Supreme Court Denies Appeal and Doubles Fines on Insurance Companies Directors
The Israeli Supreme Court recently concluded the famous insurance companies cartel case, which began in 1992, in which a group of insurance companies were found to have coordinated insurance policies premiums.
The insurance companies’ cartel was investigated by the former antitrust commissioner Dr Yoram Turbovich, after publication in the Israeli press regarding cartelistic behavior in the market. Following the investigation, indictments were pressed in 1997 against eight insurance companies and 15 of their directors. Six insurance companies and 12 of their directors admitted culpability as part of a plea arrangement, and the district court in Jerusalem imposed unprecedentedly high fines (at that time) and the directors were either suspended or retired from the market. The other two insurance companies and three of their directors decided to fight the case in court and were convicted in 2002 by the district court in Jerusalem for being parties to a horizontal restrictive agreement (cartel) in a few segments of the insurance market—mainly in motor vehicle insurance, and business and residential insurance.
The criminal proceedings held in front of the district court in Jerusalem was unprecedented in terms of its complexity, its length and for the extent of the hearings, testimonies, evidence, protocols, summations and especially for the depth and length of the convicting verdict (more than 900 pages); the honourable judge in the district court in Jerusalem called it “a dinosaur case”. The huge case was a result of the basis of the indictments, their complexity and their novelty. Apart from the bankers case held in the 80s, it was the first time a whole market business activity had been examined from the perspective of the restrictive trade practices law in the framework of a criminal proceeding, in which the parties proceeded in a strictly adversarial manner from beginning to end.
The Supreme Court, in a long (over 160 pages) and deeply reasoned verdict, decided that although there were some faults in the conduct of the authorities, there was no severe injustice that would justify an annulment of the indictments or an acquittal of the accused. The verdict thoroughly examined the essence of a restrictive agreement and its four components, together with the required mens rea of the criminal offence in this matter. The verdict presented the opinion of the Supreme Court’s judges that antitrust offences are severe, especially in this particular case, which constitutes a hard-core cartel case. The verdict also dealt with the defence’s argument that the enforcement of the restrictive trade practices law was (at the time of the offences) less strict and fastidious. The Supreme Court denied these arguments and accepted the states counter-arguments. The defence’s arguments regarding defects in the investigation proceedings and the evidential damage that was caused as a result were also denied by the Supreme Court.
Nevertheless, the Supreme Court acquitted the accused of executing and coordinating the application of insurance policy premiums in 1992, because of the limited competition in the market at the time and because of the high level of involvement of the insurance supervisor in the process of approving the policy premiums.
Finally, in reference to the defence’s argument that the length of the proceeding was tortuous for them, the Supreme Court, although it gave little criticism of their conduct, apportioned most of blame to the accused and their attorneys for the length and depth of the case.
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