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Are the major coffee chains in Israel an illegal cartel?
By NIV ELIS
10/10/2013
Naftali Bennett requests antitrust commissioner to investigate possible price-fixing among primary national chains.
 
Economy and Trade Minister Naftali Bennett on Thursday requested that antitrust commissioner David Gilo to investigate reported price-fixing among the major coffee chains in Israel.

The request follows a report in TheMarker that coffee shop executives regularly shared information and discussed whether or not they would lower prices following the entry of discount coffee house Cofix to the market.

“This morning, I was surprised to read in the media that leaders in the coffee chains exchanged messages, ostensibly to coordinate and keep the price level as high as it is today,” Bennett wrote Gilo in a letter. “The things described above, if they are true, harm the government’s stated policy of dealing with the cost of living, and may break the law.”

In its report, TheMarker quoted Café Café owner Ronen Nimni saying, “We [the coffee shop executives] are online, on the phone, I talk with them and we’re in touch with everyone.”

He continued: “Ultimately we’re all friends, we’re all together. All the big chains, we’re all in touch and we’re all talking and no one is going to reduce prices.”

According to the report, coffee chains make up less a third of Israel’s coffee shops, though they take in 70 percent of the sales.

By working together to keep prices fixed instead of competing, a term known as collusion, the chains ostensibly form a cartel.

While they benefit from keeping the prices high, they harm the consumers. The entry of Cofix, which offers coffee (and everything else on its menu) for NIS 5 – less than half the price of coffee at the big chains – might have otherwise encouraged the bigger chains to drop their prices to keep from losing business.

Many governments outlaw collusion, the same way they work to break up monopolies.

Upon the opening of the first store last week, Cofix CEO Avi Katz told The Jerusalem Post that he was convinced its success would force established coffee shops to bring down their prices.
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