Kedmi C'tee’s report on food industry targets market share

The Kedmi Committee submitted its final report on the food industry Wednesday, recommending that the state restrict the market share of leading suppliers and retailers, reduce customs duties and increase consumer protection.

The committee published a preview of its conclusions on the supply and retail sectors last month. At the time, it received criticism from Knesset Finance Committee members and industry groups, who argued that the report’s conclusions could lead to mass layoffs without achieving its stated goal of reducing prices.

Industry, Trade and Labor Minister Shalom Simhon and Finance Minister Yuval Steinitz said Wednesday the measures proposed in the final report would lead to a reduction in food prices. Simhon called it the most comprehensive work ever conducted by the Israeli food industry. The government would decide in the coming days whether to accept the whole report or most of it, he said.

Sharon Kedmi, who was appointed to head the committee after it was established in response to a consumer revolt over dairy prices last year, said high prices were the consequence of a number of market failures. He warned that there was no magic solution to reducing food prices, and only the implementation of the report “in its entirety” would strengthen competition.

The report recommended imposing a 40 percent to 100% reduction on import duties on food products for which no competition exists in Israel, lowering duties on agricultural products for which current rates are excessively high (such as fresh beef) and reducing duties on packaged goods such as tuna and fruit juice.

On the consumer front, the report recommended a series of measures including: strengthening enforcement of consumer laws; increasing the powers of the head of the Consumer Protection Authority and transferring to it some of the duties of the Industry, Trade and Labor Ministry; and regularly publishing comparisons between the price of imported food products in Israel and the rest of the world.

Just as it did in its initial report, the committee proposed regulating supplier- retailer relations through prohibiting suppliers from purchasing shelf space, placing salespeople inside stores, obtaining exclusivity to sell specific products or to offer exclusive discounts and signing agreements that fix a minimum price or guarantee them a minimum market share.

It proposed dealing with over-concentration in the supply sector by removing barriers to market entry.

For the retail sector, it recommended increasing the number of competitors though a series of measures including: reducing regulatory barriers to opening new supermarkets in regions already suffering from high concentration; restricting the leading retailers from increasing their market share by preventing them from expanding their outlets; tightening state control over property agreements involving retailers; and encouraging online and local retailers.

In a separate chapter on the dairy industry produced by a subcommittee, the report recommended gradually lowering the target price, the amount a dairy-herd owner gets for a liter of milk at the gate, by 15% over the next eight years. It proposed handing out incentives to convince inefficient dairy manufacturers to exit the industry.

The Israeli Cattle Breeders Association slammed the report, accusing Simhon of worrying about his political survival at the expense of familyowned dairy farms in the periphery.

ICBA chairman Ya’acov Bachar said: “Even though it has been proven in the past that there is no connection whatsoever between the cost of milk to the consumer and the payment made to dairy farmers for producing milk, and even though the target price has not risen since January 2008 and still stands at NIS 2.09 per liter, Minister Simhon continues on the path toward the elimination of the Israeli dairy farm and the elimination of livelihood in the periphery.”