Gov't Consumer Council: A Bastion of Waste, Inefficiency

For almost nine years, under the same CEO, the Israel Consumer Council has done precious little to help beleaguered taxpayers, according to an investigation by TheMarker.

Ruti Levy
Ruti Levy
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CEO Peleg. Only 11 class-action cases were filed during his tenure.Credit: Tomer Appelbaum
Ruti Levy
Ruti Levy

In November 2009, several lawyers found themselves in the rather rundown offices of the Israel Consumer Council on Hahashmona’im Street in Tel Aviv, discussing a request related to the freedom of information law. A journalist had asked how much taxpayers had to pay for the recording and the translation into English of the council’s theme song, which was composed by its CEO, Ehud Peleg.

Peleg was furious over the request: The ICC, an official statutory, nonprofit organization, is immune to freedom of information law requests, he told those present, adding that, like the Israel Defense Forces, the council is a kind of “consumer defense force.” Except that meanwhile, the council has not been exempted from the law, and Peleg was forced to disclose that the jingle cost the Israeli taxpayer 6,000 shekels ($1,550).

“Don’t give up consumer rights. State your case or ask advice,” the English version of the song goes. “Don’t despair and don’t delay. Don’t let the bad guys get away. Call the council, yes indeed! You’ll find everything you need. The council knows the way, to help and guarantee fair play.”

An investigation by TheMarker reveals, however, that consumers who contact the ICC do not always get everything they need, and that the organization is not always persistent about standing up for our rights.

1. Businesses ignore the council: First of all, the ICC's own spending is enough to raise eyebrows. Expenses have included hundreds of thousands of shekels paid to public relations firms even though it has its own spokesperson’s office. It also spent more than 500,000 shekels on surveys. In essence, most of the significant work carried out in the council’s name in recent years has been performed by outside providers, even though the ICC's own staff has grown from 13 people, when Peleg was appointed in 2007, to 48 last year.

In the time that has elapsed since Peleg took over, the ICC has filed only 11 class-action requests related to unfair consumer practices. For over two years during this period, the council did not have a board of directors; moreover, there had not been a turnover of senior administrative staff for at least a decade and a half. And even though Government Companies Authority policy limits a CEO’s term to seven years, Peleg is into his ninth year. If that were not enough, it turns out that thousands of consumer complaints submitted to the council have simply been deleted without being dealt with.

It’s therefore no surprise that many local businesses don’t exactly jump to attention when faced with a complaint from the ICC. In fact the council itself acknowledged in its annual report, released in February, that one-third of the businesses approached have simply ignored the council’s inquiries about consumers' complaints. These figures are particularly surprising in light of the growth of the ICC's annual budget, from 6 million shekels in 2008 to 2009, to 10 million and then 14 million shekels between 2012 and 2014.

One may have expected that the increase in the council’s staff and funding, coupled with the heightened awareness of consumer issues since the social justice protests of 2011, would have transformed the ICC into a major player on the consumer-rights front, but it has failed to take up the mantle.

People interviewed for this article, most of whom insisted on anonymity, say the reason for this is that the council has an inherent conflict of interest. On one hand, it is supposed to represent the consumer, but it is also a government-funded entity. And in addition, some say, the body's failures can be attributed what they claim is Peleg’s poor management.

For its part, it should be noted, the council claims that the information in this report is biased and inaccurate. “And tens of thousand of consumers in 2014 who had 7 million shekels returned to them thanks to our intervention from businesses that harmed them will take exception to the criticism being published. In addition, there are class actions involving tens and hundreds of millions of shekels that we have filed on behalf of consumers.”

2. Excessive spending on PR and surveys: The ICC was not thrilled about having its expenses examined, and when TheMarker undertook this investigation, Peleg wondered what interest we might have in examining the workings of an agency with such a small budget. The same message was repeated by an employee, who said, “If you’re doing investigative reporting on spending, there are bigger fish to fry.”

