The section in the Food Law that facilitated the industry will not be repealed

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Half a year after publishing the study on the section in the Food Act that prohibited a supplier from transferring payments to large retailers, the Competition Authority publishes its decision not to change the legislation regarding it. This is after an examination she conducted shows that “most of the active players opposed making any change in the existing legal situation” and even claimed that “the clause made the contracting between retailers and suppliers simpler and ‘more orderly'”.

However, a study published by the Authority on the issue makes it clear that this is much more than a “more orderly engagement” for retailers. Although from the side it seems that this is another dull gray line known as “Section 8 (d)”, but in practice this is a significant addition for the food retail sector. Thus, the Authority’s study found that one – fifth of the increase in the gross profitability of food retailers is explained by the change brought about by the implementation of the section.

Arranging satisfactory payments to retailers

The same section whose effects were examined in the study deals with the regulation of payments to suppliers to retailers. In other words, this section prohibits companies such as Tnuva or Osem from transferring certain payments to a large retailer such as Shufersal or Rami Levy in various circumstances, including a grant for opening a new store – a practice that was common in the industry in the past. The study sought the authority to examine the effects of the section on consumers, retail food chains and food suppliers, or in other words – whether the law has achieved its purpose.

“It is evident that already in the year following the implementation of the Food Law there was a significant increase in the average gross profit margin of the food retailer,” the study authors wrote. In doing so, the authors refer to data that were already known, since a significant portion of Israel’s major food chains are public companies, and their gross profit rates are visible to all.

Consumer prices fell 0.3%

Another point that emerged from the Authority’s study that certainly did not provoke opposition from suppliers and retailers is another finding that came up in the Authority’s study. According to it, the application of the clause resulted in a decrease in the wholesale price – that is, the one that the retailer pays to the supplier – of 1.1%. Regarding the impact on consumers, the study shows that prices for them fell by an average of only 0.3%.

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