Encouraging competition to lower prices- Part 2
In my previous post, A real look at the price of food in Israel, I discussed the relatively high prices for food and other commodities in Israel as compared to OECD countries. The information presented in the report was used as the foundation for creating a new law entitled Promoting Competition in the Food Industry-2013 which is still a proposal. The instigation for this new legislation was the Kedmi Report on the Food Industry of 2012 which outlined several methods to lower prices, including lowering import taxes, preventing suppliers from purchasing retail space and stronger enforcement of consumer protection laws. Since that report a new government was elected and therefore some of the recommendations did not make it to the proposed law, such as lowering import taxes and strengthening the Consumer Protection Agency. The three main areas the new law deals with are: (1) Regularizing the activities between supplier and retailer, (2) Strengthening competition in certain geographic areas and (3) Strengthening price transparency.
According to the vaadah there are four avenues that can be taken to lower food prices:
- Limiting market volume from the manufacturing end (a monopoly in one sub-industry can not be in other sub-industries as well) in addition to the retail end (limiting the market on a national level and a regional level).
- Active encouragement of the growth of small and medium-sized businesses.
- Encouraging the activity of private brands in the market volume through subsidies, research comparing the quality of different brands and advertising the results of the research.
- Creation of a body that will be responsible for collecting information, checking that the promotion of new legislation is progressing, following the lowering of prices and publishing an annual report of its findings.
When this law starts moving forward I will let you know. So far it passed the first reading and the last meeting of vaadat ksafim was the end of December.
What do you think? How do we encourage competition and lower prices?