Big Importers Flex Muscles at Retailers to Crush Competition

The small import companies send a message to the Food Committee.

Exclusive representatives of overseas manufacturers in Israel press retail chains to reject tempting offers by small importers who bring over the very same products for less, the Food Committee heard this week.

The Food Committee is an inter-ministerial inquiry headed by Industry, Trade and Labor Ministry Director General Sharon Kedmi, which is looking into the increase in food prices in Israel.

One small deodorant importer told the committee he can't sell his products to the big chains because Unilever, which is the manufacturer's licensed representative in Israel, presses the chains to reject them, say sources near the committee.

Unilever rejected the allegation. "As leaders in the deodorant category, we constantly deal with competition," the company stated. "Unilever does not block competitors and does not dictate to the chains and consumers where and from whom to buy."

But based on the testimony from small importers, the Antitrust Authority will be looking into the nature of the relations between importers and the retail chains, the sources near the committee said. A source at the Antitrust Authority said no inquiries have been opened into the matter at this point.

A small importer of toothpaste, deodorant, shampoo and food products explained how the system works. "The official importers have price lists for the retail chains. The moment a parallel importer tries to offer his products for less, the official one threatens to cancel his discounts to the retail chain not only regarding the threatened product, but for all products the official importer sells," he told TheMarker. That is why the chains won't touch his products. He sells only to small stores.

The private-label chains confirmed his statements. Adi Zim, among the owners of the Kimat Hinam discount chain, attested: "The marketing chains are afraid of the big suppliers. They hardly ever buy parallel imports because the big importers will flex muscles.

"We aren't afraid and try to help the parallel importers," Zim said. "But I'm afraid we're alone."

Super-Sol and Blue Square refused to comment for this report.

The Finance Ministry is trying to encourage competing imports in order to lower prices. But the Health Ministry supports the exclusively licensed importers, arguing that parallel imports without the manufacturer's blessing could harm consumers.

The Food Committee is also looking into lowering customs on food products in order to lower prices. For instance, the customs tax on imported honey is 250%, the tax on fresh beef is 190%, on butter it's 140% and on wheat it's 50%. Customs duties on toiletries and clothing may drop too. But unless the regulators ensure that the decreases reach consumers, they could disappear into the marketing margins of the importers and retail chains.