How a handful of companies control prices, ransom the Israelis
This article was written in February 2020.
If there is one thing that the Israelis hate, it is to be "fraierim" - pigeons.But it seems that this is the case of many consumers when it comes to buying items for the house.
AdvertisementFew people know that when they clean their cuisine, the price of their palmolive liquid soap and their Ajax window spray is fixed throughout the country by a single importer and Israeli distributor, which also provides them with their Colgate and Elmex toothpaste,Revlon and Neutrogena beauty products, the Speed Stick deodorant, dressings and others.
All these brands are franchised exclusively to a company that few have heard of, called Schestowitz.
Founded in 1954 by Shimon Shetowitz and now directed by Yoni Schestowitz, it also has the exclusive import and distribution rights of fashion brands such as Abercrombie and Fitch, Issey Miyake, Burberry, Calvin Klein and Jimmy Choo.
Des mannequins portent des créations de la collection prêt-à-porter d’Issey Miyake Automne-Hiver 2020-2021, qui a été présentée à Paris, le 1er mars 2019. (AP Photo/Michel Euler)Si vous utilisez des brosses à dents Oral B, des rasoirs Gillette, du shampoing Wella ou Head & Shoulders pour les pellicules et que vous aimez grignoter du chocolat Cadbury’s, du Toblerone, des Oreo ou des Pringles, les prix que vous payez à la caisse sont fixés par un autre importateur et distributeur unique, peu connu mais également important, Diplomat.
Created in 1963 by a partnership between an American family by the name of Mendel and an Israeli family named Wyman, Diplomat is currently led by Noam Wyman, who discreetly officiates, avoiding interviews in the media.The economic daily, The Marker, which covers and campaigns against the concentration of economic power in Israel almost daily since 2008, has nicknamed it (in Hebrew) "M.High cost of living ".
Together, Shetowitz and Diplomat enjoy exclusive import and distribution rights of an impressive number of brand products that are found in most Israeli households.
This centralized type of control is found throughout the Israeli economy.He stifles competition, guarantees that prices remain high and contributes to the fact that the Jewish state was classified at the beginning of this month as having the eighth cost of the highest living in the world.Nine years after massive social protests against this cost of living, Israel always has more monopolies than the United States or any other European country.
The 2011 social demonstrations and the fall of the holdings of the holdings
After mass demonstrations which brought down hundreds of thousands of Israelis in the streets of all the country - it was estimated at the time that the ten largest commercial groups controlled 41% of the market value of public enterprises - the Knessetadopted anti-trust legislation to encourage competition and reduce monopolies in 2013, [Law For Flom of Competition and Reduction of Concentration].
The law defines as a monopoly a commercial company controlling more than 50% of the market and gives the economy's magnates until December 2019 to reduce the number of strata authorized in Holding Companies of the Pyramid Pyramidal type.It also prohibits companies from holding financial companies, such as banks and insurance companies, the value of which exceeds 40 billion shekels (10 billion euros), as well as non -financial companies whose figure ofbusiness exceeds 6 billion shekels (1.5 billion euros).Indeed, these same owners used public money to contract loans with their own banks in order to finance their own companies.
« Le peuple exige la justice sociale » était un slogan des protestations sociales qui ont éclaté dans tout le pays à l’été 2011. (David Katz/The Israel Project)The magnates that survived had until December 2019 to get rid of excess possession.According to The Marker, those who have invested in public enterprises [listed on the stock market] sold shares for an amount of 5.5 billion shekels (1.4 billion euros) in 2019 following the law of 2013.
But after scandals, several big names in the business world have also fallen into disgrace.
NOCHI DANKNER, the former owner of the Israel Discount Bank (IDB), was sentenced to three years in prison for stock market manipulation and other crimes.On February 2, he benefited from an early parole of four months due to unrecognized health problems, with the blessing of President Reuven Rivlin.
L’ancien président du groupe IDB, Nochi Dankner, est libéré de la prison de Maasiyahu à Lod, le 2 février 2020. (Avshalom Sassoni/Flash90)The authorities are still trying to find some of the goods of the former media and real estate magnate Eliezer Fishman, who went bankrupt in June 2017.
The majority shareholder of Bezeq, Shaul Elovitch, is involved in the famous affair 4000.It would have benefited from 1.8 billion shekels (around 500 million euros) as part of an illegal counterpart agreement in which Prime Minister Benjamin Netanyahu has ensured the business needs of M.Elovitch and, in return, the latter provided him with positive coverage on his information site, Walla.
