Domestic regulation of retail food distribution services in Israel: The missing link between food prices and social protest

Introduction this chapter provides a case study tracing the impact of domestic regulation on market structure in the retail distribution services sector and its ultimate effects on consumer food prices. Taking Israel, a small and relatively liberalized Organisation for Economic Co-operation and Development (OECD) economy, as an example, our research investigates whether market concentration and the absence of international competition can be attributed to domestic regulation. We place this discussion in the context of recent consumer-led social protest against the rising cost of food in Israel. Distribution services in general, and retail distribution in particular, is at the nexus of economic activity, connecting producers, wholesale traders and importers of goods, on one hand, with end-consumers, on the other. By some accounts, retail distribution services constitute one-third of global consumer services (Nordas et al. 2008: 8), with retail food services comprising a significant part of it. This is a field in which a wide range of measures that could be considered as domestic regulation in the terms of General Agreement on Trade in Services (GATS) Article VI may apply as a matter of course, such as business opening hours and zoning requirements (Pilat 1997; Boylaud and Nicoletti 2001). Thus, even in instances where specific market access and national treatment commitments or general transparency and most favoured nation (MFN) obligations are not violated, domestic regulation may have adverse effects on international and local competition and optimal trade patterns, making it an especially interesting services sector.