Israel's Consumer Protection Authority Finally Lives Up to Its Good Name

The agency hasn't done very much over the past decade, but will now target companies like deceptive supermarket chains.

Ilan Asayag

Israel’s Consumer Protection and Fair Trade Authority was established almost a decade ago, but only now is it really taking steps to stop businesses from cheating the public.

Over the past few months the authority has opened about 170 cases of consumer-law violations, most linked to the food industry. The authority has told 25 companies that it intends to fine them a total of 15 million shekels ($3.75 million). They will get a hearing, though.

In the remaining cases, the authority is expected to levy fines totaling tens of millions of shekels, with the penalties ranging from 500,000 shekels for smaller firms to more than 1 million shekels for big corporations.

Most of the fines, 53%, have been for not marking products with prices in stores, and 45% have been for various forms of deception such as charging a higher price at the cash register than on the price sticker, misleading advertising or surreptitiously reducing the size of a product. Some 2% of the fines have been for not hanging a sign saying which products are controlled by the government.

The Yeinot Bitan supermarket chain will be fined 1.1 million shekels because thousands of its products were placed without price stickers. Food maker Osem will be fined 4.1 million shekels, and Willager 500,000 shekels.

Gindi Holdings is expected to be fined 9.1 million shekels for advertising a housing development to make it seem the project was part of the government’s “target price” program for low-cost apartments. Gindi’s project had absolutely no connection with the government plan.

Still, all these fines are subject to a hearing with the firms.

The authority’s war drums were first heard only after 25 Economy Ministry investigators were placed under the authority’s aegis on February 25. The authority is an independent body, similar to the Antitrust Authority. It seems the revolution at the Consumer Protection and Fair Trade Authority is being led by the division heads, while director Tamar Pincus — who hasn’t shown much vigor — is a partner.

When it was established, the authority received far-reaching powers to collect information and investigate and prosecute violators, as well as the authority to regulate normal business practices.

But the agency only really started operations in 2010 — after the failed attempts of then-Industry, Trade and Labor Minister Benjamin Ben-Eliezer to appoint crony Amnon Merhav to head the authority.

Under Pincus’ leadership, the authority has been harshly criticized by the state comptroller. Meanwhile, Economy Ministry officials expect that her planned retirement at the end of the year will open the way for a much better replacement. The hope is that the successor won’t be a political appointment.

A lack of deterrence

The Consumer Protection and Fair Trade Authority was established to revolutionize consumer affairs and deter violations by businesses, but it hasn’t. It never received employees to do the actual supervision in the field because the union representing Economy Ministry employees objected to the move.

There was no real supervision at the level of the consumer, which led to widespread violations of consumer-protection laws. The most obvious one was the insufficient marking of prices in stores.

In 2011, the Economy Ministry signed an agreement with the union letting ministry employees work for the authority but still be considered ministry employees. The authority drew up a plan, but it turns out the authority had no authority to tell Economy Ministry employees what to do.

The employees, meanwhile, did not report back to the authority on their findings, did not supply the requested data and in general did not cooperate with the authority.

Recently the Histadrut labor federation realized that the situation couldn’t continue because, after all, consumers weren’t getting any protection. A 2013 report by the state comptroller rapping the authority also helped effect change.

For the foot-dragging in setting up the authority, the state comptroller blamed the Civil Service Commission, the Finance Ministry and the Economy Ministry — alongside the employees themselves.

As State Comptroller Joseph Shapira stated in 2013, the authority concentrated on trivial matters instead of important ones, and never did too much deterring. That’s why the establishment of the authority hardly improved the situation.

“The focus on the actions taken in these areas has been ineffective — more than half of inspections have been made because of a suspicion of minor violations that it is easy for a customer to deal with,” Shapira said. “For a high percentage of violations, no sanctions have been imposed, and the enforcement of most violations has ended with a warning or an administrative fine.”

During those years when the authority barely functioned, compliance with consumer laws deteriorated. That’s why it was easy for the new investigators to collect 170 cases of violations and crimes in only two months.

Gargantuan task

The authority’s investigations department hopes to make the best use possible of its new investigators, but it’s clear that 25 such inspectors can’t supervise 500,000 Israeli businesses.

“Even if we work very hard, we can cover only 0.3% of businesses a year,” says Anita Isaac, head of the investigations division and the authority’s deputy head. “That’s why we’re in contact with the Finance Ministry for new positions, which will allow us to triple the number of investigators. If we can’t cover at least 1% of businesses, we’ll find it hard to create deterrence.”

Another breakthrough was legislation passed in January, after long delays, to let the authority fine companies that violate the Consumer Protection Law. These laws also include new regulations for the wholesale and retail food industries, the real estate brokers law and the law on standardized contracts.

The new amendments to the Consumer Protection Law allow the authority to fine small businesses up to 7,000 shekels for each violation, or up to 25,000 shekels for serious violations. Meanwhile, corporations can be fined 22,000 shekels, or up to 45,000 shekels for serious violations. For chains such as the large supermarkets, if many branches commit the same violations, the fines can be increased by up to 150% of these sums.

“We’ve changed the pattern of work. As soon as an investigator enters the business, everything is examined. Not just price labels, but also sales and differences between the shelf price and the cash-register price,” Isaac says.

“We found, for example, a sale on face soap that had never been sold at the full price but was marked ‘on sale.’ This is misleading the consumer, and the fine for such a deception is 45,000 shekels.”

Anat Ben Ezra-Dukan, the authority’s deputy director for regulation and administration, says her people this year will be focusing on three main areas: communications, food and direct marketing, and telemarketing, the last one in particular.

“Telemarketing companies mostly exploit older people,” Ben Ezra-Dukan says. “They tell them they’ll receive a free gift and they should give a credit-card number just to pay the 49-shekel shipping fee. The minute they give it up, they’ve lost. We’ve received a complaint about a Holocaust survivor who had 100,000 shekels taken out of his account within a month.”

The authority intends to enter the housing market too. It has established a committee with the Housing and Construction Ministry, the Justice Ministry and the Antitrust Authority. The committee will map market failures and problematic practices, especially in brokering and purchasing from developers.

The authority is also working to change the Consumer Protection Law so that a seller of land will be required to attach an assessor’s estimate to the deal. In the coming days the standard will be presented to the assessors.

“The authority will also go to work on the matter of green construction,” Ben Ezra-Dukan says. “Deceptions have been found that influence the price of an apartment.”

On May 20, the section of the new food law will go into effect that requires supermarket chains to publish the prices of every product at every store — online. Today the prices online are only for products sold online; otherwise you have visit the store. A number of websites are expected to provide price comparisons by region.