The OU, etc.

It seems to me the OU and other kosher supervising agencies may be targets of the new federal investigation of price fixing and collusion in the kosher meat industry. This is a good time to point out that, with only one or two exceptions, these companies operate as tax exempt religious corporations and shield their books under the so-called “church exemption” which allows them to avoid filings with the IRS that otherwise would be public information. This means that, for all practical purposes, these organizations from the behemoth OU down to the much smaller UMK (Rabbi Zeilingold, who might possibly have his own IRS issues brewing, although I have not confirmed this) have no public accountability for their finances. When was the last time the OU’s or UMK’s books were laid bare for the community to view? It seems this has not happened recently, and probably never happened. Worse yet, while the OU seems to legitimately fit the “church exemption,” others like the OK do not – yet they claim it nonetheless.

Will the feds pierce the veil of these “church exemptions”? I believe they will, and that piercing will result in indictments and, eventually, convictions and perhaps plea bargains.

It may very well be the corruption so rampant in the kosher industry will be cleaned up by federal prosecutors and Treasury agents, when it should have been cleaned up long ago by rabbis and community leaders.

My guess (and this is only a guess) – the federal medical prison facility in Rochester, Minnesota will have a very choshuv minyan a year or so from now.

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21 Comments

Filed under Crime, Haredim, Kosher Business?, Kosher Meat Scandal, Modern Orthodoxy

21 responses to “The OU, etc.

  1. Stephen Mendelsohn

    BS’D

    This may be a tad off-topic for this entry, but I thought it was important.

    Rabbi Jill Jacobs notes on JSpot that the OU’s position that kashrut is only about the ritual laws, while tza’ar ba’alei chayim, business ethics, worker abuse, environmental laws, et. al, are not part of its purview, is belied by a link on the OU’s own homepage where the OU calls for a boycott of Sam Rosenbloom and his website, http://www.succah.com (exact spelling only). Rosenbloom has had a seruv issued against him by the Baltimore Beth Din for refusing to give his estranged wife a get. About a year and a half ago, synagogues around the nation made announcements on Yom Kippur calling for a boycott of this website and for not extending Shabbat or Yom Tov hospitality to this scoundrel.

    Note that the OU is not claiming that Rosenbloom’s sukkot are not kosher. Rather, they are insisting that it is halachically wrong to use a sukkah bought from someone who abuses his estranged wife in this manner. But this principle can and should be applied to AgriProcessors’ meat, produced by the flagrant abuse of people and animals alike.

  2. Succas do not make much (if any) money for the OU. Meat, products with eggs, etc., do. Follow the money.

  3. Stephen Mendelsohn

    BS”D

    Exactly. It all depends on whose ox (or cow or chicken) is being gored (or throat-ripped or debeaked). My point (citing R’ Jacobs) is to show the hypocrisy of the kashrut agencies’ claims that they are not experts in animal welfare or labor practices. We have two words for this: bovine scatology.

  4. Michelle

    Pleaaaase get some indictments also for the Kosher cheese market–and for the grocery store chains that price-fix their kosher products too!

    It is horrible that these businesspeople are making more than an honest profit off of those who must buy their overpriced products.

    A pound of kosher cheese for $8.99??? Come on! It’s just mozarella!!

  5. Anonymous

    Do you have any evidence that the OU has done anything wrong concerning price fixing or are all Torah laws against lashon harah inoperative?

    The OU gives hashgachas on many competing products, as any person can readily see for himself. In addition, the OU meat hashgacha is not considered the gold standard by many persons (for the record, I rely upon it), which would tend to negate any claim that they are actively involved in a conspiracy, or that they could somehow benefit.

    Also, the theory that allocation of ranbbinical supervision amounts to allocation of markets is shaky, and legally suspect.

    For one, it may be a violation of the First Amendment for the government to dictate what supervision any product should have, and it is highly likely that a judge would dismiss any such indictment as an entanglement between religion and state.

    If you have any doubts, think of who the expert witnesses would be and how would you qualify them. What if one of two Satmar Ravs wanted to testify as to the best hashgacha or to practices in the community? Who would decide whether a certain hasgacha is acceptable to Satmar, and who indeed knows whether they eat other hasgachas in their home. Are their reliable surveys?

    If the government is trying to make a case, it will be built upon traditional explicit price fixing or market allocation, not by hashgacha. It is difficult to believe that the OU would be involved in this.

  6. nachos

    If the OU is not involved in this, then why won’t they open their books?

  7. Neo-Conservaguy

    “A pound of kosher cheese for $8.99??? Come on! It’s just mozarella!!”

    Make no mistake about it: the higher cost is the direct result of the staggeringly high cost of rabbinic supervision from big-name agencies. A perfect example that proves without question this fact is the different costs of Cabot cheese productions. The normal runs are “Tablet-K” certified but are not supervised during the production; the rennet is vegetarian, as are all ingredients. A “test” production run with full OU supervision, including the dropping of a small container of the rennet into the batch, was run last year. Every aspect of the runs was otherwise exactly the same: same equipment, same ingredients, same workers, etc. The cost differential? The “reliably kosher” run was almost 50% higher in cost.

    And to think that some of the most recognized names in the American rabbinate in the 1950’s (the dark ages, according to young YU grads) were mutar on cheese and enjoyed Kraft cheese wiz, not to mention jello…!

  8. Anonymous

    Also, it pays to keep in mind that the current stories relate to subpoenas, not indictments. The investigations are ongoing and may (or may not) result in charges.

    Remember how Fitzmas became Fizzlemas.

  9. Anonymous

    Why don’t they open their books?

