What are the consequences of being ‘second’? Is there an ‘immunity plus’ or ‘amnesty plus’ option?

The Leniency Programme is available only to the first in to cooperate. However, a corporation, its directors and employees and any other applicant may come forward to the IAA, during or in connection with an investigation relating to it and provide the IAA with full details of another second cartel, that is unrelated to the cartel that is being investigated, of which they are part. In such a case, the provider of the information will receive immunity for Restrictive Arrangement offenses covered by the Leniency Programme regarding the other cartel, whose full details he has provided. In addition, the IAA will consider the provision of information as described above as a mitigating circumstance in connection with the pending investigation against the same applicant relating to the first cartel.

7. Are subsequent firms given any beneficial treatment if they make a useful contribution? How are ‘useful contributions’ defined?

The Leniency Programme only grants immunity to the first applicant

SCOPE/FULL LENIENCY

8. Is it possible to receive full leniency? And, if so, what are the conditions required to receive full leniency?

Yes, as described in our answer to the second question, the Leniency Programme only offers full leniency.

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9. How many companies have received full immunity from fines to date?

The Leniency Programme was introduced less than two years ago. To date, all applications, if any, are still confidential.

PROCEDURE/CONFIDENTIALITY

10. What are the practical steps required to apply for leniency?

Application of a corporation or an individual is made to the Director of the Investigation Department of the IAA. The applicant is then asked to provide details and information concerning the cartel, to a degree adequate to allow the IAA to consider its qualification for the Leniency Programme. Receiving immunity from the IAA is subject to the approvals of the General Director of the IAA and the District Attorney that all the conditions for receiving immunity have been met. After the IAA verifies that all the conditions for receiving immunity have been met, the Director of the Investigation Department signs a written agreement with the applicant, which, once approved by the General Director of the IAA and the District Attorney, indicates the formal grant of immunity.

11. Is there an optimal time to approach the regulatory authority?

According to the Leniency Programme, the only pertinent timing condition is that the applicant applies before an overt investigation has begun.

12. What guarantees of leniency exist if a party cooperates?

As noted above, after the IAA verifies that all the conditions for receiving immunity under the Leniency Programme have been met, the Director of the Investigation Department will sign a written agreement with the applicant, which will receive the approval of the General Director of the IAA and the District Attorney.

However, if the applicant materially breaches the immunity agreement signed with the IAA, or provides false or misleading information, the IAA will be entitled, after receiving the consents of the General Director of the IAA and of the District Attorney, to revoke the applicant’s immunity. An appeal cannot be made against a decision to revoke leniency.

13. Is confidentiality afforded to the leniency applicant and other cooperating parties? If so, to what extent?

The IAA is not required to keep the identity of the applicant confidential.

CONSEQUENCES

14. What effects does leniency granted to a corporate defendant have on the defendant’s employees?

In order for the corporate defendant’s employees to benefit from immunity, the application to the IAA must be as a result of a clear and binding decision taken by the corporation to come forward to the IAA and provide full and complete information. Notwithstanding the foregoing, directors or employees who do not fully cooperate with the IAA will not be granted immunity.

15. Does leniency bar further criminal or private enforcement?

The immunity granted under the Leniency Programme only covers the criminal prosecution of cartel conduct and offences of destroying evidence, obstruction of legal proceedings, subornation of perjury in an investigation or in testimony and witness harassment as provided in the Israel Penal Law 1977, which are carried out in connection with a Restrictive Arrangement offence covered by the Leniency Programme. It does not bar further criminal and private enforcement actions associated with such conduct.

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REFORM/LATEST DEVELOPMENTS

16. Is there a reform underway to revisit the leniency policy? What are the latest developments?

The Leniency Programme was introduced less than two years ago and the policy is still being examined. We are not aware of any reform or reviews expected in the near future.

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