Israeli Antitrust Authority Chief : ‘If Delek Group and Noble Energy Don’t Meet Conditions for Competition, I’ll Fight in Court to Take Away Leviathan’

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Antitrust Authority director general David Gilo mentioned the negotiations with the partners in the Leviathan natural gas field over his options and attempts to create competition out of nothing in the natural gas market, and the problems that competition and the economy are liable to face because of the years of legal hearings on the matter. He was speaking at the agency’s annual conference this morning.”The objective is for the economy to soon benefit from competition and not be at the mercy of a monopoly. The competition that we’re now demanding in the talks with Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE:NBL), without the need for protracted legal hearings, is for an independent player with at least 70 billion cubic meters (BCM) of gas, and the high probability of finding relevant fields that will give it an additional 26.6 BCM, ” said Gilo. He made it clear that if Delek and Noble Energy do not meet these conditions for competition, he is prepared to fight them in court to take Leviathan from them, in order to at last achieve some competition in the long term.

“Paralleling this effort, we prepared in time the infrastructure for bringing in a new competitor. We’ve limited the existing gas partnerships so that the competitor we’re creating will be able to compete for customers in the market, including Israel Electric Corporation (IEC) (TASE: ELEC.B22). Our vision in this market is an integrated effort that includes the creation of competition in the short term on one hand with intervention in the existing gas partners’ contracts on the other hand, so that the customers will benefit from this competition and not be shackled to the existing gas partnerships.”

As for the electricity market, Gilo said, “We’re very worried about the incentive and ability of IEC and its employees to prevent independent power producers to compete against it in electricity generation through IEC’s control of the electricity grid. We’re dealing with the need to find the limits between the freedom for workers to unionize and a situation in which the workers of a monopoly use a tool ostensibly for a labor dispute in order to consolidate the position of the monopoly they work for.”

He said, “We’re simultaneously dealing with a number of cases in which indictments have been filed with the Jerusalem District Court. And the next challenge of the Antitrust Authority’s legal department is to persuade the court to increase the penalties for antitrust violations.”

“The court has already said that the proper penalty for an antitrust violation is imprisonment. This was the ruling in the Tnuva Food Industries Ltd. case, in which former President of the Supreme Court Dorit Beinisch said that imprisonment was fitting, rather than community service, for antitrust violations, in addition to a hefty fine. These are fighting words, but penalties in Israel are still lower than penalties in other countries. In the US, the average penalty for cartel violations is 25 months in jail, ” said Gilo.

“The creation of a cartel is like theft. The consumer has the right to a competitive price, so when several firms fix prices and create a cartel, it is even worse than theft from an individual, because with price fixing, the companies are picking the pockets of all consumers in the country and taking their money. That is why we think that the courts should treat them severely.”

Commenting on the Antitrust Authority’s past year, Gilo said, “This was a year with a lot of work and a year in which many new challenges emerged. On our agenda is the creation of competition in natural gas and increasing competition at the ports and in the credit card market.”

Among the other challenges in the coming year, Gilo mentioned his handling of the price gouging of consumers. “In the coming year, I expect more financial penalties against companies which cannot be handled through criminal proceedings.”

Published by Globes [online], Israel business news – www.globes-online.com 

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