Israel: Class actions – litigation, policy and latest developments
This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight
The applicable legal and regulatory regime
The Israeli Class Action Law 5766–2006 (the Class Actions Law) was enacted in 2006. It sets out the matters for which motions may be filed to certify class actions and establishes the principles and requirements governing class action claims. A class action may be filed in Israel only if it relates to a claim as specified in the Class Actions Law. One of the specified claims is a cause of action under the Israeli Economic Competition Law 5748–1988 (the Competition Law).
According to the Competition Law, any violation (by act or omission) of this law is deemed a tort under the Israeli Torts Ordinance (New Version) 5728–1968, thereby allowing the injured party to file a civil lawsuit against the violator.
Often, the trigger for private enforcement is based on an action taken by the Israeli Competition Authority (ICA). Despite the fact that a decision of the Director-General of the ICA, or a court’s decision, can constitute prima facie evidence in civil proceedings under specific circumstances, often – and in order for petitioners to be ‘first in line’ – motions to certify are filed immediately after an ICA investigation commences or when the ICA files an indictment with the court. Therefore, motions to certify that are based on investigation by the ICA or indictmentsare frequently stayed until the investigation is completed by the ICA or until the court renders its verdict on the case.
In recent years, actions initiated by foreign competition authorities and judicial proceedings in foreign courts have also triggered private enforcement in Israel.
Anticompetitive behaviour suitable for class actions
Generally, non-competitive behaviour is prohibited by the Competition Law, and the harm it can cause to the Israeli consumer can be the basis of a class action. Most competition class actions are based on allegations of:
- restrictive arrangements (cartels and other horizontal or vertical conduct); and
- abusive behaviour of a dominant entity such as exclusionary and exploitative practices (refusal to deal, price discrimination, tying, unfair prices that are excessive or predatory and so on).
Findings of competition authorities and court decisions
The Israeli law recognises several ways to use certain findings of the Director-General or court decisions in criminal cases as a basis for civil lawsuits, including class actions. Under the Evidence Ordinance (New Version) 5731–1971, the findings and conclusions of a decision in a criminal case that convicts the defendant will be admissible as prima facie evidence in civil cases with respect to what is stated in them, provided that the same defendant is a party to the civil case. This applies to violations under the Competition Law that may be enforced in criminal proceedings.
In addition, the Competition Law provides that the determination of the Director-General is admissible as prima facie evidence in every legal proceeding.
Regarding judgments and decisions of regulatory agencies or courts rendered outside of Israel, the Israeli Foreign Judgments Enforcement Law 5718–1958 establishes the formal conditions for enforcing a foreign court judgment, as well as the direct and incidental recognition of foreign judgments, under very specific circumstances. Concerning decisions of foreign regulatory agencies, there is no binding precedent of the Supreme Court of Israel on whether such decisions may be used for follow-on class actions. Currently, their evidential admissibility and weight are determined by the judges in the framework of each Israeli proceeding in accordance with the particular circumstances of each case.
Who can bring claims?
The Class Actions Law defines who is entitled to submit a motion to certify:
- A person who has grounds for an action regarding a matter listed in the Second Addendum of the Class Actions Law, or in a matter set out in an explicit legal provision that raises substantive questions of fact or law common to all members of the class.
- A public agency or organisation (including the Israel Consumer Council) may file a claim concerning one of the areas of its public operations, in a suit that raises substantial questions of fact or law common to the entire class on behalf of that class.
How to assemble a class
According to the Class Actions Law, the petitioner – whether an individual, a public agency or an organisation – must file a motion to certify that raises substantive questions of fact or law common to all members of the class. The petitioner offers a definition for the class it represents in the motion to certify. The court can accept or change the definition suggested by the petitioner.
According to the Class Actions Law, if the court grants a certification order, it must define the class in whose name the action is to be pursued and may also define sub-classes within the general class, where it finds that there are questions of law or facts that are common to some of the class members.
Threshold criteria that must be met
Under the Class Actions Law, a court may certify a claim as a class action only if it finds that all of the following cumulative conditions are met:
- the claim raises substantial questions of fact or law that are common to the class, and a reasonable possibility exists that such questions would be decided in favour of the class;
- a class action is the efficient and appropriate means of resolving the dispute under the circumstances of the case;
- there is reasonable basis to assume that the interests of all members of the class will be properly represented and managed; and
- a reasonable basis exists to assume that the interests of all members of the class will be represented and managed in good faith.
Criteria for choosing class representatives
The petitioner must convince the court that there is a reasonable basis to assume that the interests of all members of the class will be properly represented and managed by the petitioner, and that there is a reasonable basis to assume that the interests of all members of the class will be represented and managed in good faith.
Moreover, the court can replace the petitioner to ensure that class affairs will be represented and managed in the most appropriate or efficient way.
