The Competition Commissioner announced today (Wednesday) that it is considering imposing a financial sanction of NIS 111 million on Strauss, subject to a hearing. In addition, sanctions are also being considered for imposing sanctions on the Wyler farm and senior officers of both companies, subject to a hearing.
According to the Commissioner of Competition, Strauss Group and Wyler Farm carried out a merger in practice and in violation of the Economic Competition Law. This is a merger that could harm competition in the field of fresh plant-based milk substitutes. Thus, it appears that sanctions will be imposed on Strauss for the maximum amount of the sanction (NIS 111.33 million), sanctions totaling NIS 168.796 million are being considered, and sanctions ranging from NIS <>,<> to NIS <>,<> are being considered on the Wyler economy.
Competition Authority offices, photo: Gideon Markowitz
Weiler Farm is a company that manufactures and markets tofu products under the "Weiler Farm" brand, which are distributed to chains by Strauss. In addition, the Wyler Farm manufactures tofu products for private labels of several entities, as well as plant-based beverages for Strauss.
Strauss is a public company engaged in manufacturing, marketing, selling and distributing a wide range of chilled and dry food products of various types, including milk and dairy products, vegetable drinks, salads and dips, sweet and salty snacks, coffee and more. As stated, among other things, Strauss also distributes Weiler Farm products.
In February 2022, the Commissioner of Competition opposed a merger deal in which Strauss sought to acquire control of the Weiler Farm, inter alia due to concerns about harm to competition in the field of fresh vegetable beverages (soy milk, almonds, etc.). In this market, Tnuva is the dominant player in it, and Strauss and Meshek Wyler sought to enter it. The companies did not appeal the commissioner's decision.
Strauss Company (for illustration). The competition commissioner objected, Photo: Ancho Ghosh/Genie
The case currently dealt with by the Commissioner's announcement concerns competition in the field of plant-based products – beverages, cheeses and vegetable yogurts. As far as Strauss is concerned, this is a strategic area and it is working to greatly expand its activity in it in cooperation with Danone International under the Alfaro brand.
During the negotiations, Strauss insisted that after the merger, which was conditional on the approval of the Commissioner, the Wyler Farm activity would focus exclusively on tofu products. Wyler's partners found it difficult to accept Strauss's demand. During the negotiations leading up to the deal, a senior official wrote to a senior Strauss executive: "These areas are really big and significant. Our vision and dream was always to be a vegan factory (a dairy and meat substitute) and not 'just' a tofu factory."
Plant-based dairy products (illustrative), photo: Joshua Yosef
In the end, the partners in the Wyler farm were satisfied and agreed to clarify in the shareholders' agreement, which was intended to regulate the company's activities after the approval of the Competition Commissioner and the implementation of the merger, that "substitutes for dairy products, including substitutes for cheese, milk, delicacies, etc., are not included in the field of activity and it is known that the buyer (Strauss) will engage in these areas other than through the company."
However, the parties agreed that from the date of signing the share purchase agreement (prior to the approval of the Commissioner) until its realization or cancellation, Wyler will refrain from "entering new areas of business beyond those included in the company's field of activity as defined in the shareholders' agreement at the time of signing the agreement (share purchase)."
Through this directive, Strauss allegedly gained a foothold in the Wyler Farm activity in the field of plant products (beverages, yogurts, cheeses, etc.). Strauss received influence over the Wyler Farm's activity in this field even before the merger was submitted for examination by the Commissioner, and continued to hold it until the merger agreements were canceled after the objections of the Commissioner of Competition.
Company Chairman, Ofra Strauss, Photo: Yehoshua Yosef
The limitation on the areas of activity of the Wyler Farm could have delayed and even thwarted the Wyler Farm's plans to develop new products and expand its independent activity in the field of plant products. After the merger agreements were signed, the Wyler Farm acted in a manner consistent with the agreement formulated when it sought to divert funding it received from the Innovation Authority for the development of a production process of plant-based beverages and cheeses in favor of the development of tofu products.
In addition, during the examination of the merger by the Commissioner, Wyler Farm was required to approve investments it made with Strauss in order to ensure that they were in line with the "general investment plan" agreed upon by the companies – an investment plan that coincides with the intention that the Wyler Farm will focus solely on Tofu and abandon the field of plant products.
The alleged breach could have delayed and even prevented Wyler's independent entry into the field, particularly the fresh vegetable drinks market – a market dominated by Tnuva and in which Strauss intends to significantly expand its activity.
It should be noted that Strauss, the Wyler Farm and the officers have the right to be heard before the Commissioner before the final decision is made.
Dr. Sharon Elray Price addresses the salmonella affair at Strauss // Photo: Ministry of Health
Strauss said: "The company firmly rejects the claims of the Competition Authority and is confident that its conduct throughout the process was flawless. The claim that the company tried to prevent Wyler from entering the dairy substitutes market is detached from the facts, since the discourse between the companies revolves around the production and development of tofu products and not about the dairy substitutes market. This is a puzzling decision, both in its reasoning and in the amount of the disproportionate fine.
"The company and its senior executives mentioned in the decision conducted themselves at the time of formulating the agreement as expected of a leading public company, and before any move was made, they reported this to the Competition Authority and transferred the required materials for its review. All this is done transparently, fairly, in good faith and with close legal support from the best jurists in the field of competition. The clause in dispute is a general and standard clause, which is accepted in any merger agreement and has nothing to do with possible harm to competition. The company will argue its claims during the hearing and will fight for its good name in any court required."
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