New Rules May Thwart Plan to Lower Cosmetics Prices in Israel

Plans to open Israel’s market for toiletries and cosmetics to more import competition may be stopped before it starts, as draft regulations would fence off more than half of all products from new, easier import rules.

A draft version of the new rules obtained by TheMarker, three days before the Knesset Labor and Welfare Committee begins deliberations on them, shows a long list of products that would continue to be barred from fast-track procedures for equivalent imports of no more than 45 days.

The list includes all baby products, all products intended for children up to age 12, products used by pregnant and/or breast-feeding women; and all products that come into contact with the mouth’s mucus membranes, which includes all toothpastes and mouthwashes.

The Knesset-approved plan to ease imports at the end of last year as part of the 2016 Budget Arrangements Law, which would have shortened the process to get Health Ministry approval for so-called parallel imports – that is, products brought into the county by any business, not just the company-approved official importer.

Prices for cosmetic and toiletries are 62% higher in Israel on average than they are in countries belonging to the OECD (Organization for Economic Cooperation and Development), according to a study by the Finance Ministry.

The same problem exists in food, which the government has sought to address by allowing equivalent imports for dry food, popularly known as the Cornflakes Law, which went into effect in the 2016 Arrangements Law. In both cases the goal of ensuring freer competition and lower prices had to be weighed against concerns for safety because equivalent imports often source their products on the open market rather directly from the maker.

The reform of the cosmetic and toiletries market was supposed to go into effect this month, but the Health Ministry got a delay till October, citing a shortage of manpower to write the new rules. Now that a draft version is out, however, retailers and importers agreed it looks like the reform has been rendered toothless.

“The new regulations, in the form they appear now, will strike a big blow to equivalent imports and cause the cost of living to rise already next month,” said Adam Friedler, a partner in the discount pharmacy chain Good Pharm. “Again, we’re seeing how they strengthen the big importers instead of encouraging competition from small players, We won’t sit quietly until this distortion is fixed.”

In fact, some of the products on the list were already being imported by unofficial exporters, although subject to the lengthy approval procedures. Under the proposed rules, they will be banned altogether.

“It’s been more than 15 years that we’ve had equivalent imports of these products in Israel, and only now they’re telling us that they’re dangerous even though until today noting has ever happened,” said a larger equivalent importer, who asked not to be identified.

“The government says it wants to open up the market and then goes and closes it up and makes things worse than they were before,” he said.

In a statement, the Health Ministry denied that approved importers had any part of writing the new rules, and that all interested parties would be invited to comment on them once they are released to the public.

“It should be noted that there have been deaths from toothpastes that were sold with toxins in them,” the ministry said.