After Coke, ‘Milky’ Next Target of Monopoly-Pricing Lawsuit

After Coca Cola, next on the judicial firing line for economic activists in Israel is dairy concern Strauss, makers of dairy snack Milky – the very product that set off mass protests against high prices in 2011, and which has become a symbol of the higher prices Israelis are forced to pay for products that are the same as elsewhere, just more expensive. The Tel Aviv District Court on Sunday authorized for class-action status a lawsuit against Strauss, which is using its strong presence in the market in a monopolistic manner to keep the price of Milky artificially high.

Just last week, the Central District Civil Court authorized a similar lawsuit against the Central Bottling Company of Bnei Brak, the sole distributor of Coca Cola in Israel. Like with Coke, attorneys representing the plaintiffs (now a class of all consumers of Milky) claim that Strauss in essence has a monopoly on the chocolate pudding market in Israel, as 90 percent of all the puddings sold bear the Milky brand. Because it is a monopoly, Strauss is subject to anti-monopoly rules, which prevent such companies from charging above a certain amount for their products. Attorneys are seeking a settlement of NIS 100 million for plaintiffs, which would result in a significant lowering of the price.

A recent report by a farmers’ group claimed that 86 percent of the cost of a single Milky went to the coffers of the manufacturer and the big supermarket chains. Only 14 percent of the cost of the product – about three and a half shekels – accounted for the milk in it. Milky also figured largely in a spate of stories in 2014 and 2015, when Israelis who went to live in Berlin compared the price of a similar snack to the Israeli version, and found the latter to be some 40 percent higher.

In response to the lawsuit, Strauss said that the lawsuit was unfair, as there were many competitors in the market, and singling out Milky as unique because it has whipped cream where the others did not was “ridiculous.”

Attorneys in the Coca Cola lawsuit also claimed that its bottlers had cornered the market on 1.5 liter bottles of cola soft drinks in Israel. According to evidence presented by the plaintiffs, Coca Cola has for many years held some 90 percent of the cola market in Israel. In addition, research shows that the price of the product has consistently been between 45 percent and 50 percent higher than competing brands – and that when prices of other colas rise, the price of Coke does as well.

The pricing and the increases are clearly not related to the cost of raw materials or production, the plaintiffs claimed – and when asked by the court, the Central Bottling Company was unable to provide any evidence at all that would justify its claims that production costs were responsible for the price differences. The court also rejected a claim by the company that, as Coca Cola was a long-established brand with a “worldwide reputation,” the company was required to price it in alignment with prices in other countries.