Offices of Major Israeli Supermarket Chain, Food Maker Raided on Suspicions of Price-fixing

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Shufersal CEO Itzhak Aberkohen.
Shufersal CEO Itzhak Aberkohen.Credit: Eyal Toueg

Competition Authority investigators on Tuesday raided the offices of Shufersal and Strauss Group, Israel’s largest supermarket chain and second-largest food maker, respectively, on suspicions that the two had engaged in price-fixing.

Investigators seized documents and computers, and questioned senior executives, including Shufersal CEO Itzhak Aberkohen, Strauss CEO Eyal Dror. Trading in the two companies’ shares on the Tel Aviv Stock Exchange was suspended.

Eyal Ravid, who controls the food retailer Victory, and Noam Weiman, CEO and co-owner of the food importer Diplomat, were called in for questioning at the authorities’ offices. It is not believed that investigators raided their premises.

The last time food retailers the size of Shufersal and Strauss were subject to an antitrust probe was in 2009, when Shufersal was investigated for allegedly violating the conditions regulators had set for its merger with Clubmarket. At the time, Shufersal executives were suspected of pressuring suppliers to deny discounts to rival chain Mega. The case resulted in the convictions of Shufersal CEO Efi Rosenhaus and vice president of commerce Eli Gidor.

On Tuesday, the Competition Authority, recognizing the significance of the probe, issued a press release saying it had commenced a probe into suspected violations of the Competition Law by supermarket chains and their suppliers based on recent events.

Shufersal CEO Itzhak Aberkohen.Credit: Eyal Toueg

Saying the probe was in its earliest stages, the authority declined to provide further details, but the four CEOs targeted in Tuesday’s actions had recently made public statements about the likelihood of food prices rising,

In June, the authority launched an investigation of Diplomat, the official importer of Procter & Gamble products to Israel, and Strauss, whose products include Elite coffee and Milky desserts. The probe followed statements in the companies’ financial reports saying they were exploring the possibility of price increases. Such statements made in public can be the basis for price-fixing allegations on the assumption that the companies are informing each other of their plans, which is tantamount to coordinating price hikes.

Food industry executives and experts in antitrust said on Tuesday that they were trying to determine if such a wide-ranging probe by the authority signaled a new, stricter policy regarding public statements. Alternatively, they said, it could be that regulators had additional evidence of price-fixing, like a transaction between a grocery chain and a supplier to enable a price increase in exchange for certain benefits, for instance.

Food makers and importers have sought to raise prices for months but have refrained from doing so, mainly from concern about public criticism.

“The issue of public statements as a restrictive arrangement appeared in David Gilo’s draft statement as antitrust commissioner, but Michal Halperin, who succeeded him, didn’t make the draft a binding rule,” said Gil Rosenberg, a partner and head of the antitrust practice at the Shibolet Law Firm.

“This year we saw three instances of the authority launching investigations in the wake of public statements, but this time it appears that we’re actually seeing an escalation because we’re now talking about a public investigation of major companies.”

Eyal Ravid, CEO of Victory supermarkets.Credit: Eyal Toueg

Aberkohen, who leads a grocery chain with annual turnover of 15 billion shekels ($4.8 billion), is regarded as the most important target of the current probe. Several months ago, when talk about price increases surfaced, he declined to address the subject. More recently, however, he broke his silence.

Two weeks ago he was quoted by Yehuda Sharoni of the Maariv daily as saying, “A wave of price increases can’t be prevented. I don’t represent the manufacturers, but I can say with certainty that commodities prices have risen all over the world by 30 percent to 60 percent.

“To that, you have to factor in increases in the thousands of percent in maritime transport and delivery costs from the Far East and Europe,” he said. “Add in the talk of a package deal in which the minimum wage will rise to 6,000 shekels a month. All of this has to manifest itself in prices, which affects manufacturers and importers and forces them to raise prices.”

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