Israel Takes Another Stab at Food Reform With ‘Cornflakes Law’

Experience shows that legislation fails to bring lower prices for shoppers.

Daniel Tchetchik

Israel’s so-called “cornflakes law,” which will make it easier to import food with the hope of creating more competition on supermarket shelves and lowering prices, is due to go the Knesset for approval by the end of the year, say officials in the government readying the final details of the legislation.

The law is taking on new urgency as public anger over high food prices has reared again in the past week after a Facebook posting that showed the price of a German chocolate pudding sold for a third the price of Israel’s “Milky” equivalent.

The law, which was cleared by the cabinet six months ago, will apply to non-sensitive food from a health perspective, a category that includes items like breakfast cereal, baked goods, pasta and rice. Categories such as meat and fish, which require close regulatory supervision, are not included.

The non-sensitive food covered by the law accounts for about half of Israel’s $4.3 billion in annual food imports, according to the Central Bureau of Statistics, so that the law could have a major impact. But experience shows that easing the way for imports into Israel’s supermarkets and street-corner groceries doesn’t translate into lower prices for shoppers or increase the selection. The government has a long and sorry history of introducing reform to the food sector, only for it to yield few benefits.

The first in a series of reforms aimed at lowering food prices was undertaken by a committee headed by Sharon Kedmi, who was director general of the Industry, Trade and Labor (now Economy) Ministry at the time. It called for easing quotas on dairy imports, lowering the price dairies pay for raw milk and an overhaul of dairy farming to cut costs.

A dispute between the Agriculture Ministry and the economy and finance ministries threatened to scuttle the reforms, but Prime Minister’s Office Director General Harel Locker resolved it and the program went into effect a year ago. The government eased import quotas on dairy products, but as the recent flap over Milky prices demonstrates, prices for dairy products have not fallen.

The Food Committee, which was formed in 2011 and later took the Kedmi committee under its wing, was weakened by the interference of cabinet ministers, especially regarding steps that would have helped small- and medium-sized food makers to better compete against the industry leaders.

A watered-down version of the food reforms is due to go into effect in January, enhancing the power of the Antitrust Authority to act against the big food manufacturers. Or not: Some of the big food makers are lobbying to delay implementing the law, saying regulators are not yet ready to enforce its terms.

But the authority has already eased rules that allow big food companies to stock shelves in the smaller, private supermarket chains. In the food industry, the change was seen as surrendering to the big food companies by giving them the power to place products to their advantage, but antitrust officials insist that this will benefit smaller producers, who don’t have the resources to stock shelves themselves.

The “cornflakes law” aims to ease the way for more imports by eliminating the regulatory barriers that have blocked them until now. The practice of multinational companies appointing exclusive importers for their products in Israel will be done away with. Products that meet European Union standards will be given a free regulatory pass from Israel. All the importer needs to do is certify to the Health Ministry that a product meets local standards.

By comparison, today an importer needs to get approval before he can bring in an imported product. Such approval hinges on the foreign manufacturers providing written approvals, a requirement that creates considerable bureaucracy and often serves as a barrier to importing products at all.

Legislating the reform has been entangled in bureaucracy in its own right. The attorney general ruled in July that the cornflakes law could not be included in the Budget Arrangements Law but had to be brought to the Knesset as bill in its own right. Turf disputes between the health and agriculture ministries caused further delays.

But now officials at the health and justice ministries are working on drafting the legislation that will come in the form of an amendment to the Public Health Law (Food). Next, the Justice Ministry’s criminal division will devise the various penalties and fines the proposed law’s violators will be subject to.

Israel is drawing from the EU’s experience, which allows non-sensitive foods to cross between national borders without regulatory interference. Only EU standards set in advance govern trade in such food categories.