The Consumer Council calls on the government to examine the competition in the milk and dairy product market and to rethink its policy regarding supervision on the price of these products. The Israeli dairy market is regulated by the Industry & Commerce and Agriculture offices by power of law which states government supervision on the prices of milk and dairy products. In 2006 a number of basic dairy products were removed from supervision. A survey commissioned by the Consumer Council shows that the removal from supervision caused an acute rise in the price of these products without any economic justification.
The survey shows that the Israeli dairy market is extremely centralized: the Tnuva Company monopolizes the field of raw milk supply to companies that produce milk products (controlling 90% of the milk reception market). Three dairy production plants- Tnuva, Tara and Strauss- constitute 96% of the industrial milk production market. In addition, there is no actual competition over some dairy products- the prices of imported products are higher than the price of products manufactured in Israel, because of taxes and special refrigeration conditions that up the cost of transporting the products to Israel.
The Consumer Council's survey shows a high and allegedly unreasonable price increase of unsupervised dairy products in 2006 and 2007 up to the middle of 2009.
The decision to remove supervision from the prices of dairy products was based on the premise that removing supervision will create competition in the market. Research shows this premise was mistaken.
The survey raises the concern that since supervision on dairy products was removed in 2006, the companies in the dairy market took advantage of their current power in the market, which does not follow free market economy rules- and increase the price not only of now unsupervised products but of all the companies' other products as well. The removal of supervision in fact enabled the companies to price their products without any restriction.
In this reality and in order to prevent any further detriment to all consumers, and especially to vulnerable populations, the Council's stand is that price supervision policy must be continued. This until conditions exist that enable market forces to set the price of dairy products at a reasonable level .
According to the Consumer Council's CEO, Adv. Ehud Peleg, there are fields in which the mantra "Let the market forces work" simply does not work, this because the presumption that free competition exists in that field turns out to be completely fictitious. In these cases , the Council's CEO emphasizes, the only way to protect consumers from prices going wild is by enforcing supervision on prices.
