Competitors Authority director-general Adv. Michal Cohen has imposed monetary penalties on meals firm Strauss Group (TASE: STRS) and tofu merchandise firm Wyler Farm and on officers of the 2 corporations due to an illegal merger between them. Strauss Group will likely be obliged to pay NIS 111 million, an unprecedented penalty for breaches of this sort, and Wyler Farm will likely be obliged to pay NIS 1 million.
As well as, three senior Strauss Group managers have been fined NIS 600,000 every: former Strauss Group CEO Giora Bardea; former Strauss Israel CEO Eyal Dror; and former Strauss Israel CFO Gur Zamir. Fines have additionally been imposed on three firm officers of Wyler Farm, of between NIS 119,000 and NIS 154,000.
The Competitors Authority discovered that Strauss Group and Wyler Farm carried out a merger with out reporting it to the Competitors Authority director-general and with out her consent. Underneath the Financial Competitors Legislation, corporations wishing to merge are required to use to the director-general of the Competitors Authority and to acquire her consent earlier than continuing with the merger. The legislation forbids finishing up a merger, full or partial, earlier than the director-general’s resolution.
The affair started in July 2021, when Strauss Group introduced its intention of merging with Wyler Farm. For Strauss, milk options are a strategic phase, and it’s working to increase its exercise in it significantly, in cooperation with worldwide meals firm Danone, below the Alpro model.
The Competitors Authority didn’t approve the deal between Strauss Group and Wyler Farm, due to the concern of hurt to competitors, and in the midst of its examination it claimed that Strauss group had begun the merger course of earlier than receiving approval from the director-general.
Within the merger negotiations, Strauss Group insisted that, after the merger, Wyler Farm ought to focus solely on tofu merchandise. Wyler Farm expressed a want to proceed to deal in milk options after the merger, however Strauss demanded that Wyler Farm shouldn’t be lively in that subject, because it supposed to deal in it itself exterior the framework of the merged firm.
In the long run, the businesses agreed that, after the merger, Wyler Farm wouldn’t deal in that subject.
After the merger settlement was signed, Wyler Farm acted in accordance with that understanding, and sought to divert financing that it had obtained from the Israel Innovation Authority for growing manufacturing processes for plant-based drinks and cheeses to growth of tofu merchandise.
In February 2022, the director-general of the Coopetition Auhtority expressed opposition to the merger, amongst different issues due to the concern of hurt to competitors in recent plant-based drinks (soy milk, almond milk, and so forth), through which Tnuva is the dominant participant, and which Strauss Group and Wyler Frams sought to interrupt into.
Strauss Group and Wyler Farm didn’t attraction in opposition to the choice, and the merger was cancelled. In the midst of its examination, nevertheless, the Competitors Authority discovered that, even earlier than the businesses utilized for approval of the merger, which ultimately was not forthcoming, they’d agreed that Wyler Farm wouldn’t deal in milk options with out prior approval in writing from Strauss Group. The Competitors Authority director-general discovered that Strauss Group and Wyler Farm had thus breached the Financial Competitors Legislation.
Concentrated market
The plant-based drinks market is a concentrated market dominated by Tnuva, and it was discovered that Strauss and Wyler Farm had been the one corporations engaged on coming into that market within the foreseeable future. Each corporations thought-about a fast entry into the market to be vital. The merger agreements instantly halted all of Wyler Farm’s exercise within the subject, whereas Strauss Group continued to make progress. The breach not solely held again Wyler Farm’s introduction as a competitor within the recent plant-based drinks market, but in addition diminished its incentive and skill to compete in that market sooner or later.
The NIS 111 million tremendous on Strauss Group was the best offered for within the legislation on the time that the Competitors Authority director-general introduced her intention of imposing penalties.
The Competitors Authority mentioned that the director-general had taken into consideration the particular circumstances through which Wyler Farm discovered itself due to the conflict, and had decreased the penalties on the corporate and its officers.
Most penalty
Fines of this order have by no means been imposed earlier than for related infringements. The best tremendous thus far was of NIS 39 million, imposed in 2019 on the Central Bottling Firm (Coca Cola Israel) for abuses of its monopoly standing and breach of the situations for a merger.
The dimensions of penalties is a perform of the gross sales turnover of the businesses involved, however the legislation set a ceiling (since revised) of NIS 100 million. By imposing the large tremendous on Strauss Group and on firm officers, the Competitors Authority has made clear the severity of the infringement and its influence on competitors.
Strauss Group: We’ll attraction
As quickly because the Competitors Authority introduced its intention of imposing penalties, Strauss Group denied the declare that it had tried to forestall Wyler Farm from coming into the milk options market, and mentioned that the dialogue between the businesses had been about manufacturing and growth of tofu merchandise, and never about milk options. Strauss Group additionally says that the dimensions of the penalty is disproportionate to the worth of the deal, which was NIS 20 million.
Competitors Authority director-general Cohen mentioned, “The recent plant-based drinks market is a concentrated market that’s rising and is very vital to shoppers. We discovered that the breach had the potential of appreciable hurt to competitors, in that it was liable to forestall the entry of a competing participant that would have had an influence on the vary of merchandise on this space and their costs. The Competitors Authority will proceed with uncompromising enforcement within the case of any try to hurt competitors and the buyer.”
Strauss mentioned in an announcement: “This can be a unusual and populistic resolution, each in its reasoning and within the disproportionate dimension of the tremendous, and the corporate strongly rejects the Competitors Authority’s resolution. The corporate and the senior managers talked about within the resolution behaved as anticipated from officers of a number one public firm and in accordance with correct company governance and on authorized recommendation. The corporate is satisfied that its conduct was flawless. The corporate will file an attraction, and we’ve got little doubt that the corporate’s place will likely be accepted within the courts.”
Printed by Globes, Israel enterprise information – en.globes.co.il – on October 30, 2024.
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