Government Approves Reforms Aimed at Lowering Price of Food

Measures place limits on how much the big food retail chains can expand, put restrictions on relations between manufacturers and retailers and give the treasury more authority to impose price transparency.

The government on Sunday unanimously approved recommendations of two panels charged with reforming the food and milk products sectors with the aim of bringing down consumer prices.

The recommendations of the government panel on competition and prices in the food sector, popularly known as the Kedmi committee, places limits on how much the big food retail chains can expand in the future, puts restrictions on relations between food manufacturers and retailers, streamlines regulation and gives the treasury more authority to impose price transparency. In addition, the reform will lower import barriers.

Among other things, the Kedmi reforms will bar big food manufacturers from buying exclusive shelf space in supermarkets or from compelling retailers to limit the number of competitors whose goods they carry, thereby depriving consumers of choice.

The reforms will allow multiple importers of the same product to compete with one another. They will also entitle the industry minister to order retailers to create separate shelves for price-controlled goods.

"We'll do for the food market what we did for the cell phone market. This is an important development for bringing down the cost of living," Prime Minister Benjamin Netanyahu said at the opening of the cabinet meeting Sunday, referring to last spring's opening of the mobile telephony market to competition.

Industry, Trade and Labor Minister Shalom Simhon said he expects to submit a draft of the amended laws to the Knesset in a matter of weeks, and that they would bring down prices rapidly even if the January 22 election brings a new coalition to power.

"It doesn't make any different which government comes to power, officials at the industry and finance ministries will remain and continue the work of reform," he said.

But Labor Party Chairwoman Shelly Yacimovich poured scorn on the cabinet approvals, saying that ministers ignored the central recommendations of the Kedmi committee and adopted measures that will have little impact. "The most important recommendations - supervision of basic food prices, the cost of living and economic concentration, which is because small food makers are being squeezed - were entirely ignored," she said.

Besides rejecting the Kedmi committee's proposals for control on some food prices, including a threat to supervise prices on items where profits are deemed excessive, the cabinet also turned down a plan to give preference to small- and medium-sized food makers in government tenders and to ease access to credit and export markets. Proposals for bringing new competition to the food sector were also rejected.

Meanwhile, the Agriculture Ministry and farmers' organizations signed an agreement in principle on Sunday on production and imports of milk and dairy products following more than a year of sparring over the reforms first proposed by the Trajtenberg committee on socioeconomic reforms.

The pact will lower duties on dairy products, but the reductions will be far smaller than the treasury had envisioned. The pact will gradually bring down the target prices for milk - the price dairies pay farmers for the raw product - and opens the market immediately to more import competition.

"We're not talking about a revolution but of reforms that will lower prices for the average citizen and will improve the dairy market," Finance Minister Yuval Steinitz said at a press conference.

Sources in the dairy industry said they expected little impact from the measures on prices for quite some time. They pointed that the so-called target prices for milk rose 9.5%, so that even if the reforms talk about a 2% annual decrease in the target prices, the price of dairy products will still have to rise.

"Even if the price of dairy products were to fall because of the refroms, the reductions will be smaller than the price rise already in the works," said one senior industry executive.

With reporting by Adi Dovrat-Meseritz.

Ofer Vaknin
Toemr Appelbaum