In more detail
Anti-competitive practices
a. Horizontal agreements:
The Law takes a clear stance against anti-competitive agreements between competitors. These include agreements to fix prices, divide markets and limit production, as well as collective boycotts and bid rigging. It remains to be seen how the implementing regulations will interpret these provisions and how they will be implemented in practice. Decisions of associations of undertakings are also covered by the new law.
b. Vertical agreements:
Vertical arrangements, such as distribution agreements, are also covered by the Law. The Law adds that practices that restrict resale pricing or limit supply to manipulate market conditions are prohibited.
Prohibited vertical practices include the following:
- Imposing minimum resale prices.
- Reducing supply to increase prices.
- Restricting access to distribution channels or market outlets.
Abuse of dominance
The Law introduces a nuanced approach to market dominance. A company may be considered dominant if it can control prices or volume of goods in the relevant market. While a market share above 35% is a strong indicator, dominance can also be established even below this threshold if the company’s influence could cause harm or distort competition, or if other factors are deemed sufficient to justify this classification.
Examples of prohibited practices include the following:
- Unjustified refusal to sell or obstructing sales.
- Predatory pricing.
- Excessive pricing, or creating artificial shortages or surpluses to manipulate prices.
- Tying unrelated products together or imposing time-based purchase obligations.
- Discriminating between buyers on non-objective grounds.
Agreements whose benefits outweigh anti-competitive effects are exempt, subject to prior written approval from the Competition Department (which is part of the Ministry of National Economy).
De minimis rule
The Law provides for a de minimis safe harbor, whereby agreements with minor market impact (i.e., where the combined market share does not exceed 10%) that do not involve price fixing or market allocation are exempt from the prohibition on anti-competitive agreements.
Merger control
The Law introduces a mandatory and suspensory merger control regime. In this regard, a structured process is provided for transactions that qualify as economic concentrations. Businesses planning mergers, acquisitions or joint ventures must obtain prior written approval from the Competition Department before proceeding.
Key requirements:
- Submit an application within 60 days of signing the agreement.
- Ensure that the new entity has a minimum capital of USD 150,000.
- Provide supporting documents, including founding contracts, audited financial statements for the last three years, shareholder details and any additional information requested.
Decision-making process:
- The Competition Administration will issue a decision within 45 days, with the possibility of a 45-day extension if further information is needed.
- Approval may be granted, granted with conditions, or refused.
- No new entity resulting from an economic concentration can be licensed until approval is secured.
- Approval may be revoked if based on false information or if conditions are breached.
Conclusion
This Law represents a significant step toward strengthening market integrity and transparency in Palestinian Territories. The Competition Department is expected to go through a period of capacity building, but we expect it to also begin implementing the Law. Market players active in Palestinian Territories are highly advised to closely monitor the activities of the new Competition Department and assess how enforcement will unfold in practice.
Businesses should review their existing business models, distribution contracts and approaches in light of the Law to ensure full compliance.
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