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30/07/18
 

An end to exclusivity arrangements between "Shufersal" and shopping centers and commercial centers

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Date of Publication:
30/07/2018

July 30, 2018

Press release

An end to exclusivity arrangements between "Shufersal" and shopping centers and commercial centers

In addition, Shufersal will pay approx. 9 million NIS for violations of the "food law"

In the context of an agreement on an agreed order with Shufersal, Shufersal will cancel all the exclusivity arrangements in real estate the company is a party to. In addition, Shufersal will pay an administrative fine of 8.9 million NIS for violations of the Law for Encouragement of Competitiveness in the Food Sector

Today, (30.7.2018) the Director-General of the Antitrust Authority reached agreement on an agreed order with "Shufersal" to cancel all exclusivity arrangements in real estate that Shufersal is a party to. This action is expected to ease the entry of competitors in the food market (including bakeries, fruit and vegetable stores, and delicatessens) to shopping malls and commercial centers. Shufersal will further pay an administrative fine of about 9 million shekel for violating the "Food Law".

As part of the agreed order, Shufersal committed to cancelling about 185 exclusivity arrangements the company had entered into in rented real estate where branches of the chain are location; and to notifying other property owners in property owners the firm owns that Shufersal will not stand on exclusivity at these properties and will take no steps to implement the right to exclusivity. Shufersal will be allowed to be a party to future exclusivity arrangements for only 25 new branches and for no more than 3 years. After this period, Shufersal will not be allowed to enter into exclusivity arrangements at all.

At the same time, Shufersal will pay an agreed administrative fine of approx. 9 million NIS, for violations of the Food Law. According to the Authority's inquiries, Shufersal extended 18 exclusivity arrangements it was party to, in violation of the Food Law, which bars entering into exclusivity arrangements in real estate, or extending such existing arrangements, in areas in which a retailer has a significant presence of more than 30% of the stores in the area.

The exclusivity arrangements dealt with in the agreed order are rental agreements that bar the owner of a shopping mall or commercial center to rent retail space to a competitor of the renter. Thus, the renter ensures a limitation of competition in his competitive area in a manner which may harm competition and consumers.

As remembered, about a year ago the Director-General of the Antitrust Authority reached agreement on an agreed order with Super-Pharm, in which Super-Pharm was obliged to cancel all the exclusivity arrangements it was a party to, excepting a number of exceptional branches. Before this agreement, in 2005 the Antitrust Authority determined that an exclusivity arrangement in real estate between Discount Bank and the Harel Shopping Center in Mevaseret-Zion was an illegal limiting arrangement. While real estate exclusivity arrangements have declined since then,  Shufersal abstained from cancelling the exclusivity arrangements it was a party to on its own, and therefore the Director-General decided to bring the exclusivity arrangements to an end as detailed above, and to impose an agreed administrative fine on Shufersal of 9 million NIS for violations of the Food Law.