Competition Authority fines Strauss Group NIS 111m

Strauss Elite factory in Nazareth  credit: Strauss PR
Strauss Elite factory in Nazareth credit: Strauss PR

The unprecedented fine on the food company is for an unauthorized merger agreement with tofu products company Wyler Group alleged to have harmed competition.

Competition Authority director-general Adv. Michal Cohen has imposed financial penalties on food company Strauss Group (TASE: STRS) and tofu products company Wyler Farm and on officers of the two companies because of an unlawful merger between them. Strauss Group will be obliged to pay NIS 111 million, an unprecedented penalty for breaches of this kind, and Wyler Farm will be obliged to pay NIS 1 million.

In addition, three senior Strauss Group managers have been fined NIS 600,000 each: former Strauss Group CEO Giora Bardea; former Strauss Israel CEO Eyal Dror; and former Strauss Israel CFO Gur Zamir. Fines have also been imposed on three company officers of Wyler Farm, of between NIS 119,000 and NIS 154,000.

The Competition Authority found that Strauss Group and Wyler Farm carried out a merger without reporting it to the Competition Authority director-general and without her consent. Under the Economic Competition Law, companies wishing to merge are required to apply to the director-general of the Competition Authority and to obtain her consent before proceeding with the merger. The law forbids carrying out a merger, full or partial, before the director-general’s decision.

The affair began in July 2021, when Strauss Group announced its intention of merging with Wyler Farm. For Strauss, milk alternatives are a strategic segment, and it is working to expand its activity in it considerably, in cooperation with international food company Danone, under the Alpro brand.

The Competition Authority did not approve the deal between Strauss Group and Wyler Farm, because of the fear of harm to competition, and in the course of its examination it claimed that Strauss group had begun the merger process before receiving approval from the director-general.

In the merger negotiations, Strauss Group insisted that, after the merger, Wyler Farm should focus exclusively on tofu products. Wyler Farm expressed a desire to continue to deal in milk alternatives after the merger, but Strauss demanded that Wyler Farm should not be active in that field, as it intended to deal in it itself outside the framework of the merged company.

In the end, the companies agreed that, after the merger, Wyler Farm would not deal in that field.

After the merger agreement was signed, Wyler Farm acted in accordance with that understanding, and sought to divert financing that it had received from the Israel Innovation Authority for developing production processes for plant-based beverages and cheeses to development of tofu products.

In February 2022, the director-general of the Coopetition Auhtority expressed opposition to the merger, among other things because of the fear of harm to competition in fresh plant-based beverages (soy milk, almond milk, and so on), in which Tnuva is the dominant player, and which Strauss Group and Wyler Frams sought to break into.

Strauss Group and Wyler Farm did not appeal against the decision, and the merger was cancelled. In the course of its examination, however, the Competition Authority found that, even before the companies applied for approval of the merger, which in the end was not forthcoming, they had agreed that Wyler Farm would not deal in milk alternatives without prior approval in writing from Strauss Group. The Competition Authority director-general found that Strauss Group and Wyler Farm had thus breached the Economic Competition Law.

Concentrated market

The plant-based beverages market is a concentrated market dominated by Tnuva, and it was found that Strauss and Wyler Farm were the only companies working on entering that market in the foreseeable future. Both companies considered a quick entry into the market to be important. The merger agreements immediately halted all of Wyler Farm’s activity in the field, while Strauss Group continued to make progress. The breach not only held back Wyler Farm’s advent as a competitor in the fresh plant-based beverages market, but also diminished its incentive and ability to compete in that market in the future.

The NIS 111 million fine on Strauss Group was the highest provided for in the law at the time that the Competition Authority director-general announced her intention of imposing penalties.

The Competition Authority said that the director-general had taken into account the special circumstances in which Wyler Farm found itself because of the war, and had reduced the penalties on the company and its officers.

Maximum penalty

Fines of this order have never been imposed before for similar infringements. The highest fine up to now was of NIS 39 million, imposed in 2019 on the Central Bottling Company (Coca Cola Israel) for abuses of its monopoly status and breach of the conditions for a merger.

The size of penalties is a function of the sales turnover of the companies concerned, but the law set a ceiling (since revised) of NIS 100 million. By imposing the huge fine on Strauss Group and on company officers, the Competition Authority has made clear the severity of the infringement and its impact on competition.

Strauss Group: We’ll appeal

As soon as the Competition Authority announced its intention of imposing penalties, Strauss Group denied the claim that it had tried to prevent Wyler Farm from entering the milk alternatives market, and said that the dialogue between the companies had been about production and development of tofu products, and not about milk alternatives. Strauss Group also says that the size of the penalty is disproportionate to the value of the deal, which was NIS 20 million.

