Bezeq shareholder Yonatan Dauber is demanding that the company file suit for NIS 400 million from Telrad and Tadiran Telecommunications (now ECI Telecom) for the damage caused to Bezeq from a price fixing scheme between them. The affair was revealed by “Globes” three years ago. “Globes” has learned that the Anti-Trust Authority is preparing indictments against person concerned in the affair.
Dauber’s legal representative, Atty. Menachem Gelbard, is demanding under the terms of the Government Companies Law that within 45 days, Bezeq report on the steps it will take as a result of the letter, “detailing the actions taken and the bodies deciding them, including the names of the those making the decisions.”
Gelbard is demanding that if a member or officeholder in the company has a personal interest in the decision – this must be noted in the decision and in a statement to the prosecutor.
Dauber threatens that if Bezeq does not take legal action as soon as possible, he will reserve the right as a Bezeq shareholder to file a derivative suit under the terms of article 194 of the Government Companies Law.
On November 3, 1997, Anti-Trust Authority investigators raided the offices of Koor, Tadiran, Telrad and Tadiran Telecommunications, following an investigative report in “Globes” the previous evening. The report exposed a 10-year old written agreement between Telrad and Tadiran Telecommunications, with the knowledge of Tadiran and Koor, to coordinate prices for public switchboards for Israel’s sole customer in this field – Bezeq – and settled market share between them for the private switchboard market. The Anti-Trust Authority announced that the investigation was due to the report.
The individuals mentioned in the investigation as involved in the affair were Tadiran Telecommunications general manager Haim Rosen, former Tadiran and Telrad general managers Yisrael Zamir and Gurion Meltzer, former Koor general manager Benny Gaon, and former Telrad general manager Betzalel Zamir. These and other individuals were investigated or questioned. Later, the investigators raided the offices of Bezeq and its subsidiary for Network Terminating Point (NTP) services, Bezeqal, where various individuals were also investigated.
Dauber’s suit details the history of the agreements between Bezeq and the suppliers of its public switchboards, Telrad and Tadiran Telecommunications. It quotes the Anti-Trust Authority director general David Tadmor’s report, published a year after the opening of the investigation in December 1998.
Atty. Gelbard writes, “The investigation focused on two main issues: the public switchboard market, including the supply of digital switchboard equipment and their accompanying services by Tadiran Telecommunications and Telrad; and on the NTP switchboard market. Tadmor added that the investigation findings showed a harsh picture regarding the way Bezeq purchased its switchboards from the Koor concern, and the in which the NTP switchboard market was managed until recently.
Gelbard continues, “In the public switchboard field, the Anti-Trust Authority investigation raises suspicions of collaboration between Telrad and Tadiran vis-a-vis Bezeq. These include an apparent suspicion that Telrad and Tadiran coordinated various aspects of their competition toward Bezeq, in some instances with the company’s knowledge, and without it in others. The Authority’s investigation includes the suspicion of collaboration between Telrad and Tadiran with regard to Bezeq tenders in 1998, and in regard to framework agreements with the company in 1994 and 1996.”
Gelbard states that the company’s prospectus details its investments in switching equipment, which is the subject of the Anti-Trust Authority investigation, and the basis of the suit. He said that Note % of the 1999 financial reports shows that most of the investment in switching equipment was made during the period of the price fixing. He notes that according to an accountant specializing in the field, the price fixing caused Bezeq damages in the amount of NIS 400 million.
Bezeq’s spokeswoman said in response, “The Anti-Trust Authority director general has not yet published any decision on the Telrad Tadiran matter, but only a press release stating that there is heavy suspicion of price fixing, and that he has transferred the matter to the Authority’s legal department. Since then (about two years ago), we have not received any announcement from the Anti-Trust Authority of any ruling on the matter. The letter we received from Yonatan Dauber’s attorney has been sent to Bezeq’s legal department, which is examining the matter.”
Tadmor said in response, “Following the publication by the Authority of the conclusion of its investigation, and due to new circumstances uncovered, a comprehensive supplementary investigation is being conducted, which has taken a long time. With the conclusion of the supplementary investigation, the case was returned to the Authority’s legal department.
“The time taken for the file is not exceptional for such large and complicated cases, even though there is no doubt that every effort must be made to complete the handling of the matter as soon as possible. The legal team is determined to complete its work, and its expects to do so soon.”
Published by Israel's Business Arena on 5 December 2000