Supreme Court upholds Conviction of Frozen-Vegetable Cartel Members
Israel’s Supreme Court has denied an appeal by convicted members of a frozen vegetables cartel. It held that, because frozen vegetables are not agriculture products, they do not enjoy a statutory exemption for restrictive arrangements in the agricultural sector
In 2000, the Israeli Antitrust Authority began to investigate a suspected cartel in the frozen vegetable market. It found that all four major manufacturers of frozen vegetables, and their superior officers, held regular meetings in which they divided the market and
the clients among themselves and coordinated the prices of their products.
In 2005, the agency’s legal department submitted an indictment to the District Court in Jerusalem. When the defendants’ preliminary arguments were denied, all of them admitted their role in the cartel and were convicted, some as part of a plea bargain.
Despite their admission, some of the defendants – one of the companies and its former CEO, and the former CEOs of two other companies – appealed to the Supreme Court. Their main argument was that frozen vegetables are agricultural products and that therefore they are exempted from the prohibition on making restrictive arrangements. They also argued against their punishments (community service and fines). The Supreme Court denied their argument, inter alia, in light of the changes to a fresh vegetable’s characteristics during the production of frozen vegetables.
Discussing the production process, the Supreme Court stated that “the change that is made in the frozen vegetables, vis-à-vis their natural state as fresh vegetables, and especially the blanching and freezing, change their organoleptic characteristics, similarly to boiling, and make them softer […] change their texture, harm their cell’s membranes, lowers the quantity of bacteria in it and shorten the needed cooking time. Therefore, the change that distinguishes frozen vegetables from bei ng fresh vegetables is clearly recognized and fulfils the criteria set in the change test”.
Discussing the punishments, the Supreme Court emphasized that “clear and constant policy regarding the appropriate punishment in antitrust offences, according to which regularly the ones executing such offences, should be sentenced to actual imprisonment not by means of community service”. In addition, the court noted that “the characteristics of the discussed arrangement, an horizontal arrangement of market division and price and discounts coordination that harms competition and the public without any distinction, is an appropriate case to implement the said policy”. Despite these firm statements, taking into consideration the complete circumstances of the case, the court upheld the sentencing of one of the CEOs to six months’ community service. The court also decided to reduce the CEO’s fine from 250,000 New Israeli shekels (US$61,000) to NIS180,000 (US$44,000), but denied the company’s appeal against its fine – NIS900,000 (US$220,000), inter alia, because of the additional severity in its activity and because its share of the affected market was larger than the other companies’ share.
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