Duty Free Americas, which manages the biggest chain of duty free stores in the US, is trying to break deeper into the Israeli market. In May, the corporation, which is owned by the Falic family, which is close to Prime Minister Benjamin Netanyahu, submitted a bid for the tender to operate duty free stores at the Begin (Taba) border crossing between Israel and Egypt and the Sheikh Hussein border crossing over the River Jordan between Israel and Jordan.
Duty Free Americas also recently petitioned the Tel Aviv District Court asking that the Israel Airports Authority (IAA) disqualify the participants in the tender - Heinemann, (the German company that owns shares in James Richardson). According to the petition, the company has been suspended in two previous court rulings - one in the international Commercial Court and the second in the Tel Aviv District Court for rigging tenders more than a decade ago.
At this stage, the request for a temporary injunction has been accepted by the Tel Aviv District Court and the date for announcing the winning bid has been postponed until the ruling is handed down on the petition and a decision by the Israel Competition Authority on whether to open an investigation on the matter.
The IAA said in response, "The Authority has not yet received the petition. When it has been received it will respond to it to the court, as is the custom."
A struggle that began more than 10 years ago
The story began in 2013 when Heinemann bid with Alfa to operate the duty free stores at Ben Gurion airport. Heinemann and Alfa were beaten in the tender by James Richardson but it subsequently transpired that several months before the bids were submitted, the controlling owners of Heinemann and James Richardson met secretly in Hamburg. There had also been two telephone calls between them shortly before the final date to submit the bids.
In 2017, the IAA issued a new tender in which Heinemann did not bid together with Alfa but with its former rival James Richardson. The bid won the tender and since then Heinemann and James Richardson have operated the duty free stores at Ben Gurion airport.
Alfa, the company that had bid with Heinemann in the previous tender, claimed that Heinemann had violated their agreement and deliberately caused their joint bid to fail by conspiring with James Richardson in order to cooperate with it in the future. In the wakes of this, Alfa submitted a suit to the Internation Court of Arbitration, which accepted its claim and upheld serious findings against James Richardson.
In 2022, the majority position in the arbitration case found that James Richardson conspired against Alfa. It was also ruled that there was sufficient convincing evidence to show that a senior executive at James Richardson knew that Heinemann’s bid was for about $169 million, and that Heinemann agreed that the joint offer with Alfa in the first tender would be lower, in order to help James Richardson retain its franchise. As a result, Heinemann was ordered to pay huge compensation of over $23 million.
Following the ruling, the IAA appointed an internal investigation committee to examine the case. The committee ruled that "There was not enough evidence to unequivocally determine that there had been fixing in the 2013 tender between Heinemann and James Richardson." It is further written that "As the team stressed, it had not seen sufficient evidence to reach the opposite conclusion, that is, that the tender was not fixed by Heineman and Richardson, however, since these are significant and serious accusations, which constitute criminal offenses and an act of real deception, the required evidence for the purpose of a positive determination regarding the existence of such rigging is not sufficient to take any steps, including steps related to future tenders that will be published by the Authority."
The decision contradicted the ruling of the Tel Aviv District Court in 2022, in which Judge Yehudit Shevach stated, "The arbitration ruling brings a long line of circumstantial evidence and reasoning, which by their combined and cumulative force properly substantiate the factual finding regarding the existence of a conspiracy between Heinemann and James Richardson."
Seeking to break the control of Heinemann
Heinemann is a privately-held German company controlled by the Heinemann family and one of the biggest players in the global duty free market and the European market in particular. In 2016, the company acquired a 50% stake in James Richardson, which operates the duty free stores at most of Israel’s border crossings. This year Heinemann acquired the remaining 50% of James Richardson.
Duty Free Americas, which is striving to replace Heinemann, owns French brands Christian Lacroix and cosmetics and perfume brands, and also operates in the wine and spirits market in Israel. In the past Duty Free Americas through one of the companies in its group operated the duty free stores at Ovda airport in the Negev and its currently operates the duty free store at the Rabin Border Crossing (Allenby Bridge) between Israel and Jordan.
Published by Globes, Israel business news - en.globes.co.il - on August 19, 2024.
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