MKs accuse Shufersal, Rami Levy of colluding on food prices

A day after the Competition Authority raided the offices of a leading supermarket chain and food producer, the Knesset Economics Committee held a stormy debate on the cost of living.

Shufersal CEO Itzhak Aberkohen vociferously denied allegations that his grocery chain was colluding on prices with manufacturers. Rami Levy, owner of the supermarket chain that bears his name, was expelled from the meeting after yelling at Knesset members and calling them populists.

Israel’s food industry came under intense scrutiny last week after it was revealed that Shufersal, Israel’s largest supermarket chain, was offering a website targeted at haredi shoppers with lower prices than those on its mainstream shopping site. Consumers are already frustrated with the rising cost of living, with food prices starting to creep up significantly for the first time in a decade, and the revelation that Shufersal was discounting products by 10-20% to the ultra-Orthodox market seemed to imply that everyone else is a friar (sucker) for paying more.

Shufersal responded to the public outcry by suspending the mehadrin site, but that enflamed even more anger, as the public demanded to know why they were paying so much.

“Shame on you for closing the haredi site,” said UTJ MK Uri Maklev at Wednesday’s committee meeting. “After you dug this well and drank from it, you are closing it down instead of giving equal prices to everyone?”

On Tuesday, Competition Authority agents raided the offices of Shufersal, the Victory supermarket chain, food producer Strauss Group and food importer Diplomat Holdings, saying they were suspected of violating laws about fair market competition. Details about the accusations have not yet been revealed, but it is understood that the parties are accused of price collusion. The investigation is expected to continue through the coming days.

Aberkohen and Levy were livid as they joined Wednesday morning’s committee meeting. As Aberkohen entered the meeting, he said to Levy, “Don’t sit next to me. They’ll say we are colluding.”

The committee debated who was responsible for allowing the cost of living in Israel to get so high, with accusations flying at farmers, importers, distributors, and the current and previous governments. 

When Economics Committee chairman MK Michael Bitton asked Aberkohen if Shufersal was colluding on prices with other chains, he responded angrily, “Are you normal? No!”

Levy, wearing a white t-shirt, told lawmakers that his gross profit margin is 21%, similar to those in Europe and around the world. However, he said, operating profits are lower and food prices are 50% more. “Everything here is expensive – fuel, taxes, property taxes, electricity,” Levy yelled. “The one who is responsible for high costs isn’t the supermarket chains. It is the state.”

After MKs ganged up on Levy, accusing him of deceiving the public, Levy stood up and called them “crazy”, at which point, Bitton expelled him from the meeting. “You will not speak disrespectfully like that here,” he said. 

In the end, the committee undertook to study the issue more deeply and prepare plans for reducing the cost of living.

Bitton vowed that competition laws would be enforced more strictly moving forward than they have in the past. “If anyone thinks this investigation will end with fines of NIS 50 million and an indictment for someone, they are wrong. The committee will not allow it anymore. We will investigate matters and check with the competition authority every month to see if there is a need to declare someone as a monopoly or cartel.”

The national budget approved by the government last week included a wide-ranging list of reforms promising to bring down the cost of living by making it cheaper and easier to import goods from abroad. Meanwhile, prices for all types of products have been rising around the world in recent months due to global supply chain delays and other pandemic-related factors.

Food prices in Israel have not risen significantly in about a decade. Ever since a rise in cottage cheese prices spiraled into the 2011 social-justice protests that brought hundreds of thousands of angry Israelis to the streets, grocery chains have been fearful that the social cost of raising prices would not be worth it. However, with production costs rising so quickly, retailers say that they now have no choice but to raise prices.