Religious Services Ministry Warns Privatized Kashrut Model Created Shell Companies and Weak Oversight

The Ministry of Religious Services has released a detailed regulatory report on the consequences of Israel’s kashrut reform and says the previous competition-and-privatization model created serious structural failures. The report, published in the context of amendments to the Law Against Kashrut Fraud, argues that kashrut is a “trust product” marked by extreme information asymmetry, where consumers cannot tell through their senses whether food meets halakhic standards.

According to the ministry’s analysis, bringing in private for-profit certifiers created a market failure and a “race to the bottom” in halakhic standards. Private bodies competing for paying businesses had an economic incentive to loosen supervision and cut costs to win clients. The ministry says the new amendment is meant to end that privatization track and protect the system’s credibility.

One of the report’s harshest findings concerns the abolition of regional boundaries under the earlier reform, which allowed local rabbis to issue kashrut certificates outside their home areas. In practice, the ministry says, some rabbis operating beyond their districts set up private “shell companies” that collected money from businesses without proper oversight, contrary to orderly administration and ministry policy. It also says local rabbis struggled to provide professional, uniform service outside their territories without the logistical and managerial support of the local religious council.

The new 2026 law includes major changes: restoring regional jurisdiction, severing the direct financial link between inspectors and businesses, and setting national, uniform kashrut standards. Under the proposal, only local public authorities will issue certificates, each city rabbi will supervise only within his municipality, and the rabbinical chief council must publish written, transparent standards. Businesses will no longer pay supervisors directly, and salaries will instead be funded through local kashrut authorities using fixed, proportional fees. The ministry says this will block improper competition among rabbis and end the shell-company phenomenon. Kashrut watchdog group Kosharot welcomed the report, saying it confirms that commercial interests and private companies harm independence, professionalism and public trust.