Competition Commissioner: The restrictive arrangement of the ISA and the Israel Defense Forces is not in the public interest and must not be approved


On Thursday, September 17, 2020, the Competition Commissioner submitted to the Competition Court its position regarding the application for approval of a restrictive arrangement submitted by Automatic Banking Services Ltd. (ISA) and Banking Clearance Center Ltd. (MSAB). The matter of the application submitted by the ISA and Masab is a restrictive arrangement by way of cooperation and the provision of mutual services to each other. In the Commissioner’s position, the collaborations as presented between Masab and Sheba are a restrictive arrangement that is not in the public interest and should not be approved.

The Commissioner’s examination revealed that the collaborations and joint conduct of the ISA and the Masab, in the format requested in the application for approval, raise real competitive concerns. The plaintiffs have not shown that the collaborations between them are necessary in order to obtain benefits to the public in a manner that exceeds the damages that will be caused by them. In this situation, there is no room to approve the restrictive arrangement.

On May 10, 2020, ISA and Masab submitted a request for approval of a restrictive arrangement concerning the cooperation that exists between them, which consists of a long list of common affiliations at all levels of activity of the companies. These affiliations include a joint CEO and managerial backbone, mutual services provided between the companies, a joint technological infrastructure, joint work teams and more.

ISA and Masab are the two main infrastructures that are at the core of Israel’s payment system and the cooperation between them has a direct and dramatic impact on the fate of the payments sector in Israel. In the past, these two infrastructures were held by the central banks. However, following the implementation of the conclusions of the Strum Committee, the banks were required to reduce their holdings in the IPA, and today four banks hold less than 40% of the IPS.

Despite this change in the control structure of the ISA, the operational management of Masab and the ISA remained as it was on the eve of the change in the holding structure of the ISA, including joint management, joint offices, joint staff and joint infrastructure.

Against this background, the Competition Authority contacted the ISA and the MSB in October 2019 and informed them that the continuation of this joint conduct may amount to a violation of the law. It was this appeal that gave rise to the request of the ISA and Masab from the competition court to approve the existing restrictive arrangement between them.

In accordance with the provisions of the Economic Competition Law, 1988, the Competition Commissioner was required to submit her position to the Competition Court on the question of whether the restrictive arrangement whose approval was requested is in the public interest.

After a comprehensive examination, the Commissioner found that the competition between ISA and Masab is already taking place and is expected to continue to intensify on several levels, including: competition for the development of new infrastructure in the field of payment systems; Competition with payment service providers such as payment applications that can choose to offer their services on IPS systems or MSAB systems; And the competition to increase the attractiveness of the means of payment (such as credit cards, payment applications, etc.) that use the infrastructure of one of the companies, over the use of another means of payment.

The plaintiffs, on the other hand, have not shown that the collaborations between them in the requested format are necessary for the attainment of the benefits and certainly have not proved that there is a benefit to the public to outweigh the competitive harm that the restrictive arrangement may cause.

In this situation, the Commissioner expressed the position that there was no need to approve the restrictive arrangement in the requested format.

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