Minister of Economy and Industry Nir Barkat has presented his proposed legislation on promoting competition in the food and toiletries sector. He calls this the Law to Dismantle the Monopolies." The Knesset bill that he is proposing is in effect a reformed version of the clause that was jettisoned from the Economic Arrangements Law, which would have restricted the ability of major suppliers to exclusively control the products of large manufacturers.
Suppliers would have to choose to either market the brands of only a large manufacturer or several medium sized manufacturers, or alternatively to keep both segments, provided that the financial turnover from these brands does not exceed half of its financial turnover.
The move is designed to disperse the brands of food and toiletries suppliers like Diplomat and Schestowitz. But there is also a concern that it would indirectly reduce competition if it would lead to the suppliers reducing the number of products that they market.
Be that as it may, this is a dramatic step in the market, and it is not the only one that has recently taken place among organizations subject to the Ministry of Economy and Industry. Over the past few weeks, the Israel Competition Authority has investigated Schestowitz, fined Strauss and Wolt for violating competition rules, and this week even declared a new food monopoly for the first time in decades - Wissotzky. Behind all this, there has been an attempt by Barkat to oust the head of the Israel Competition Authority Adv. Michal Cohen, a move that may have influenced the activities of the Authority.
In an exceptional and unprecedented move, the Consumer Protection Authority has demanded that the soft drink companies cancel their price increases (although it is unclear to what extent the request has legal validity), and Barkat himself has demanded, through the Supervisor of Prices, an examination of the costs of the 15 largest food companies, a move that is also legally questionable.
But above all else, it seems that Barkat and the ministry's flagship move is to unify European import standards with Israeli ones - "what is good for Europe, is good for Israel", according to Barkat.
Barkat needs his officials in order to move things along
It seems that Barkat wants to do in the food market what former Minister of Finance and Communications Moshe Kahlon did in the mobile phone market. There are definitely similarities, according to a market insider, who observes that Kahlon opened up imports in the mobile device market, which is what Barkat intends to do with food and toiletries. "The devices once cost a fortune, and it was possible to import them only through official importers. The device itself served as handcuffs that prevented competition and switching between suppliers," the market source explains.
On the other hand, a source in the antitrust field explains that there is still far to go. "In order to really move things along, he needs cooperation with various government agencies, such as the Ministry of Health and the Standards Institute," he says. "It's no coincidence that it doesn't happen. The bureaucratic mechanisms are a horror story before there can be any new announcement with warnings the dangers that may come if we dare to open up to European competition and standards. Of course, there is the precedent with Remedia (the baby food that led to deaths and serious illness in toddlers, etc.) because a regulator did not check everything. No one wants such an affair on their watch, so they prefer to take a policy of zero risk."
Other sources in the industry see Ministry of Health bureaucracy as Barkat's biggest obstacle. "Previous ministers also sent their officials to crash against the walls of the Ministry of Health," they say. Barkat also understands this, and between the Ministry of Economy and the Ministry of Health there is an active dialogue with the aim of allowing the import reforms to ove ahead. Former Competition Authority head Adv. Dror Strum insists there is no way to overcome bureaucratic obstacles without legislation: "In the past, they were satisfied with declaratory reforms, but they did not understand that mechanisms at the Ministry of Health, the Ministry of Agriculture, and the Standards Institute produce tons of procedures, so that the risk from the officials' point of view will be zero. They actually torpedoed this whole move, because ministers refused to go into the small details and handle every procedure. If we don't shake up this system in a direct and blatant way - nothing will happen, because they will empty it of its content."
Will Barkat succeed in achieving a "Kahlon effect" in the field of competition and the cost of living in Israel? It's still too early to tell. But at the very least, he is working in a variety of ways to make it happen. Some of the moves, such as the reform of European standards, have quite broad support - but also a series of challenges prior to implementation. But other measures create the impression of populism, and above all it is doubtful whether they survive petitions to the courts.
Published by Globes, Israel business news - en.globes.co.il - on June 29, 2023.
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