An Israeli Coffee Cartel?

Antitrust Probing Alleged Price Collusion at Leading Chains

Investigators raid Cafe Cafe office after a report by TheMarker; Roladin and Cafe Greg also being examined.

Antitrust investigators raided the offices of the Cafe Cafe chain Monday and opened an investigation into its owner, Ronen Nimni, as well as into a partner in the Roladin cafe chain and the controlling owner of Cafe Greg. They are suspected of possible price collusion.

The Israel Antitrust Authority conducted a search of Nimni's office and computers Monday, and the investigation of Roladin partner Kobi Hakak apparently began a few days earlier. The third suspect is Cafe Greg's Yair Malka.

The three chains involved are among Israel's biggest, with Cafe Cafe operating 120 outlets around the country, Cafe Greg 88 and Roladin 44.

Yariv Shefa, who controls Aroma, the country's largest cafe chain, said Monday that he had not been called in for questioning in connection with the probe.

The police raid followed an expose by TheMarker last month that presented evidence that Israel's big cafe chains coordinate their business operations, including discussions among themselves about how to respond to the launch of an upstart chain, Cofix, which is selling coffee for NIS 5 a cup. Cafe Greg, by contrast, charges between NIS 9 (for an espresso) and NIS 24 (for a large Jamaica cappuccino).

Following the Marker report on October 10, Antitrust Commissioner David Gilo termed the alleged collusion a serious violation and said he would investigate it.

"The antitrust authority opened an investigation several weeks ago on suspicions that there was price coordination between some of the cafe chains," it said in a statement. "The authority's investigations and intelligence unit is conducting a number of investigative operations, among them searching offices and computer data. In connection with these operations, a number of cafe chain owners have been asked to come in for questioning."

Cafe chains now account for 30% of all cafes in Israel and 70% of all cafe turnover, according to Czamanski Ben Shahar & Company, a Haifa-based economic consulting firm.

Earlier, Judge Shmuel Melamed of the Tel Aviv Magistrate's Court issued an injunction, at the request of the antitrust authority, ordering TheMarker to turn over immediately any recordings it had made of conversations with Nimni. The order came after TheMarker rejected a written request by the authority for the material.

The authority said Monday that while it respects the rights of the media, the press also "has an important role in advancing [business] competition in Israel."

TheMarker's report revealed that the principals of the big cafe chains and their top managers discussed business among themselves on a regular basis and exchanged information. When Cofix came along, they discussed market conditions and agreed not to lower prices or offer discounts to counter the new competition, according to the Marker report.

“We [the coffee shop executives] are online, on the phone, I talk with them and we’re in touch with everyone,” Nimni told TheMarker last month. "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.”

At the time, Nimni declined to say which colleagues he had spoken with but made clear he was talking about the owners of the big chains. Asked why he could rely on the word of his competitors, he answered, “I’m friends with everyone... We’re colleagues, I’m not a competitor.”

The owner of one cafe chain recounted that after Cofix opened, he received a call from a senior executive at Delek Israel, which owns the Cafe Joe and Menta convenience-store chains, asking whether he was planning discounts to counter the undercutting.

“I told him I’m not responding," the owner said. "So he said, ‘I also thought not to respond, but I wanted another opinion.’”

Cafe Cafe said it "has nothing to hide and is cooperating with everyone who has asked or will ask."

Roladin said it has never engaged in price collusion with other chains and was responding to investigators' queries. Cafe Greg declined to comment.

Daniel Bar-On