ISRAEL AT WAR - DAY 149

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Israel antitrust watchdog declares Wissotzky a monopoly

Israel Competition Authority cites abuse of market power by company when it comes to green teas and herbal infusions

Sharon Wrobel is a tech reporter for The Times of Israel.

Wissotzky tea. (Courtesy)
Wissotzky tea. (Courtesy)

Israel’s antitrust watchdog this week declared Wissotzky had a monopoly on green teas and herbal infusions, which allowed the teamaker to charge higher prices than competitors and inhibited other players to disrupt the market.

In the ruling by the Israel Competition Authority, the tea group was deemed a “market power,” following an 18-month long examination, which found that Wissotzky’s market share in sales of green tea and herbal infusion teas to retailers in Israel is more than 70%.

In what was described as a “precedential step” by the antitrust watchdog, the group was declared a monopoly as its market power allowed it to charge higher prices than its competitors and maintain a dominant position for a number of years. The ruling followed a hearing process in the past couple of months.

Wissotzky’s dominant position has led to a failure of free market forces, as competitors had difficulties in increasing their sales even when they offered lower prices. Its position also inhibited the entry of new brands and players, that had enjoyed success abroad, the Israel Competition Authority said in a statement.

The declaration dictates that Wissotzky will be classified as a “large supplier,” as defined in the Law Advancing Competition in the food sector. In practice, the classification means that Wissotzky will not be allowed to interfere with how retail shelf space is arranged in supermarkets or other retailers. In addition, the group will be prohibited from making the sale of one product conditional on the purchase of another, or from interfering with consumer retail pricing. Other restrictions will also apply.

Family owned since 1849, Wissotzky was founded in Russia, before establishing its first factory in Israel in 1936. Israel’s largest tea importer and manufacturer with a wide range of about 200 tea blends has in recent years entered other areas with the sale of olive oils and olives and baked goods.

In 2016, Wissotzky entered the cold beverage market with Wissotzky Iced Tea infusions. The group operates three manufacturing sites and has 400 employees.

“I am happy to see that the competition authority is waking up from a long slumber and after 20 years has declared a monopoly in Israel,” said Industry and Economy Minister Nir Barkat. “My expectation from the competition authority — subordinate to the Ministry of Economy — is to act decisively against anyone who prevents competition, acts as a monopoly and oppresses the public.”

“I expect many more steps in this direction to follow,” Barkat added.

The Israel Competition Authority’s mandate includes enforcement against anticompetitive restrictive arrangements and monopolies abusing their dominant position, merger control, regulation of collectively dominant firms, as well as market research and competition advocacy roles.

The action by the competition authority comes after Barkat in May lambasted its head Michal Cohen making her responsible for the agency’s “severe underperformance” and calling for her resignation.

Barkat accused Cohen of “refusing” to adopt his policies to address core issues needed to help boost competition and lower the high cost of living in Israel. The move followed several price increases by food manufacturers in recent weeks, along with government-regulated dairy products and bread.

Before the hearing process, Cohen had also considered declaring Wissotzky a monopoly in the black tea and flavored black tea markets, the antitrust watchdog said.

“However, the data gathered following the hearing supported the conclusion that Wissotzsky’s share in the black tea market was lower than 50% and was gradually decreasing, as well as the fact that Wissotzky has a competitor that also enjoys a not-insignificant market share in this market,” the Israel Competition Authority said. “Regarding flavored black tea, following the hearing and examination of the data gathered, there were difficulties in concluding that this was a clearly distinct product market.”

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