Steps in how to successfully certify a class
The Class Actions Law establishes a two-stage process for the administration of class action proceedings:
- the preliminary stage is the motion to certify, in which the court is required to determine (principally), based on prima facie evidence, whether the claim raises a cause of action and if a class action is the appropriate procedural instrument to address the claim; and
- a second, substantive stage, in which, if certified as a class action, the claim is administered, settled or decided in accordance with the Class Actions Law’s specialised procedures.
According to some case law, in a class action brought pursuant to the Competition Law that also has criminal elements, the evidentiary threshold is higher. This is particularly applicable in class actions that include excessive and unfair price claims – and in which an especially high evidentiary threshold is required already at the stage of the motion to certify the case as a class action.
Notifying class members
The Class Actions Law determines that a copy of the motion to certify be sent to the Director of the Courts by the petitioner to be published in the registry of class actions. The Class Actions Law also includes instructions pertaining to notification to class members. It provides a list of specific outcomes of the proceedings the occurrence of each of which must be accompanied by a published notification to the members of the class in a representative action. These are:
- a decision to certify a class action;
- a decision to approve the withdrawal of all representative petitioners or all class counsel or a decision determining the incapacity of the representative petitioners, or their counsel, to continue in their respective positions, or a decision to dismiss a class action;
- the filing of a motion to approve a settlement or compromise;
- a court decision to approve a settlement; and
- a court decision or order in the representative action.
Apart from these specific provisions, the Class Actions Law provides additional general powers whereby a court may order the publication of any notification it deems necessary for the management of proceedings and the fair and efficient representation of the class.
Operation on an opt-in or opt-out basis
Under the Class Actions Law, the default for joining a class action is an opt-out mechanism, unless the court explicitly determines that an opt-in mechanism should apply in a specific case due to special circumstances.
The Class Actions Law guides the courts on how to quantify damages and divide remedies among members of the class. First, the court may issue an order for payment of monetary compensation, or it may grant another remedy directly to each individual member of the class whose eligibility to such remedy has been proven, in the amount and manner decided by the court. Second, the court may order that each member of the class prove their eligibility for monetary compensation or another remedy. Third, the court may order the defendants to pay an inclusive sum of damages, from which members of the class would receive individual compensation on a pro-rata basis.
When members of the class either relinquish their compensation, fail to prove their eligibility or cannot be located, the remaining sum is allocated among the other members of the class in proportion to the harm each has sustained, and where funds remain unallocated, they will be reverted to the State Treasury.
The process for settling claims
Proposed settlement agreements in class actions must be brought before the court and are subject to its approval. Judicial procedures regarding settlement agreements are divided into two stages:
- the filing of a motion to approve a settlement agreement; and
- a subsequent stage for the court’s approval of the settlement agreement.
In the first stage, a motion is filed with the court, and if the court does not find grounds to reject the settlement, it will order the publication of a notice concerning the filing of the motion to the members of the class. The court will send the notice and copies of the motion to approve the settlement, the proposed settlement and the class action to the Israeli Attorney General, the Israeli Director of the Courts and to any other person the court may instruct. A person who is a member of a class, a public authority, an organisation or the Attorney General may submit an objection to the proposed settlement, and the parties have the right to respond to these objections.
In recent years, it has become more common for the Attorney General, public authorities and organisations to file objections to settlements on various grounds. The court is not bound by these objections; however, they could affect any potential settlement.
Concerning the second stage, relating to judicial approval of the settlement, the Class Actions Law provides that the court may not approve a settlement ‘unless it finds that the settlement is proper, fair and reasonable in view of the interests of the class members… and resolution of the dispute by means of a settlement constitutes the most efficient and fair means of resolving the matter under the circumstances of the matter’.
The main advantage of a settlement is that, when finally approved, it constitutes res judicata regarding all the members of the alleged class and in connection with all the causes of action included in the settlement. Generally, it is very common in Israel for class actions to conclude in settlements and, in most cases, motions for the approval of a settlement are submitted with the court during the certification stage. It is possible for parties to also settle after a class has been certified.
Concerning how damages or settlement amounts are apportioned and distributed, in the context of the motion to approve a settlement the defendant usually commits to compensate the members of the class, either by way of a cash payment or other non-cash benefits (such as equivalent services or discounts), or a mix of both.
The Class Actions Law establishes a fund for the management and distribution of the sum awarded as a remedy. Accordingly, if monetary compensation was awarded to the class members and a balance remained after its distribution, the court will order the transfer of the remaining sum to the fund and designate the latter to a cause that is proximate to the subject of the class action. A court will also make such a direction for a contribution to the fund in cases where the court has made an order for a monetary remedy for the public benefit – for example, if payments to the individual members of the class are low or difficult to process.
