Howard Rice, chairman of The Pharmaceutical Association in Israel, a pharmacist and owner of the Kikar Hamedina pharmacy in Tel Aviv, today applied to the Tel Aviv District Court for permission to bring a NIS 1.7 billion class action against the credit card companies owned by Bank Hapoalim, Bank Leumi and Discount Bank. The grounds for the application were that those companies had collected excessive commissions from businesses honouring credit cards.
The action against Israel Credit Cards and Diners Club in Israel, owned by Bank Leumi and Discount Bank, Isracard and Poalim American Express, owned by Bank Hapoalim, was filed pursuant to the Restraint of Trade Law, the Banking Law and the Consumer Protection Law.
Rice alleges that ever since being founded, the credit card companies and the banks have been collecting excessive and scandalous commissions from businesses honouring credit cards, while discriminating against small, weak businesses.
That they are able to do so, Rice alleges, is due to the fact that Israel's major banks and the credit card companies operating under their auspices, shared out the credit cards market between them, while creating cartels, abusing their power as monopolists and inflicting unlawful damage on potential competitors.
The plaintiff alleges that the cartel formed by the respondents has either prevented or reduced competition in the field of credit cards, and the respondents should be viewed as monopolists in the credit card field. As monopolists, he alleges, the respondents abused their status in that they established commissions in rates both unfair, unreasonable, discriminatory and oppressive, in such a way that these commissions secured the respondents tremendous and unreasonable profits at the expense of small businesses.
The plaintiff also alleges that those businesses discriminated against small as against big businesses, habitually setting tough contractual conditions for small businesses, while practising flexibility, and showing willingness to please and to meet the wishes of big businesses.
The claimant seeks to represent, in his action, more than fifty thousand businesses out of the seventy thousand honouring credit cards, and which have paid the respondents commission in a rate exceeding 2%. He asks the court to reimburse the group with the difference between business commission at a rate of 3.5% collected by the respondents from the members of the group, and business commission at a rate of 2%. He estimates the difference at NIS 1.7 billion.
Rice maintains, through Advs. Ran Rotman and Shiri Beitner, that the matter is one of unlawful profits derived by the respondents from the clearing services they supplied to each of the group members, while exploiting their monopolistic status, and their being parties to cartels, and while taking advantage of the disadvantaged situation of the group members in order to transact with them on conditions neither generally accepted nor reasonable.
Published by Israel's Business Arena August 17, 1998