The Law of Arrangements currently being discussed includes a plan to reduce centralization in the economy and increase competition in the food sector. In general, this includes limiting the activities of the major importers while imposing prohibitions on them to represent manufacturers. The bill prohibits a supplier that supplies groceries from a large manufacturer from supplying groceries from other large or medium-sized manufacturers, unless it supplies no more than 50% of the large manufacturer’s turnover. Even then, he will only be able to sell products from other manufacturers, provided that even in those he cannot exceed half of the sales.
In a position paper submitted today by the Union of Chambers of Commerce to the Ministry of Finance, the union claims that while the goal of reducing the cost of living is a welcome one, the way it is done in the area of food and toiletry is wrong and will not lead to a reduction in the cost of living. The move promoted by the Ministry of Finance will create legal and contractual problems with suppliers and manufacturers abroad and may ultimately lead to a wave of price increases and the disappearance of leading brands from the Israeli market.
It is further stated in the union’s position paper that the proposals in this chapter of the Law on Settlements against successful business companies are invalid and unnecessary on at least three levels: also on the principle level in the sense of trampling the basic principles of a free market and competitive policy beyond what is stipulated in the Competition Law and the Food Law; Also on the practical level, since they will not promote any price reduction and any relief for the consumer, perhaps on the contrary; And also in a fundamental concept of economic policy, which should encourage competition while bringing in more players and more producers and not limiting the number of players and limiting the number of producers.
In the position paper, the union points to a number of key failures in the plan, and they are:
There is no guarantee that the new importer will lower prices. If the public agreed to pay the existing price today, what interest does another importer have in lowering the price?
The proposal could lead to a reduction in the variety of products flowing to Israel. The international companies are not ready to work with any local importer and the result could be harm to the variety of products that the Israeli consumer enjoys.
The local importer is obliged to make a large investment in systems CRM and customer service, automation, quality control and more. All these translate into costs of millions of shekels. If this entire array has to serve only one brand, it may no longer be financially viable for the local importer or alternatively the price of the brand will actually have to rise.
According to the bill, the direct importer will be required to include a clause in his agreement with the manufacturer according to which he allows direct importers of the manufacturer in other countries to sell to parallel importers in Israel. What can be done when the manufacturer refuses to include such a clause in the agreement?
The bill claims to dictate commercial terms to a large international manufacturer, as if the large international manufacturers are under the control of the state. This is an unfounded pretension. It is the large international manufacturer that dictates the price to the Israeli supplier. The attempt to dictate in the Israeli legislation the conditions set by the manufacturer is no less than delusional and also indicates a failed fundamental concept in the whole handling of the issue.
Uriel Lin, president of the Union of Chambers of Commerce and who led, among other things, the legislation of the basic law on freedom of occupation when he served as chairman of the Knesset’s Constitution Committee, says today that “freedom of occupation and the right to property are rights that have been granted constitutional status ‘above the law’ and ordinary law cannot harm in them without any factual justification. The importer’s agreement with the manufacturer is a proprietary right of the business. Now they want to cut off this right. This is a disproportionate violation of the freedom of occupation, and this in addition to an ordinary provision of the law, which contradicts a provision of a fundamental law.’
It should be remembered that the businesses that today bring brands from several manufacturers have invested quite a bit of money in order to create a market for those brands. Investments in marketing, advertising, distribution systems and more. Now they ask that the direct importer be responsible for the business success of the indirect import.
According to Lin, there are already many tools designed to enforce and protect competition in the food sector. The problem is that they are not implemented. “Instead of exercising the powers that currently exist in the Competition Law and the Food Law, the government is creating new draconian laws that do not even exist in communist countries, while creating legal and commercial problems. We have not seen a precedent for this type of proposal and such a rude intervention by the regulator in the private market. The state should not divide private sector brands into quotas and determine what market share each business will hold. The state should encourage competition and reduce the burden of regulation instead, the Israeli market should be opened to the entry of additional manufacturers, make it easier for competing importers, lower tariffs on the import of consumer goods from China,” says Lin.