Costs of Living: Lack of Competition. Rami Levy was clearly warned. He will face daily control (MK Biton)

Israel is known for having one of the highest costs of living in the world. In 2021 Tel Aviv was even the most expensive city in the world. The causes are manifold, but can be reduced to two main causes, as a review of the current debate in the Knesset’s ‘Economic Affairs Committee‘ shows: Too high taxes and too little competition. The state is partly to blame for the high cost of living.

The Economic Affairs Committee, chaired by MK David Bitan (Likud), convened on Monday for its first meeting in the 25th Knesset, which was dedicated to the increase in food prices and its effect on the cost of living in Israel.

Confrontation MK Biton – Rami Levy

The apparent misconduct of Rami Levy, owner of Rami Levy Hashikma Marketing, even found its way into the official statement: “Rami Levy interrupted MK Biton, who responded by saying “Rami Levy [does not run things here], even if he is a Likudnik. We will be a fortified wall for the good of the consumer.” MK Biton, the former chairman of the ‘Economic Affairs Committee‘, finally addressed Levy with the words: “Sit quietly and let me speak, you have become a tycoon, we will check you every day“
 
Committee Chair MK Bitan said that just as he had worked to raise the disability benefits, he would do the same with regards to the price increases. “With all due respect to the Government, if we will be convinced that we have to take action for the benefit of the Israeli consumer, we will,” he, MK Bitan said and concluded. “I don’t blame anyone for anything, and it ​is clear to me that the Government must put its hand in its pocket and that the manufacturers have to make a profit; no one has to lose. But on the other hand, we have to care for the consumer, and everyone else.”

Increase of prices are baseless

Finance Ministry official Galit Ben Naim mentioned that in 2020, small suppliers had a hard time importing goods due to the corona crisis, while the major suppliers got stronger. “According to her, the figures from 2021 show no change in profitability, and the suppliers’ argument that there is no other choice but to increase prices is baseless.”, is Gali ben Naim summarized by the press release of the Knesset.

And Ron Tomer added, according to the release, on behalf of the manufactures that they, the manufactures, even lowered the prices, but the big supermarketchains does not give the reduction to the consumers. Additionally the problem is that also water, electricity and property taxes raised to much. They are major reason for the increase of prices.

In the press release by the Knesset it is to read: “Ron Tomer, President of the Manufacturers’ Association of Israel, said that between the years 2013 to 2021, food manufacturers reduced prices for retailers by 7%, and the state needs to check why this reduction did not reach the consumers. The Food Law, he noted, does not permit manufacturers to determine a suggested price for consumers. He also mentioned that the current price increases are the result of the spike in the price of raw materials, electricity, water and property tax since the beginning of 2020, and he praised the recent measures taken by the Prime Minister and Finance Minister to curb the price hikes.” (highlighted by VonNaftali)

Finally, MK Michael Biton (National Unity Party) said: “There is no competition among the supermarket chains. The Competition Authority, which has been authorized to impose a NIS 100 million fine, has yet to do so.”

No competition

Lobby 99 CEO Linor Deutsch said that when commodity prices around the world dropped from 2012 to 2020, this did not lead to price reductions in Israel, but when commodity prices increased due to the corona crisis, this was immediately passed on to the consumer. “There is a market failure here, and overregulation, and when there is no competition, it is easy to pass price increases over to the consumer, and a consumer boycott is not enough,” she said.

Committee Chair MK Bitan said he has yet to receive an answer as to how the prices for the consumer can be lowered, and added: “I won’t let the Treasury do its usual trick where it lowers in one place and increases in another. They need to put their hand in the pocket.”

Committee Chair MK Bitan said “We will hold a number of meetings, until we learn the issue, and I hope that – unlike the past – we will succeed in reducing prices. I am not looking for guilty parties, I am looking for solutions.”      

 

Source: Press Release Knesset.