Recognition of collective settlement in the absence of claims
Generally, there is no collective settlement that is not in a class action proceeding filed in accordance with the Class Actions Law. There are some exceptional proceedings in which collective settlements can be made, such as derivative suit proceedings and a collective claim pursuant to the Law for the Prevention of Environmental Nuisances 5782–1992.
Mandatory or voluntary redress schemes
The ICA cannot impose mandatory redress schemes or allow voluntary redress schemes. However, according to the Competition Law, the Director-General and third parties are authorised to agree to a consent decree that may include, among other things, payment to the State Treasury in lieu of other enforcement measures.
The competent court, according to the Director-General’s request, may grant the agreement between the Director-General and another person the force of a decree. The consent decree may be without admission of liability and may include, among other things, an obligation to pay a sum of money to the State Treasury and an obligation to carry out or refrain from carrying out an action. In some cases, the ICA has enabled a consent decree to be reached, including an option to pay class members, in relevant class actions in the framework of settlements and under certain circumstances, instead of processing payments to the State Treasury.
Right to appeal
The decision of a district court is generally appealed to the Supreme Court of Israel. Competition class actions are rarely filed with magistrate courts.
A district court decision that deniesa motion to certify is subject to appeal as of right to the Supreme Court within 60 days. Following the Supreme Court’s decision, theoretically, an additional hearing can be held on its decision before an expanded panel of the Supreme Court. The possibility for an additional hearing is at the discretion of the Supreme Court.
For all other district court decisions, including a certifying decision, leave to appeal must be obtained from the Supreme Court (as a matter of discretion). A motion to grant leave to appeal must be filed within 60 days from the date the decision was rendered.
Excessive and unfair price cause of action
The Competition Law lists four types of conduct that would create a presumption of abuse of dominant position. In general, these types of conduct involve attempts to exclude competitors from the market. On the other hand, the prohibition of setting an excessive and unfair price does not refer to an excluding practice, but rather to an act of consumer exploitation. This cause of action and its implementation in practice are at the heart of the dispute among scholars in Israel and worldwide on the question of whether the existence of cause of action should be recognised.
On 26 July 2022, the Israeli Supreme Court rendered a landmark decision in the Coca-Cola class action case, acknowledging that the Competition Law prohibits a monopoly from setting unfair high prices (and not only predatory low prices). The court determined that prohibiting excessive and unfair prices is necessary to protect consumers’ welfare; however, for a claimant to have a case, it must prove the defendant has a monopoly in the relevant market and that the prices the monopoly charged are both ‘excessive’ and ‘unfair’.
If the claimant proves the element of excessive price, then the burden of proof will shift to the monopoly to prove its prices are fair. The main tests established to evaluate the ‘excessiveness’ of prices are the cost test, the comparison test and the profitability test.
Although the Supreme Court held that the excessive price cause of action was recognised under Israeli law, the difficulties involved with it underlie the cautious and restrained approach established in the case for the manner of its application. This approach is consistent with the position of the Israeli Attorney General, which was submitted in the Coca-Cola class action case, with the position of the ICA and the way the cause of action has been implemented under European competition laws.
On 20 March 2023, the Israeli Supreme Court rendered another landmark decision in the Cottage Cheese class action case, and ruled that it had not been proven that the price of Tnuva – Israel’s largest dairy – for the cottage cheese was significantly higher than the price that would have been determined under competitive conditions. In addition, the main considerations regarding the fairness of the price were not even considered.
This was in practice the first time that the Supreme Court in Israel heard and decided a case in which an excessive price cause of action was alleged, in the framework of a complete proceeding (post-certification stage) that included the submission of evidence.
The decision in the Cottage Cheese class action emphasises that courts must take a restrained and cautious approach regarding excessive and unfair prices cause of action, particularly within a class action. It was held that the restrained and cautious approach must be applied also within the certification stage.
Effects of the Coca-Cola and Cottage Cheese class actions
The adjudication of the excessive price cause of action is characterised by the investment of especially substantial resources, in consideration of the difficulties of its implementation.  This could support the setting of a higher threshold for the certification of a claim as a class action for the cause of action. It appears that these decisions underline the need for caution and restraint in implementing the excessive price cause of action so that only blatantly obvious cases would be recognised, and it is expected to have a ‘chilling effect’ on more than fifty excessive pricing cases that are pending in Israeli courts. Therefore, it is not surprising that following the Coca Cola class action case, and more so after the Cottage Cheese class action case, many petitioners are requesting to withdraw from their claims.
 In addition, the Class Actions Regulations 5770–2010 were enacted in 2010, dealing mostly with procedural aspects.
 As specified in Item 4 of the Second Addendum of the Class Actions Law.
 See reference below, under the title ‘Findings of competition authorities and court decisions’.
 See reference to private enforcement below, under the title ‘Excessive and unfair price cause of action’.
