Bakers Suspected of Fixing’ Bread Prices for Haredim

Six suspects have been arrested so far; suspected of fixing bread prices or of illegally dividing up the market among themselves.

The Antitrust Authority has thrown its entire division of investigators into the “bread cartel” case, and yesterday TheMarker learned of new suspicions that bakers colluded on special deals for bread sold in Haredi neighborhoods.

Six suspects have been arrested so far. They are suspected of fixing bread prices or of illegally dividing up the market among themselves. The bakeries in question are Angel, Berman and Merhavit. Another suspect, Isaiah Davidovich of the Davidovich Bakery, is expected to return to Israel at the end of the week.

Yehuda Schneidman
Moti Kimche

The bakeries are suspected of coordinating the prices of price-controlled bread, including white and brown bread and challahs, both whole and sliced.
The suspects argue that they couldn’t have coordinated the prices of price-controlled products. In any case, they say, the profit margin on such products is vanishingly low: If anything, they often produce these breads and compensate with the prices of other, more expensive breads.

However, TheMarker has learned that the bakeries are suspected, for instance, of agreeing among themselves to end special discounts on price-controlled products, involving the sale of three such loaves for NIS 10, mainly to the Haredi community.
The Antitrust Authority is also investigating allegations that the bakeries divided up the market of non-price controlled bread between them. Theoretically the bakeries could have decided which would serve each retail chain, or they could have decided on exclusive marketing rights by geographical area. It is not known what type of division the bakeries are suspected of employing.

Antitrust Commissioner Ronit Kan commented that bread is a staple of the utmost importance to all households in Israel. As such, the investigation into the alleged bread cartel is “one of the most important” the Antitrust Authority has even conducted, she stated yesterday. “We therefore have invested and will continue to invest resources in order to wrap up the investigation quickly,” she said.

Yaron Angel
Moti Kimche

In its request to extend the remand of the suspects arrested so far, Antitrust Authority representatives charged that the alleged price-fixing, by top people at the bakeries, targeted the poorest families in Israel, with many children, who buy large quantities of bread.

On Monday Judge Ilan Dafadi extended the remand of three CEOs − Yaron Angel of Angel Bakery, Merhavit Bakery CEO Yohanan Aharonson and Berman Bakery CEO Yehuda Schneiderman − by 48 hours, though the Antitrust Authority had asked for a 72-hour extension. They will be released today unless the trustbuster requests, and is granted, another extension.

‘A market riddled with tension and hatred’

The bakers deny any wrongdoing. The attorneys for Angel and Aharonson told the court that their clients deny all of the allegations against them.

Jacques Chen, counsel for Aharonson, on Monday tried to persuade the court that since his client has given his version to the investigators and his office in Kiryat Shmona and the bakery in Kibbutz Einat had been searched there was no reason for him to remain in custody.

The Antitrust Authority’s legal counsel, Haim Arbiv, argued that Aharonson could disrupt the investigation if freed: “He is deeply involved in the affair,” Arbiv told the court.
In refusing the request to release Aharonson, Dafadi cited two reasons: He noted the extension earlier on Monday of the remand of the other two bakery CEOs had been extended, and said that he did not want to discriminate against them by letting the third go. In any event, the judge said, the continued remand was warranted.

Although sources at the Antitrust Authority claimed on Monday that the investigation is of price-collusion of various types of bread, the formal arrest motion submitted to court mentions only price-controlled breads.

It’s ridiculous to even talk about price-fixing controlled prices, scoffed the lawyer defending one of the bakery CEOs yesterday. “You start from the cost price and competition is only as far as the price the regulator demands. You can see that’s ludicrous.”

One issue arising from the investigation is that certain bakeries eschewed tenders, which raises the suspicion that they divided up the market between them. “In the name of competition, you have to compete over tenders even if it doesn’t pay, snorted one of the defense lawyers. «This market is wildly competitive. It’s a tough market. The bread market is riddled with tensions and competition and hatred going back in time. What cartel? When you connect with the people in this market you realize how silly that is.”