Israeli banks have been denounced for getting closer to these magnates by granting them extraordinary loans, announcing hundreds of millions of shekels from their debts, then balancing their own accounts by making their regular customers pay more feesraised for daily financial services, which cost billions of shekels to Israelis.
Strong market concentration
Although there is a little less concentration than before 2013, the Israeli economy still remains very concentrated.One of the consequences is a massive gap between the richness of a few families and the rest of the Israeli population, as an analysis of the Journal Haaretz illustrated last year on the 30 richest richer.
L’homme d’affaires israélien Yitzhak Tshuva s’exprime lors d’une conférence sur l’énergie à Tel Aviv, le 27 février 2018. (Flash90)The most blatant example is the natural gas monopoly that Netanyahu has personally passed to the Bulldozer by the Knesset in 2015, providing exceptional profits both for the Delek group belonging to Yitzhak Tshuva (which is evaluated at 4.5billions of dollars by Forbes magazine) and for the noble Energy company based in Texas.The reason for this decision, which pushed David Gilo, then commissioner of the antitrust authority, to resign, was never clear.Tshuva has also invested a lot in water desalination and is an important shareholder in the twelfth television channel, with Dorit Wertheim, Dudi Wertheim's sister (see below).Channels 12 and 13 broadcast the most popular information programs in the country.
Idan Ofer (see below) was the owner of the thirteenth chain but agreed last year with the Competition Authority that, as a condition for entering the Private electric power plant market, the OFER group would renounce its activities inthe media sector for 25 years.
Photo de feu Sammy Ofer avec son fils, Idan Ofer. (Moshe Shai/Flash90)OFER, with his two brothers and sisters, divided the business of their late father Sammy Ofer, thus controlling another important part of the economy.Idan directs the fertilizer and special chemicals industry, controlling mining extraction and oil refineries through the Holdings Israel Chemicals Limited and Oil Refineries LTD (Bazan).Brother Eyal controls maritime transport and, with Dudi Wertheim, he shares the majority participation in Bank Mizrahi Tfahot, the third largest bank in the country and a major mortgage lender.Laura Ofer supervises the considerable real estate activities of the family.
The factories linked to OFER were responsible for at least 1.2 billion shekels (300 million euros) of public health damage in 2018 due to air pollution, according to a study published in November.
Higher prices, less choice
Market concentration not only leads to high prices, but also a reduced choice for consumers.The Israeli dietary market, for example, is dominated by only a handful of companies - TNUVA, known for its dairy products, also has Adom Adom meat, Sanfrost frozen vegetables, Mama Off chicken and Tirat Zvi cold meats.
Unilever Israel presides over the development of savory snacks such as Beigal, Klik chocolate, Dove, Knorr, Lipton’s Tea, Mayonnaise Hellman’s, Breakfast cereals and Strauss ice cream.
OSEM's "big and happy family" includes cereals for breakfast Nestlé, Bamba, Bizli, Beigele, Pasta, Ketchup, Soups, Shkedei Marak (croutons), Vitaminchik fruit drinks, Taster's coffeeChoice and the producer of vegetarian food Tivol.
Une employée d’Osem remplit les rayons d’un supermarché Rami Levy à Jérusalem, le 20 février 2020. (Sue Surkes/Times of Israel)These products tend to dominate the "eye" rays of large supermarkets.As small producers have testified on Israeli television in the past, entering the big supermarkets is a relatively Herculean task.Being relegated on the top or bottom shelves where few people look are therefore completely normal.
According to the Israeli Institute for Economic Planning (IEP), a non -profit reflection group, the monopolistic markets that most directly affect the consumer include food and drinks, babies, toiletries, paintingsAnd lacquers, electricity, water, air transport, recycling, parking lots, postal services, wired media, telephone and internet infrastructure, television, refined petroleum products and gas exploration.
The IEP examined 317 different markets having a direct impact on consumer receipts and found that 111 of them - more than a third - were controlled by monopolies.Of these 111 monopolies, 69 had been declared as such by the Competition Authority.
He also found that the people most affected by the lack of competition were the poor, because the high prices absorbed a larger share of their income.
And just as competition is insufficient in Israel, that from abroad - which could lower prices - is limited by formidable import barriers, especially in sectors such as agriculture.
