Towards the end of 2024, the Israel Competition Authority (ICA) announced that one of the main enforcement priorities for the coming year would focus on actions to hinder parallel imports. The amendment to the Competition Law, which introduced the prohibition against harming parallel imports, is one component of the “Import Reform” that has been in the process of implementation in recent years.
Recently, the ICA notified the direct importer of KYMCO scooters in Israel of its intention to impose a penalty of approximately USD 4 million, subject to a hearing. According to the ICA, in 2024, an Israeli importer engaged with a supplier in Poland for the parallel import of hundreds of KYMCO scooters to be marketed in Israel. Shortly after the parallel import commenced, a representative of the direct importer visited the showroom of the parallel importer, photographed the chassis numbers of KYMCO scooters, and forwarded the photos to KYMCO. That same day, the scooter supplier informed the parallel importer that it was halting the supply of scooters due to instructions received from the manufacturer, along with the attached photos.
One of the actions that, under the Law, may be considered as potentially
harming parallel imports is when a direct importer reports to the manufacturer about goods sourced from parallel imports, in a way that enables tracking the goods’ supply chain. According to ICA’s findings, cutting off the supply of scooters to the parallel importer prevented the development of this competitive avenue by the latter. The ICA further noted that the conduct of the direct importer allegedly caused significant harm to competition in the market, which is highly concentrated, or at least, posed the potential for such harm. Competition could have resulted in price reduction, improved service, potentially increased product variety, and encourage entry of addional importers. The ICA also deemed the action to primarily aim at preventing or reducing competition from parallel imports. Consequently, ICA argued that the direct importer’s action fulfilled three alternative criteria, any one of which alone could constitute a breach.
This is the first enforcement action against a direct importer since the latest amendment concerning parallel imports came into effect. Given the ICA’s declared policy, it is likely this will not be the last case in the near future. The prohibitions in this context are broadly defined in the Law, making it essential that enforcement actions are implemented wisely and in a way that allows official importers as well to safeguard their legitimate interests. In any case, compliance with the new requirements may necessitate changes in business practices, including in the drafting of agreements with foreign manufacturers as well as local distributors. Therefore, it is crucial for official importers to increase awareness on the subject and prepare accordingly.
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