Competition Authority director-general Cohen said, "The fresh plant-based beverages market is a concentrated market that is growing and is highly important to consumers. We found that the breach had the potential of considerable harm to competition, in that it was liable to prevent the entry of a competing player that could have had an impact on the range of products in this area and their prices. The Competition Authority will continue with uncompromising enforcement in the case of any attempt to harm competition and the consumer."

Strauss said in a statement: "This is a strange and populistic decision, both in its reasoning and in the disproportionate size of the fine, and the company strongly rejects the Competition Authority’s decision. The company and the senior managers mentioned in the decision behaved as expected from officers of a leading public company and in accordance with proper corporate governance and on legal advice. The company is convinced that its conduct was flawless. The company will file an appeal, and we have no doubt that the company’s position will be accepted in the courts."

Published by Globes, Israel business news - en.globes.co.il - on October 30, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Strauss Elite factory in Nazareth  credit: Strauss PR
Strauss Elite factory in Nazareth credit: Strauss PR
Unframe founders credit: Yossi Yarom Israeli AI enterprise platform co Unframe raises $50m

Unframe’s turnkey AI solutions enable companies to solve any enterprise AI use case at scale with fully functional, customized AI solutions for businesses in a matter of hours, rather than months.

Combatica credit: Combatica Combatica launches next-gen VR AI training platform

The Israeli company's virtual reality platform includes 50 AI generated scenarios, seven maps and even situations for operating night vision.

Shekel credit: Shutterstock Vladirina 32 Shekel volatility after US tariffs announcement

The shekel is weakening sharply against the euro, which is gaining following the unveiling of Donald Trump's tariffs plan.

Minister of Finance Bezalel Smotrich credit: Noam Moskovitz Knesset Spokesperson Treasury assesses potential damage to Israel's US exports

Israel will be charged a higher tariff on its exports to the US - its biggest export customer - than Turkey and the UAE.

Iranian flag credit: Shutterstock Why inflation haunts Iran

With a month-on-month increase of 3.3% and an annual rate of 37.1%, inflation reflects the struggles of millions of Iranians.

APM merges with lawyers from Doron, Tikotzky Kantor, Gutman credit: Eyal Merilos APM merges with 12 lawyers from Doron, Tikotzky Kantor, Gutman

With the addition of these 12 lawyers, Amit Pollak Matalon & Co. will now have 135 lawyers.

US President Donald Trump credit: Reuters Sipa USA Israel on list as Trump unveils tariffs

Relatively low reciprocal tariffs will be imposed on Israeli goods sold in the US.

Deflated unicorn credit: Shutterstock Big Tech 50 reports more huge falls in startup valuations

Israeli R&D partnership Big Tech 50 reports that an investment of $2 million in Orcam made in 2021, shrank to just $31,000 at the end of 2024.

NextFerm technologies based on yeast credit: NextFerm Food-tech co NextFerm suspends operations

The company, which produces food ingredients in yeast without genetic engineering, cannot pay its debts and is seeking a buyer.

Minister of Finance Bezalel Smotrich credit: Shlomi Yosef OECD sees recovery in growth but high inflation

The OECD Israel Economic Survey 2025 recommends that the Israeli government take several restraining measures, in order to exit the economic storm created by the war.

Dano Ben-Hur credit: Dror Sithakol Statisticians contradict BoI on impact of housing finance deals

The Central Bureau of Statistics insists the impact of 20/80 buy now pay later financing deals on the real estate market and housing prices is minimal.

Governor of the Bank of Israel Amir Yaron  credit: Government Press Office Debt fears top Bank of Israel's concerns

Most unusually, Governor of the Bank of Israel Amir Yaron's press conference last week did not focus on inflation and the impending interest rate decision.

US President Donald Trump  credit: Reuters/Leah Millis Israel moves to avoid Trump's tariffs axe

Minister of Finance Bezalel Smotrich has signed an order canceling all tariffs on imports from the US. The impact will mostly be on agricultural produce.

Forbes Rich List credit: Shutterstock Maslowski Marcin Wiz founders ranked in Forbes 2025 Rich List

There are a few dozen Israelis listed in the 2025 Forbes Real-Time Billionaires List including Wiz founders Assaf Rappaport, Yinon Costica, Roy Reznik and Ami Luttwak.

SatixFy CEO Nir Barkan credit: Ariel Barkan Canada's MDA Space to buy Israeli satcom co SatixFy

MDA Space will pay $269 million for the Israeli company, including taking on a $76 million debt and a 75% premium on SatixFy's closing price on Nasdaq yesterday.

Raising dollars credit: Shutterstock Israeli startups raised over $1b in March

Israeli privately-held tech companies have raised $2.1 billion in the first three months of 2025, according to IVC-LeumiTech, up 24% from the corresponding quarter of 2024.

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018