Cabinet Unanimously Approves Proposals to Foster Competition

But decision judged unlikely to stop summer protests over prices.

The cabinet on Sunday unanimously approved the recommendations of the Committee on Increasing Competitiveness in the Economy. It also authorized Prime Minister Benjamin Netanyahu, Finance Minister Yuval Steinitz and Justice Minister Yaakov Neeman to prepare a draft of the legislation needed to implement the recommendations as soon as possible.

"The government's decision today is another step in lowering the cost of living," said Netanyahu in a statement. He told the cabinet that getting rid of cartels and monopolies would increase competition.

The cabinet meeting Sunday in Jerusalem. The ball is in the Knesset’s court now.
Amit Shaabi

A team of lawyers and other experts from the Prime Minister's Office, the treasury and the Justice Ministry will present the Ministerial Committee for Legislation, headed by Neeman, with the bills for approval, and then they will go to the Knesset.

The plan would break up some of the country's largest conglomerates, aiming to increase competition and bring down prices after protests over the cost of living last summer.

Israel has one of the highest concentrations of corporate power in the developed world with the government estimating that the country's 10 largest business groups control 41% of the market value of public companies.

The cabinet decided that most of the members of the original committee on reducing economic concentration would aid in preparing the bills and during the legislative process in the Knesset. These include the chairman of the National Economic Council, Prof. Eugene Kandel; Commissioner of Capital Markets, Insurance and Savings n the Finance Ministry, Oded Sarig; Antitrust Commissioner David Gilo; chairman of the Israel Securities Authority Shmuel Hauser; Supervisor of Banks in the Bank of Israel David Zaken and Assistant Attorney General for Fiscal and Economic Affairs Avi Licht.

Lobbyists representing big business are expected to put heavy presure on Knesset members to water down the recommendations.

Under the recommendations, conglomerates will have to choose between owning major financial or nonfinancial companies. Caps will be placed on the levels of subsidiary companies that so-called pyramid companies can have. Existing groups will be limited to three levels, that is listed subsidiaries and their subsidiaries, while new groups will be limited to two tiers only.

Companies will have four years to comply with the changes.

Social activists say local conglomerates are partly responsible for rising prices of basic goods. The protests of last summer are expected to resume within a few weeks.

If the committee's recommendations are followed, companies will be barred from simultaneously holding a financial firm with assets above NIS 40 billion and a nonfinancial company with more than NIS 6 billion of revenue.

These terms would force Nochi Dankner's IDB Group to sell off either Clal Insurance or other key holdings such as Cellcom, Israel's largest mobile phone operator. Yitzhak Tshuva's Delek Group would have to decide between keeping insurance company Phoenix and brokerage Excellence Nessuah or its petroleum business, which includes a number of offshore natural-gas fields.

"For years people have talked about limiting cartels and monopolies, but we are doing [something]," Netanyahu said on Sunday.