VAT on all Amazon, Ali Express commands under study
The chief economist of the Ministry of Finance, Shira Greenberg, speaks for a few months of perceiving VAT (17%) on all the items ordered from foreign online retailers, such as Amazon and Ali Express, to help bring togetherfund necessary for the reimbursement of the country's deficit.
Until now, purchases of less than $ 75 have been exempt from VAT, which allows Israelis to get around the prices swollen in their country and put pressure on Israeli retailers to also lower their prices.The number of packages arriving in Israel for such platforms has increased from 8.5 million ten years ago to around 50 million today.The population of the country amounts to around nine million inhabitants.
Sur cette photo du 20 décembre 2017, un employé sélectionne un article sur un rayon et le scanne avec un terminal portable pour exécuter la commande d’un client à l’entrepôt Amazon Prime à New York. (AP Photo/Mark Lennihan)To the question of how much the government is supposed to win by eliminating this exemption, a spokesperson for the Ministry of Finance has just answered: "It will be relevant when there is a government and budgetary discussions".
High lifestyle
It is the high concentration of the market at the heart of the Israeli economy which largely explains why a study by CEOWORLD published at the beginning of the month revealed that Israel ranked in the eighth place in the cost of living,above countries known to be expensive such as Singapore and South Korea.
It should be noted that the Israeli average monthly salary amounted to 11004shekels (2862 euros) in July 2019, according to the Central Statistics Office.In Singapore, it would be 5034 euros.
Lobby99, a non -profit organization that makes crowdfunding to put pressure on the government and the Knesset on behalf of the citizens, discovered that Schestowitz controlled around 66% of the toothpaste market while Diplomat reigned over around 80% of the marketrazors, 81.5% of the market for antipellicular shampoos and 57% of the liquid soap market.(Editor's note: the director of public policy and government relations at Lobby 99 is the wife of an editor of Times of Israel).
According to The Marker, Shetowitz also controls almost 52% of the pasta sauces market, thanks to its exclusive import and distribution rights in Barilla, and 32% of the soybean drinks market, thanks to its rights on Alpro.
Yoni Schestowitz, propriétaire et PDG de Schestowitz. (Capture d’écran)Lobby99 investigators compared Israeli prices with just under 70 products imported by Diplomat, Shetowitz and another company called Leiman Schlussel with those of the United States.(Two other companies which matter exclusively similar products, but which have not been included in the research of the lobby99, are Unilever Israel and Alpha Cosmetics, the latter belonging to the Brand family.Alpha has exclusive import rights of Nivea, Labello and a multitude of prestigious perfumes).
Les écarts les plus flagrants concernent les ventes de Gillette de Procter & Gamble par Diplomat et de dentifrice Colgate par Schestowitz.A package of 16 Gillette Fusion razor blades proved to cost 159.90 shekels (41.57 euros) in Israel and 54.36 Shekels (14.13 euros) in the United States, while a Skinguard razor costs 64Shekels (16.64 euros) in Israel against 29.36 Shekels (7.63 euros) in the United States.
A tube of 100 milliliters of COLGATE OPTIC White toothpaste costs 23 shekels (5.98 euros) in Israel, compared to 8.23 shekels (2.14 euros) in the United States.
Out of 69 articles, only 16 were cheaper in Israel, including (at Diplomat) Café Jacobs (imported from Russia), Pampers (from Germany and Mexico), La Tide de France gel, Milka products from Germanyand Baci treats produced in Italy.
Des articles de Colgate en vente à Jérusalem, le 5 février 2020. (Sue Surkes/Times of Israel)In parallel with high prices, we regularly hear allegations of intimidation behavior on the part of large importers and distributors to put an end to what is called parallel imports.Large international companies set different prices for different countries.Importers who buy stocks abroad where a particular product is cheaper and then offer to sell it in Israel at a lower price are called parallel importers.
Harel Wiesel. (Capture d’écran)Fox Group, owned and managed by Harel Wiesel, has the franchise for Nike and Foot Locker (through its retailers subsidiary), as well as for other major brands such as American Eagle, Billabong, Mango, Children's Place,Urban Outfitters, Fox (Mode) and Fox Home.He owns the Fashion and Household items online Terminalx and S "is associated with the retailer of Babies Shilav and Leline, which sells bath and beauty products.
Fox Group sells Nike products in its Nike and Foot Locker stores, as well as in some of its other smaller sports stores.Currently, he also creates a new channel called Just Sport.