After Peleg expressed indignation over being asked to reveal how much was spent on the council’s song, this month his organization was again forced to respond to a freedom of information request, this time from the Movement for Freedom of Information and TheMarker. The query regarded information about the council’s suppliers, and it generated some surprising information.

Last year, it transpires, the ICC paid somewhere on the order of 450,000 shekels to the Arad Communications PR firm, about 34,000 per month on average, a huge sum for such a small government corporation with barely 50 employees. For comparison’s sake, one of the country’s major banks pays about 25,000 shekels a month for PR services. The council's expenses are particularly surprising in light of the fact that for at least a decade, the organization has maintained its own office with a spokeswoman and an assistant spokeswoman. In recent years, the office has also taken on a website manager and a new media coordinator.

Council staff say that services provided by outside sources included “strategic advice” over a period of just seven months, at 14,200 shekels per month, and that the other 302,000 shekels did not go to Arad Communications but was instead invested, after consultation, in media-related purchases during a campaign tracking supermarket prices.

In actuality, however, the monthly payments to Arad for consulting services were 2,160 shekels higher than the maximum amount specified in the public tender for bids for such work. It is also not clear why hundreds of thousands of shekels that were not mentioned in the public tender process were paid via Arad Communications.

The council also spent 506,000 shekels on surveys conducted last year by the Geocartography opinion and market data research firm. This sum includes 22,800 shekels on important polls related to consumer awareness of products under government price controls, as per the law requiring that such products be displayed with special signage. On the other hand, the expenses also included 11,800 shekels for a survey on the shortage of parking in Tel Aviv; it found that 82 percent of consumers are dissatisfied with the availability of parking in the city. Not exactly a surprise.

3. CEO's personal expenses: The amount of spending by Peleg himself also raises questions. Even though the focus of the council’s activities is limited to Israel, between 2012 and 2014, Peleg’s office spent between 1,300 and 5,100 shekels a year for English lessons for the CEO, in advance of overseas conferences which he attended three times a year. Last year, Peleg also took at least 30 hours of training on “polishing media messages” at a cost of about 600 shekels an hour, adding up to at least 18,000 shekels.

And then there’s the payment for the council song, which staff members said Peleg insisted on playing on the bus to staff retreats. Employees added that they felt like they were in some kind of youth group.

4. Organizational inefficiency: Despite the increase in the council’s budget and staff, much of its important work has been done in recent years by outsiders, for a fee. This has been particularly true with respect to legal work. The council itself has a staff of seven lawyers; at one time there had been eight. But the organization hired a former staff lawyer, to the tune of about 600 shekels an hour, to write information for the council’s website, and it is thought that he spent dozens of hours doing so.

Class-action cases were also sometimes prepared by outside counsel. “It’s an organization that doesn’t cultivate its employees,” said one former staffer. “The idea is that those on the inside are not good enough and that people from the outside take on the important things.”

In recent years, the council has issued reports on money refunded to consumers. In 2013, it was claimed, that sum came to 5.36 million shekels, while last year it was 7.2 million. But it is not exactly clear how these figures were arrived at. TheMarker has discovered that some of the data are based on estimates that may not be reliable.

It’s not that the ICC doesn’t take its work seriously. Over the past couple of years, vice president Tzvika Weshler has made efforts to augment employee motivation – for example, among staff who handle public complaints. Employees who meet certain performance targets are rewarded with bonuses.

However, the staff has had some trouble adjusting to the changes. Part of the problem may derive from the troubled relations between staff and management. In fact, in December, Peleg sent a letter to employees alluding to inappropriate conduct by certain staff members, including conduct vis-a-vis management personnel.

As noted above, the council disputes much of what appears in this article. In a statement, it responded that it, “regrets the biased article, which distorts the many accomplishments of the council and the functioning of the person who heads it in spearheading efforts on behalf of consumers.”

The ICC added that the article will “raise eyebrows among many Knesset members who have been witness to the battle waged by the ICC on behalf of the consumer in Knesset committees, and who have received dozens of legislative amendments proposed by the council.”

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