Banks hit with class-action suit

Disgruntled customers seek redress for collusion in fee-fixing.

A Bank Hapoalim branch 248.88 (photo credit: Ariel Jerozolimski)
A Bank Hapoalim branch 248.88
(photo credit: Ariel Jerozolimski)
Local bank customers on Monday filed a NIS 1 billion class-action suit against the country's five largest banks for collaborating in the exchange of information on fees. "The plaintiffs, like all bank customers, have fallen victim to a sophisticated and well-organized conspiracy," according to the class-action suit filed with the Tel Aviv District Court against Bank Hapoalim, Bank Leumi, Israel Discount Bank, Bank Mizrahi and First International Bank of Israel. "Open-market competition has been replaced by an arrangement by the banks to pass information to each other to facilitate the collusion of fees. The banks need to compensate the public for the prohibited activities." The plaintiffs are represented by attorneys Ram Gorodisky and Amir Israeli. The suit says the "coordinated and systematic exchange of information among the banks, executed in an cooperative manner, which is prohibited, has damaged competition and helped the banks to maintain a uniform [high] level of fees." Bank Leumi, Bank Hapoalim and Israel Discount Bank already face a NIS 7b. class-action lawsuit over claims they overcharged customers for loans and services. Monday's suit comes a day after the Antitrust Authority issued a civil ruling against the country's five largest banks for colluding over fees. On Sunday, Antitrust Authority director-general Ronit Kan issued a decision stating that the country's five largest banks were engaged in restrictive arrangements concerning exchange of information regarding fees. "The findings concerning the conduct of Israel's five largest banks speak for themselves," she said. "The decision serves the public and the Israeli economy by setting a precedent and revealing for the first time the exchange of information between the banks regarding fees, as well as allowing all of the banks' customers and households harmed by the restrictive arrangements to use the decision in tort suits." The public may rely on the decision as evidence in legal proceedings, since it represents a civil decision that constitutes prima facie evidence in all legal proceedings, the Antitrust Authority said. The decision was issued following an investigation by the Antitrust Authority and a hearing process in which the banks were given the opportunity to present their arguments. According to the decision, beginning in the early 1990s until the commencement of the Antitrust Authority's investigation in November 2004, bank executives exchanged information on fees. This information, which included nonpublic data, was taken into account by the banks while they were in the process of setting their fees policies, allowing them to collude and hinder the competitive process. "Given the findings of the investigation, and in light of the ongoing competitive shortcomings in the Israeli banking system, which is characterized by high concentration, substantial entry barriers for competitors and considerable switching barriers for consumers, the exchange of information by the banks is an illicit restrictive arrangement according to antitrust law," the Antitrust Authority said.