Competition Authority warns Strauss of pending indictments

The Competition Authority has notified food company Strauss Group (TASE: STRS), its former CEO Giora Bardea, and its chief financial officer Ariel Chetrit, of its intention of filing indictments against them, subject to a hearing.

According to the notice, Strauss signaled to its competitors through its quarterly financials, in a press release, and in other messages, that it was considering raising prices “as a trial balloon with the aim of signaling to the major food suppliers, particularly its competitors, of its desire to reach an arrangement on a price hike.” The company and its officers are therefore suspected of attempting to form a cartel.

In its financial statements for the first quarter of 2021, released in May that year, Strauss stated that, in the light of rises in the prices of some raw materials and of shipping, it was prepared for various eventualities, and that in some cases it would examine revising its selling prices.

At the same time as the quarterly report was published, Strauss also published a press release in which it stated that it was monitoring the effects of the rise in input prices, and was examining plans and courses of action, including pricing policy. This was accompanied by other public messages in which Strauss said that it was examining in depth the possibility of price rises, and had not yet reached a decision.

According to the Competition Authority, these public messages were broadcast despite the fact that no substantial discussion had taken place at the company on raising prices, and despite the fact that, as far as Strauss was concerned, this was an unimportant consideration in terms of its effect of Strauss in Israel, in comparison with other business plans.

The statement of the allegations also claims that Strauss acted in the way that it did despite the fear that arose at the company that it would pay a price for these statements in negative media coverage, harm to the company’s reputation, and a decline in consumers’ demand for its products, especially as it was the first food company to express itself on the subject. Strauss even estimated that raising prices would lead to a negative public reaction and would harm its public image and its competitiveness.

The statement of allegations makes reference to the fact that the supply, marketing, and distribution of food in Israel are characterized by a high degree of concentration, and that a small number of suppliers with large market shares controls most of the market, and to Strauss’s status as one of the biggest food suppliers in Israel and as a monopoly in certain parts of the food market.

The affair broke in November 2021, when Competition Authority investigators raided the offices of supermarket chain Shufersal and questioned senior managers, among them then CEO Itzhak Abercohen, and also questioned then Strauss CEO Bardea. In the following days, Rami Levy, owner of Rami Levi Chain Stores, and the CEOs of supermarket chains Victory, Yochananof, and Osher Ad, were also questioned. On the food suppliers side, senior managers of Diplomat, Williger, and Unilever were questioned. The investigation of the suppliers continued until a few months ago, and Bardea was questioned again in May this year.

No decision has yet been made about possible charges against other companies investigated in the affair, and some are still being investigated.

The suspicion under investigation is that there was a cartel involving competing suppliers and retailers. At the heart of the investigation are statements in the press and media, on Facebook, and in financial reports. The investigation focuses on interviews given by senior managers in the food industry to the media in a way that could represent the passing of messages in order to coordinate positions on raising prices.

A statement on behalf of Strauss Group says, “Our position is that the company’s conduct was flawless, and that the company officers behaved as expected of them, and on legal advice. We are sure that, after the company and its officers present their position, an informed decision will be made on closing the case.”

Presumption of innocence: The suspects in the affair have not been convicted of committing any crime, and they are entitled to the presumption of innocence.

Published by Globes, Israel business news – en.globes.co.il – on August 21, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.