Court Rules in Favor of Retailer in Dispute Over In-Store Promotions

A recent court ruling has shed light on the significant financial investments suppliers make to influence consumers within supermarkets. Rehovot Magistrate's Court Judge Israel Pat ruled in favor of the retail chain Victory against the marketing company Benefit, ordering Benefit to pay Victory NIS 1.74 million for the final four months of their contract, plus NIS 75,000 in legal fees. The court also dismissed Benefit's counterclaim, which alleged Victory had stolen branding and advertising materials installed in stores.

The decade-long relationship between Victory and Benefit, which began around 2012, ended in early 2022 when Victory switched to a competitor, TMI. Benefit sought to remove its branding materials from Victory stores, but the chain refused. In response, Benefit canceled future checks it had provided to Victory, leading to the legal disputes.

The lawsuits revealed that Benefit operated a system where it installed and leased marketing displays within retail chains to suppliers. An agreement from 2016 stipulated that Benefit would pay Victory NIS 4.8 million annually for the right to install these displays. This figure, however, only represents Benefit's payment to Victory, with Benefit likely charging suppliers a significantly higher rate to cover its own costs and generate profit.

This case is one example of how suppliers invest heavily in in-store promotions. Previously, it was reported that Osem paid at least NIS 7 million annually for shelf-stocking services, a practice now prohibited under the Food Law. This service, provided by companies like Lumblico, involved placing supplier employees in supermarkets to arrange shelves, thereby increasing product visibility at the expense of smaller suppliers unable to afford such services. This advantage helped large suppliers maintain market dominance for years until the Competition Authority revoked an exemption that allowed them to stock shelves in large retail chains.