Last week, eight owners of sports stores filed a collective action for an amount of 230 million shekels (57.5 million euros) before the Tel Aviv District Court against Nike Israel and Retailers, accusing them ofProof of discrimination and take punitive measures against them (for example, by interrupting supplies, delaying the delivery of models presented in other stores), blocking cheaper parallel imports and coordinating prices in stores.
Shetowitz, on the other hand, appeared before the district court of Jerusalem, which acts as a competition court of the country, for having agreed with Colgate-Palmolive in order to try to limit parallel imports and to rule out competition.The Competition Authority brought the case before the court in 2018 after discovering more than 2000communications by email between Schestowitz and Colgate Palmolive sent over several years and containing detailed reports of the first on parallel imports of productsColgate in Israel.
The Marker reported on Wednesday that the court had suggested a compromise and gave the competition authority and Schestowitz until March 9 to reach an agreement.In the meantime, he imposed a temporary prescription allowing Shetowitz to continue to communicate details to Colgate-Palmolive such as the name of the store where parallel imports are sold, but without details such as barcodes and photographs.Communication must be done solely in writing and in a format that the competition authority can control.
At the beginning of this month, the program "It’s Worth Money" of the thirteenth chain interviewed Yossi Kagan, CEO of Lindo, an important parallel importer of perfumes in Israel.Kagan said that about two months ago, he started to supply the BE branch of Shufersal, which sells beauty and interior products, in what he described as the first initiative of a large channelto sell parallel imports.Lindo, and in turn the BE channel, sold at lower prices than those fixed by Schestowitz.
Yossi Kagan, PDG de Lindo, un importateur parallèle de parfums. (Capture d’écran)Suddenly, said Yossi Kagan, strange things have started to happen.He had the surprise visit of four officials from the Ministry of Health who interviewed him about his sales to the BE channel.There have been attempts to prevent some of its customers from buying their products."Even if I buy at higher prices, I always sell cheaper than Schestowitz," he said on the show.For example, he said that the BE channel was able to lower the price of a bottle of 100 milliliters of Narciso Rodriguez by more than 400 shekels (100 euros) to 299 shekels (74.75 euros) after signing with him.Last week, she was still sold in the SuperPharm pharmacies chain at 424.50 Shekels (106 euros).
Coca Cola sentenced to a fine of 39 million shekels
In March 2017, the Central Bottling Co.by Dudi Wertheim (Coca Cola Israel) was inflicted a fine of 62.7 million shekels (15.67 million euros) for having exploited his status as a monopoly and tried to repel competition.The fine was reduced in December to 39 million shekels (9.75 million euros).
Des bouteilles de Coca-Cola empaquetée dans l’usine Coca-Cola à Bnei Brak, le 23 novembre 2009. (Yaakov Naumi / Flash90)Among the policies that the company would have adopted, there was a refusal to authorize the presence of competing products in the refrigerators it provided to the retailers, as well as the attempt to force retailers to withdraw the refrigerators from the competitors.
The Central Bottling Company exclusively markets Coca-Cola and non-alcoholic beverages such as Kinley, Fanta, Sprite and Fuze Tea.It also has the Tara dairy (and its subsidiary Meshek Zuriel Dairy), Neviot mineral water, fresh prigat juices and the brassing license of tuborg beer, Carlsberg, Stella Artois, Guinness and others in Israel.
Colgate: only fights against cavities?
Lobby99 was created in response to the presence and power of the 215 commercial lobbyists employed by companies to influence the 120 parliamentarians of the Knesset.
People who make donations to Lobby99 can vote on the issues on which the organization should concentrate.During a vote in September, the fight against high prices of imported products obtained the most votes.
Lobby99 wrote to Michal Halperin, director of the competition authority, at the beginning of this year: "The case of Schestowitz [and its alleged report to Colgate-Palmolive on parallel imports of the company's toothpaste] provides a study ofrepresentative case of the lack of competitiveness on the imported consumer goods market ”.
He asked the competition authority to examine these exclusive agreements and impose sanctions on restrictive practices, which are prohibited by law.
Dror Strum. (Crédit: Facebook)Dror Strum, former head of what was then called the antitrust authority, which today directs the Israeli Institute of Economic Planning, asked Michal Halperin to declare the monopolies of Schestowitz and Diplomat, citing both theDefinition of a monopoly on the 2013 law as controlling more than 50% of the market in a particular sector, and the wider definition contained in an amendment to this law adopted in the summer of 2019.The amendment has extended the definition of a monopoly to companies which do not necessarily control more than half of the market, but which provide much higher prices than they could offer in a more competitive market.
