Lapid presents bill to Finance Committee to bring down food prices

Food prices in Israel have soared in past decade, relative to OECD average by 25% this year

By
December 10, 2013 04:57
2 minute read.
Fruits [Illustrative]

Fruits 370. (photo credit: Wikimedia Commons)

Finance Minister Yair Lapid presented a bill to reform the food market and bring down prices on Monday to a joint meeting of the Knesset’s Finance and Economy Committees.

“We will not hold back on any efforts to bring down the cost of living,” said Lapid, calling the proposal the “most important law for increasing competition in the food market.”

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Israel’s food prices have soared in the past decade, from 10 percent below the OECD average in 2004 to 25% above it this year, Economy Minister Naftali Bennett said in a video posted to his Facebook page explaining and backing the law, on Sunday.

According to Lapid, the average household spends 16% of its income – NIS 2,250 – on food.

The bill, based on the findings of the “Kadmi Committee” in the Economy and Trade Ministry, lays out three avenues of reform.

The first is increasing price transparency, requiring big chains to publicize their prices in an online database that will allow consumers to search for the lowest price.

“There will be competition for all the products between all the chains in Israel,” Bennett said.

The second component is increasing geographic competition by mapping out what chains service particular communities in Israel.

If a community has just one supermarket, for example, the government would block that chain from opening another branch – which would effectively lock out local competition – in the same community.

The third would be to impose limits on suppliers that have enough market power that they push a set of products to sellers to the disadvantage of both the markets and consumers.

The focus on competition comes from data that demonstrates how a very limited number of suppliers control large portions of the market.

The top three suppliers accounted for 93% of the carbonated beverage market, 90% of the dairy product market, 83% of the coffee market, and 60% of the retail food market (e.g.

supermarket chains).

Several Knesset Members on the committee expressed disappointment in the bill.

Yesh Atid MK Ofer Shelah said the bill didn’t go far enough, saying that the actions to bring down food prices in two years were not sufficient.

Likud MK Gila Gamliel said the issue of concentration among the producers should be targeted.

Shas MK Yitzhak Vaknin, called for reinstating price controls.

Amir Hayek, head of Israel Manufacturer’s Association, warned that the reforms could be disastrous for the industry and its employees.

“Since the Trajtenberg committee, the food industry is undergoing legal torture,” he said, referring to the committee for social change that set out vast policy recommendations in the wake of the 2011 social protests.

While not averse to competition, he said, the underlying causes of the increasing food prices was unrelated.

Higher input prices were to blame, he said, estimating that increased an average of 40% as a result of increases in the minimum wage and price targets for supervised products, like milk.

The price of water alone, he noted, has gone up 220%.

The solution, he said, was reducing regulation and bureaucracy.


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