The plan to break the monopolies of the Ministries of Economy and Finance will be launched within the framework of the Settlements Law, with the exception of sections that will require special legislation. The program, parts of which have been unsuccessfully promoted in the past as well, is designed to address one of the most acute problems in the Israeli economy – the control of a number of importers. The result is several times higher prices compared to Europe and the USA.
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This is a particularly ambitious initiative. The goal is to “break” the control of the major importers who own the main brands – from imports and local production and more than half of the products sold in the grocery and pharmacy chains.
These are the main names that came up in the discussions: in the food sector local production and imports – Tnuva, Strauss, Unilever and Asem; In the field of cleaning and personal hygiene products – Diplomat, Shastowitz, the Central Company and Sno. The companies that will enter the size category will be examined according to their market share in the various fields, and the exact details, the cataloging method and the type of structural change that will be determined have not yet been formulated.
The power of these monopolies and companies is great, and it is expected that Economy Minister Nir Barkat and the entire government will encounter great opposition, including in the Knesset – where the companies will try to oppose and text the plan.
And against this background, it is worth noting that a share diplomat one of the largest importers in the economy, fell today (Monday) by more than 10% since the publication of the plan.
The first step: strict restrictions on monopolies
The plan was written after an in-depth study conducted by the Ministry of Economy on the effect of monopolies on the cost of living, and after legal and economic consultation. It includes two main sections: one, which is published for the first time here in Globes, is severe restrictions that will be imposed on companies that control a monopoly market share. The monopoly threshold will be determined according to the field and its characteristics, and not according to a fixed threshold of half of the market share.
Among the companies that will be affected by the move are Strauss, which controls 70% of the milk delicacy market; Diplomat, whose share in the washing powder market reaches 58% and in the Gillette razor market to 73%; and Unilever, which controls 74% of the mayonnaise market and 51% of the cornflakes market.
The companies at the center of the government plan
The food sector:
● Yield
● Strauss
● Unilever
● Barn
The field of personal cleaning and gardening products:
● Diplomat
● Shastowitz
● The central company
● Snow
As part of the program, close supervision will be imposed on the companies to ensure that they do not abuse their power, thus preventing damage to parallel imports or competitors. Many times chains try to import products themselves, but encounter joint resistance from the local companies, manufacturers and monopolies, who threaten to refrain from supplying other products.
Also, in many cases importers file idle lawsuits against parallel importers, and prevent, with the cooperation of the major manufacturers from abroad, the granting of permits to parallel importers, which are necessary to obtain the import permit from the Ministry of Economy.
Second step: the suppliers will be forced to choose one area
The second part of the program is related and coincides with the previous one. Upon its implementation, the monopolistic companies will be forced to focus only on one significant area, and will not be able to market flagship products that sell best in the market from other areas.
That is, a supplier like Diplomat will be forced to give up some of its big brands and focus on one import area. Diplomat today markets the products of the giant Proctor & Gamble corporation (Pampers, Always, Gillette, Ariel laundry powder, Pantene shampoo and more); This is in addition to Kellogg’s products, the manufacturer of breakfast cereals and salty snacks such as Pringles; and the products of the Mondelez Corporation, which sells food products such as Milka Cadbury chocolate and Toblerone, Oreo cookies; And also Starkist the tuna giant.
So are local producers and suppliers such as Tnuva, Strauss and Asem, who will be forced to cut back on overlapping areas of food products. Assem and Strauss will give up marketing products of other manufacturers in the food sector such as honey, energy bars, processed and frozen agricultural products and more.
According to sources in the Ministry of Economy and Finance, “the plan is a real structural change in the trade of everyday products, and its implementation, although it will certainly encounter great opposition, should lead to a price reduction of tens of percent in hundreds of products that are in the permanent basket of an Israeli family.”
The result, the offices hope, is to bring new players into the fields of marketing and distribution of various products and lead to real competition in the economy.
Not everything is glittering: what was left out of the plan
However, in the plan there is no reference to the heavy government regulation and the excessive supervision of imports. In this matter too, steps have been taken in recent years to improve, but in many areas the problems remain, such as in care products and other products that are under the responsibility of the Ministry of Health. In addition, the program does not refer to marketing chains that market products themselves, such as Shufersal and Rami Levy, which in many cases thus harm the competition.
The Ministry of Economy says that this plan is part of a broader move in which all the factors related to the cost of living in Israel will be addressed. For example, the issue of the intermediation gaps between the producers and the shelf price is also being examined, and it is possible that changes in this area will also be proposed in preparation for the raising of the Arrangements Law.
“What was is not what will be,” declared Economy Minister Nir Barkat during his visit last week to the Standards Institute. “It is unacceptable that the citizens of Israel will suffer from the absurd burden of regulation – which causes the citizens of Israel to pay much more unnecessarily. I have instructed the Ministry of Economy and Industry team to formulate as soon as possible a series of recommendations that will reduce the barriers to importing products from abroad, that will increase competition and lower the prices of products.” A binding declaration, and its implementation will be examined soon.
Economy Minister Nir Barkat / Photo: Eyal Yitzhar
Barkat, Smotrich and Netanyahu: the new economic kitchen
The plan in question was born in the limited economic kitchen of the new Israeli government that we reported on in Globes about two weeks ago, consisting of Prime Minister Benjamin Netanyahu, Finance Minister Bezalel Smotrich and Economy Minister Nir Barkat.
Minister Barkat, like Netanyahu and Smotrich, has been dealing with economic matters in recent years, and even stated in the past that he wanted to be finance minister. Although he, like other members of Likud, were disappointed by Netanyahu’s decision to appoint Smotrich as Minister of Finance, he also plans to lead reforms in the Ministry of Economy. He derives some of them from an economic plan for Israel that he formulated together with Prof. Michael Porter from Harvard University.
A central part of the plan is a fight against monopolies and centralization, as it is now manifested. The principles of the current plan were already raised at the first meeting of this kitchen about two weeks ago which dealt with steps to reduce the cost of living. Smotrich was entrusted with the economic measures mainly in tax matters, which were presented last week, and Barakat with the issues in his field, especially the lack of competition affecting the cost of living. He presented the plan to Smotrich and the finance officials last week, and also to Netanyahu and received their support.