The Food Law was one of the great hopes of Israel's consumers, but the version that the Joint Economics-Finance Committee for the Promotion of Competition in the Food Sector approved on Tuesday for the second and third reading by the Knesset plenum will not lower consumer prices. Even the sections which appear to help consumers are ultimately liable to harm them, and for all its good intentions, the legislature will turn out to have made matters worse rather than better.
As part of the transparency chapter, it was decided to require retailers to publish the prices for all products at every store once per hour. The practical result will be Excel tables with thousands of products at every chain, in which consumers will get lost. The search for the cheapest product will be like looking for a needle in a haystack.
While the expanded database won't serve the consumer, it will actually serve the supermarkets. It should be said that the retailers already maintain a dialogue. Not in words, but on the shelves. When one retailer publishes a loss leader and the other retailers match the price, it raises prices for other products, and the other retailers usually follow suit. No supermarket wants to see its profit margins erode, and they all exploit the consumer's limited memory and inattention. Now they will just do this more easily.
Deja vu
The legislature had a chance to say that it wanted to guarantee the public low prices for a basket of basic goods. A basket which would allow every Israeli family to walk with head held high to the supermarket and to live with dignity. This basket should not include 12,000-18,000 items, but a few hundred items at the most. It should include all the important categories and list the competing brands in each one. Many products that are purely optional goods that can actually be hazardous to the health, such as candy, are unimportant. Listing prices every hour does not favor consumers either. Even if a consumer has prepared a computerized database, by the time he or she goes shopping, the prices are liable to change and the file will be worthless.
Another section in the bill deals with restricting shelf space for large suppliers. The bill proposes limiting the shelf space of a supplier with an annual turnover of over NIS 1 billion to 50%. This section makes exposes the legislature to ridicule, because it does not define shelf space by category, but by supermarket.
Take Tnuva Food Industries Ltd. for example. Although Tnuva is a monopoly in the dairy sector, it has never held more than 50% of the total shelf space at a retailer for one simple reason: it is not a player in many categories sold at a supermarket. It does not sell beverages, dry goods, toiletries, and other products. In contrast, in the store's dairy refrigerated section, where Tnuva is a monopoly, under the bill it can continue to keep more than 50% of the shelf space, unless the Antitrust Authority makes the unusual decision to intervene.
Tnuva is, of course, just an example. Under this bill, Wissotzky Tea Ltd. will be able to continue to dominate the tea shelves, Osem Investments Ltd. (TASE: OSEM) will continue to dominate the snacks shelves, and so on.
Things will carry on as they were, and the Israeli consumer will continue to pay.
Published by Globes [online], Israel business news - www.globes-online.com - on March 5, 2014
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