Panel recommends forcing tycoons to choose between holdings

Netanyahu: Committee was established to boost competition, lower cost of living.

By NADAV SHEMER
September 20, 2011 03:17
3 minute read.
shekel and dollar

shekel versus dollar 521. (photo credit: REUTERS)

 
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The Committee on Strengthening Market Competitiveness submitted its interim findings to the government on Monday, recommending that business magnates be banned from simultaneously controlling large financial and non-financial institutions.

Prime Minister Binyamin Netanyahu said at a press conference in Jerusalem that the committee - which took almost a year to reach its conclusions – was established to help address the high cost of living, which he said was the result of a lack of competition.

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One of the panel’s key recommendations was to enforce the separation of financial and non-financial holdings by prohibiting large non-financial corporations or companies controlling large non-financial corporations from controlling financial institutions.

According to the committee’s definition, a large financial corporation is a company that has NIS 50 billion or more in assets under management, and a large non-financial corporation is a company with more than NIS 8 billion in sales.

Large companies will now have a chance to respond to the draft report. According to the business daily Globes, holdings that should escape scrutiny because of the committee’s definitions will include Nochi Dankner’s control of supermarket chain Shufersal, Shari Arison’s control of Shikun U’binui Holdings and Bank Hapoalim, and Apax Partners’ control of leading food manufacturer Tnuva and Psagot Investment House.

However, Globes said Dankner’s IDB Holding Corp.



will have to give up its controlling share in Clal Insurance, and Yitzhak Tshuva’s Delek Group will likewise have to give up control of Phoenix Holdings. It said Zadik Bino will be given a choice between selling Paz Oil Company and First International Bank of Israel.

If the recommendations are approved, controlling shareholders in both large financial and large non-financial institutions will have four years in which to sell one of them.

Netanyahu said the report would be submitted to the cabinet within three months but warned that while the aim was to increase competition, it must not damage Israel’s business sector.

“We don’t want to harm business growth. Businesspeople lead the way in the economy, create jobs and are important to the market. They are friends of the Israeli economy and we must ensure that continues,” Netanyahu said.

The committee, more commonly known as “the committee on market concentration,” also recommended ways to break up holding companies with a pyramid structure, called for the Antitrust Authority’s powers to be expanded, and said the authority’s director should be tasked with examining the effects that privatizing large infrastructure and natural resources companies have on market concentration.

In its conclusions on holding companies with pyramid structures, the committee argued against imposing restrictions, recommending instead that they be regulated through the tools of corporate governance.

This way, it said, investors will be able to decide when a pyramid structure benefits them or whether it serves only the controlling shareholder’s interests.

Finance Minister Yuval Steinitz and Bank of Israel Governor Stanley Fischer, speaking at the press conference, both praised the committee for its findings.

Steinitz applauded its suggestion on separating control of financial and non-financial institutions. Implementation of the recommendations “will lead to a more efficient distribution of market capital,” he said, and to the continuation of the Israeli economy’s ongoing development.

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