 Horizontal agreements include cartel conducts (eg, price fixing, market allocation and bid rigging) and ‘softer’ conduct such as exchange of information among competitors. Vertical agreements may include exclusivity and MFN clauses.
 Section 42(a).
 Section 43.
 Section 4.
 For example, a cause of action against a banking corporation; in a matter between the bank and a customer (whether they have or do not have a contract); a cause of action against an insurer, in a matter between the insurer and a customer (whether they have or do not have a contract); and a cause of action based on the Competition Law.
 The Competition Law includes an additional barrier to representation by an organisation, providing that an organisation may only serve as the representative body if the court is convinced, under the circumstances, that a difficulty exists in terms of the motion being filed by an individual. The Israel Consumer Council is excluded from such a barrier.
 Currently, the Israeli parliament (the Knesset) is considering the Class Actions Law (Amendment No. 14) (Standing of Environmental Organisations) 5782–2022. The proposed amendment would permit, in addition to the Israel Consumer Council, the environmental organisations that the legislator has included in the list of organisations to submit collective claims pursuant to the Class Actions Law.
 Section 4.
 Section 10.
 Section 8.
 See for example: Miscellaneous Civil Applications (Tel Aviv) 14471-01 Azualas v The American Israeli Gas Company Ltd, at paragraph 23 (19 December 2006); Class Action (Tel Aviv) 7033-06-12 Korman v Play Pot Group Ltd, at paragraph 65 (6 January 2021).
 See reference below, under the title ‘Excessive and unfair price cause of action’.
 Section 6.
 Section 25.
 Section 25(b).
 Section 11.
 Section 20(a).
 Section 20(a)(1).
 Section 20(a)(2).
 Subject to the rule that a class member may not receive higher compensation than that which is their due.
 Section 20(a)(3). Each of the three methods is subject to the important caveat that in granting the order, the court should take precautions to avoid unnecessarily burdening the parties and members of the class.
 In the process of evaluating the proposed settlement, the court may appoint an ‘examiner’ (ie, an expert in the class action relevant field) who will operate as an ‘officer of the court’ and advise the judge on the proposed settlement.
 Section 19.
 In recent years, Israeli courts have tended to favour monetary compensation over non-cash benefits. In cases where a difficulty to identify the members of the class arises, it is possible for the compensation to be paid in part, or in full, to charitable or other non-governmental organisations.
 Section 27(a).
 Section 13.
 Section 50B.
 Section 29A(b).
 Leave for Civil Appeal 1248/19 The Central Bottling Company Ltd v Gafniel (26 July 2022) (the Coca-Cola class action).
 Israeli Competition Law does not prohibit a company from being ‘a monopoly’, but it does prohibit the company from abusing its dominant position. This distinction is based on the acknowledgement that companies’ aim to obtain such a position is mainly beneficial to competition and to the public.
 Civil Appeal 4120/20 Naor v Tnuva (20 March 2023) (the Cottage Cheeseclass action).
 Such main considerations include super dominance of the entity being sued; existence of alternatives; preferences of consumers; how essential is the product; the time period; harm to incentives of the relevant players (incentives to earn a good reputation, become more efficient and differentiate the product by investing in R&D to improve the product); and the existence of a regulator.
 It is noted in this context that on 30 March 2023 a motion requesting a further hearing was filed in this case (Further Civil Hearing 2665/23), and on 4 June 4 2023 the motion was deleted by the Supreme Court following to the petitioner’s request.
 The Cottage Cheese class action, at paragraph 64.
 Ibid., at paragraph 67.
 See also: Public Statement 1/17, at page 15.
 See, for example: Class Action (Central) 67156-11-17 Klapholtz v The Central Bottling Company Ltd (2 May 2023); Class Action (Central) 47464-07-18 Lachman v Arkia Israel Airlines Ltd(20 February 2023); Class Action (Central) 36050-05-16 Zadok et al v Strauss Group Ltd (21 April 2023); Class Action (Central) 32810-10-16 Debby v Nespresso Israel Ltd (11 June 2023); Class Action (Central) 28030-03-20 Hadad v The Central Bottling Company Ltd (8 May 2023); Class Action (Central) 16958-06-19 Rabin v The Central Bottling Company Ltd (9 May 2023); Class Action (Central) 31568-10-16 Soroker v Osem Ltd (11 June 2023); Class Action (Central) 22162-08-20 De-Yong v Tnuva Ltd (6 June 2023); Class Action (Central) 54429-05-19 Barak v Unilever Israel Ltd (29 June 2023); Class Action (Tel-Aviv) 20925-05-16 Gur-Lavie v Wissotzky Tea (Israel) Ltd(30 July 2023); Class Action (Central) 14901-01-19 Nuri v Tnuva Ltd (25 July 2023).