JERUSALEM (Reuters) - A plan to break up some of Israel's largest conglomerates cleared a key hurdle when parliament gave its initial approval on Monday to a government move intended to increase competition and appease public outrage over the high cost of living.
Lawmakers voted 28-0 in favor of the bill, which still needs to pass two more readings in parliament, the Knesset, to become law.
Moments before the vote, Finance Minister Yuval Steinitz told parliament the law would change the face of Israel's economy and lead to lower prices for consumers.
Israel has one of the highest concentrations of corporate power in the developed world with the government estimating that the country's 10 largest business groups control 41 percent of the market value of public companies.
"We are working to reduce the monopolies in Israel's economy and boost competition. That is the right thing to do from an economic and social point of view," Prime Minister Benjamin Netanyahu told legislators of his Likud party before the vote.
Conglomerates will have to choose between owning major financial or non-financial companies. Holding companies structured like pyramids will have to limit how many tiers of subsidiaries they have.
Existing groups, which currently hold listed subsidiaries that in turn have their own subsidiaries, will be allowed no more than three tiers of subsidiaries. New conglomerates can have two.
Companies will have four years to comply.
A year ago protesters set up tent cities and partly blamed Israel's conglomerates for driving up prices of basic goods. That prompted the government to form a committee, which issued its recommendations that were approved by the cabinet in April. Protests have resumed but are smaller in scale so far than last summer.
According to the recommendations, companies cannot hold a financial firm with assets above 40 billion shekels ($10 billion) at the same time as a non-financial company of more than 6 billion shekels of revenue.
Delek Group (DLEKG.TA) would have to decide between keeping insurance company Phoenix (PHOE1.TA) and brokerage Excellence Nessuah or its fuel business - which includes a number of offshore natural gas fields.
Private equity firm Apax Partners APAX.UL would need to choose between food maker Tnuva or the Psagot brokerage.
($1 = 3.98 shekels)
Additional reporting by Jeffrey Heller; Editing by Ruth Pitchford