CEOs and the Government Are Teaming Up Against Israeli Consumers

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Shufersal CEO Itzik Abercohen speaking at the Knesset Economic Affairs Committee last week.

“Absolutely not,” the CEO of the Shufersal supermarket chain, Itzik Abercohen, shouted last week when a member of the Knesset Economic Affairs Committee asked him if he engaged in price fixing. Rami Levy, the owner and CEO of the supermarket chain named after him, burst out at Religious Zionism MK Ofir Sofer: “I don’t know who you are. You’re a populist.”

That got Levy tossed from the hearing. After all, Sofer’s dignity is a thousand times more important than some guy Levy who employs 7,500 people.

The truth is, it’s unpleasant to attend a Knesset committee meeting. The level of debate is shallow and the MKs exploit the stage to score points in the media. But Abercohen, Levy and Eyal Ravid, the founder and CEO of the Victory supermarket chain, are no angels. Last week they were questioned by the Israel Competition Authority on suspicions of price fixing.

Abercohen was asked about what he said two weeks ago: “A wave of price increases in the market is inevitable. Commodity prices have risen 30 to 60 percent, to which you have to add the jump in maritime shipping costs. Add the rise in the minimum wage … and I believe that soon major producers will be announcing price increases.”

It’s embarrassingly transparent: The statement was made so that consumers are aware that price hikes are on the way, they're inevitable, so we have no choice but to pay up and keep quiet. It's also clear to me that Abercohen’s words were also meant to tell competitors that they should close ranks and raise prices too.

His biggest fear, after all, is that Shufersal will raise prices and the people will vote with their wallets and switch to a competitor that hasn’t lifted prices. After all, Rami Levy and Eitan Yochananof, another supermarket captain, said they wouldn't rush to raise prices. Abercohen fears that if only Shufersal increases prices, his sales will take a hit and the whole thing will backfire on him. Such things have happened before.

Price-fixing methods have evolved over the years. The insurance chiefs used to fix prices on a restaurant napkin over lunch. Recently the major bread producers were caught fixing prices via their cellphones. Now there's a new method: coordination through the media.

Ravid, the Victory CEO, is very media savvy. Around two weeks ago he spoke with deep sadness about the rise in shipping and energy costs, shedding crocodile tears about how “difficult days are ahead, a tsunami of price increases. The suppliers have already announced that after a decade of not raising prices, they have no choice.” It just breaks your heart.

One wonders why Abercohen and Ravid forgot the dramatic drop in the dollar against the shekel. After all, raw materials are imported, as are quite a few of the products sold. So why are they only talking about what has gone up in price, ignoring what has gone down?

Maybe the weaker dollar offsets higher shipping costs? They also forgot to note that our electric bills aren’t rising massively as they are in Europe, because we have natural gas from the Leviathan field offshore.

Interestingly, two of these chains, Shufersal and Rami Levy, hold the record for breaching the law requiring transparent prices online. They must dislike telling us what their prices are. This is also why Abercohen, Levy and Ravid fight tooth and nail against the price marking law. They don’t want us to be able to know which product is cheaper, because it won’t have a price tag. That way you can easily hike prices.

The crazy part of the story is that Economy and Industry Minister Orna Barbivai gave in to them and is doing everything to overturn the law requiring supermarkets to stick a price label on every item, the most important consumer law of all. She doesn’t care that no previous minister ever abandoned consumers like this, to the point where I don’t know who’s worse for consumers, Abercohen or Barbivai.

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