Michal Halperin has not yet responded to Dror Strum.But she informed Lobby99 at the beginning of the month that she would not declare the two behemoths in monopoly situations - despite the fact that Schestowitz and Diplomat control more than 50% of the market in certain sectors and that their products have been showncost more than abroad.
Michal Halperin, directrice de l’Autorité de la concurrence. (Capture d’écran)Halperin argued that the authority "did not prohibit, mostly, exclusive agreements", adding that "exclusive agreements, being vertical agreements, can be effective for consumers".
She said that any decision that companies were monopolies is only declaratory, and has refrained from defining the exclusive agreements of these monopolies as restrictive practices.
Declaring a monopoly can have serious consequences.First of all, this considerably facilitates the legal action of citizens against monopolies, because they do not have to prove monopoly practices, which is notoriously difficult.They just have to prove that the monopoly abused its position.Second, this obliges the company to put order with her - to review her prices and his behavior towards her competitors and to ensure that she does not use her power on one product to sell another by grouping togetherboth.(An example would be to sell only a gillette razor with a deodorant).Failure to comply with the law would then expose this company not only to collective appeals before the courts, but also to the intervention of the Competition Authority.
Eli Cohen, membre du parti Koulanou et ministre de l’Economie et de l’Industrie, assiste à une réunion de la faction Koulanou à Tel Aviv, le 1er avril 2019. (Flash90)Last week, the Minister of Economy, Eli Cohen, intervened, threatening to legislate if Michal Halperin did not qualify companies of companies such as Schestowitz and Diplomat.The interested party retaliated, considering that the authority was not subject to political interference.
In his intervention on the program "It's Worth the Money", Ms. Halperin insisted that parallel imports had increased in recent years and that the competition authority has stood up to "dozens of large companies", amongWhich Coca Cola, Tnuva, Bezeq (who was inflicted a fine of 30 million shekels), the port of Ashdod and Schestowitz.
But she abstained to use her power to prosecute the monopolies criminal.In fact, there have been no criminal proceedings in Israel for many years.
And the fines that have been imposed are a brutality for giants such as Coca Cola.
Cartels of tree tailors and laundry merchants
The report of the authority on its activities in 2018, published in Hebrew at the end of last year, details the "agreed" fines with certain large companies such as the Shufersal supermarket chain (2,90000 Shekels) and the Delek group(257,000 shekels).
But an editorial of Haaretz of the beginning of the month accused the organization of focusing on small and medium -sized enterprises such as the cartels of trees and laundry merchants and on an attempt at the taxi driver union to preventDrivers to grant discounts to people who go to Ben Gurion International Airport, rather than opposing large monopolies.(By the way, this is not a coincidence if Uber is not in Israel - the country's taxis lobby is far too powerful).
It reflects the statements of criticisms that authority has failed to tackle the main areas of economic concentration that really have an impact on people's lives, such as banks and the monopoly of natural gas.And he stressed that other public organizations such as the Israeli securities authority, the Israeli tax authority, the banking supervision department of the Bank of Israel, the Institute of Israel Standards and the Ministry ofEnvironmental protection treat great players in the same way with velvet gloves.Why ?"Because large companies have batteries of lawyers and economists who undermine the confidence of the authorities in their ability to file a complaint and have them condemned".
Distributeurs de la banque Hapoalim. Illustration. (Crédit : Yonatan Sindel/Flash90)In a statement to the Times of Israel, the Ministry of the Economy has listed various measures which, according to him, have been taken to reduce market concentration and lower the cost of.These include the so -called Cornflakes law, adopted in 2015 - which authorizes parallel imports and aims to reduce the delays in leaving ports of ports - as well as regulatory reform and measures to introduce into the countryup to five items, or up to $ 1,000 in goods (depending on the highest amount), per month, without import permit, as indicated on the government's website (in Hebrew).
But criticisms say that there is no real political will to oppose monopolies and that there is no concerted consumer effort to lower prices.
As long as the public debate is dominated by security and the elections will be held on the basis of personalities and ideas rather than on the real questions of the day, organizations such as Lobby99 and the Israeli Economic Planning Institute will continue to leadA difficult battle for change.