    I am all for all communual organizations opening their books. However, the fact that they do not open their books does not mean that they are involved with price-fixing.
    It is much more likely that OU (and other) executives do not wish for their salaries to be made public.

    As for the high cost of kosher food, only a study using internal cost data is likely to reveal the truth. Possible answers are:

    1) Extra cost of ensuring kasruth and supervision.

    2) A less competive environment because the market is (relatively) small.

    3) Barriers to entry; possibly including artificial barriers set up by suppliers with entrenched interests.

    4) Price fixing and collusion.

    If the cost of supervision was the only answer then producers such as Empire, who have substantial resources, would have every incentive to set up their own supervisory organizations or to publicly object that the cost is outrageous.

    If it is so easy to produce kosher cheese at the same cost as non-kosher then I suggest that you start your own company and sell the product. There are plenty of pizza stores who would be glad to pay less for cheese.
    (Even if you are not the business type therre are assuredly others who are and would love to make more money).

  10. The OU refused to give Kraft a hechsher for cheese in the 60’s because it would drive the Jewish producer out of business.

  11. Anonymous

    The 60’s? Come on; you are talking about almost a half century ago. (I assume you mean the 1960s; not the 1860s).

    If you want to accuse the OU of being anticompetitive, you will have to do better than that.

    Besides, I am sure the O.K; Kof K; Star-K; all hechsharim acceptable to most orthodox Jews, would be glad to certify Kraft if the OU refuses.

    Try again.

  12. You obviously do not understand the economy of scale.

  13. Anonymous

    The OU being anti-competitive?

    A heresay story from the 1960’s isn’t going to convince many people and if you simply take a look at their client list, they certiy dozens of competiting brands and companies, both Jewish/Kosher brands and mass market ones as well.

    There are probably many stories about how they do things people don’t like, and some could even be illegal and play into the current Fed investigation, but a 1960’s story ain’t gonna cut it.

    Lastly, I highly doubt the ‘high cost’ of kashrus supervision has much to do with the prices we pay at the store, if that were true, we wouldn’t have much to eat, because large mass-market brands wouldn’t be able to justify spending the money.

    Our price structure has more to do with the economies of scale that the Jewish/Kosher companies DON’T have compared to mass-marketed products. It just costs more per item if you manufacture only 10 or 20% (or less) of the volume.

    Also, the Kosher food distribution system, much like the non-kosher specialty food industry relies on a tiered network of distributors and brokers, each level needing to make an honest buck.

    With all that said, I assume we could pay much less for beef, if the big 3 beef guys would actually play fair with us consumers, and not artificially inflate and fix the prices amongst themselves.

  14. Anonymous

    1. It is not a “hearsay story.”

    2. You neither understand the kosher food industry or its distribution system. Wait for the indictments. You’ll actuall learn something.

  15. Isa

    Kosher cheese:
    Eons ago I went with someone to ‘make’ kosher cheese curds, got up at 3 am, went to a cheese factory in Wisconsin. This was to pour the rennent in the bath.
    Then we waited for the curds to form and were then shoveled out (with stainless steel shovels) into a drum which was then sealed and to be shipped off to be further processed. Did it once. Then the microbially rennant came out, not from an animal and cheaper than ‘tref’ rennant. So everyone will use. Now what? About the time, cheese processors mixed meat with cheese so any factory doing that can no longer be supervised. Also it was said that the microbially rennant was grown from a wheat broth (Passover problems)
    My take is kosher cheese factory employ otherwise unemployable people as mashgiahs and these people need jobs!
    I understand that all cheese (at least in the USA) is now made with microbially rennant.

  16. Neo-Conservaguy

    As far as I know, most cheese made in the USA is made with vegetarian rennet, followed by recombinant microbial enzyme rennet. Fewer and fewer cheeses are made with animal rennet – although the ones that are tend to be the top of the line traditional products.

  17. Anonymous

    You want good cheap kosher cheese? Not gonna happen, unless Tnuva decides it can. Tnuva holds the license to sell to the US kosher market. They artificially raise prices by restricting export, and don’t like competition from US or any other country’s companies. There are only a few who are allowed to compete & prices are kept artificially high
    http://www.readme.co.il/pikanti/english/011-eng.htm

    Want to sell CY mozzarella? Good luck battling the giants on the east coast. They have an inferior product, yet sell at premium prices- because they can.

  18. Anonymous

    What do economies of scale have to do with Rabbinical supervision?

    If anything, the presence of economies of scale (which is the presumed ability to make things at a lesser production cost when produced in greater quantities) would explain the higher prices for kosher cheese, because the market for kosher cheese is much smaller than for non-kosher cheese.

    I have heard that smaller quantities are the reason that kosher cheese is more expensive; however, I really have no idea if economies of scakle exist in the cheese industry at the relevant production levels or not. That is an empirical question which can only be answered with hard data.

    Throwing around words, no matter how fancy they sound to a laymen, is no substitute for real knowledge of economics.

    In addition, I never said there is no price fixing in the kosher industry. I only asked w hat evide nce you have tbat the OU is invoplved, assuming that price fixing exists?

    To date, you have only come up with a perfectly legal refusal to issue a hashgacha to Kraft cheese. (The anti-trust laws only prohibit conspiracies. A refusal to deal, absent an agreement with a third party, is patently legal. I could get you a cite if you wish but this is basic anti-trust law.).

  19. While you’re looking that up, look up another legal term – collusion.

  20. Anonymous

    Unless you spoke to the Kraft people involved of teh OU still has employees aroud from the Kashrus division form teh 1960’s, its hearsay.

    Believe me, I know plenty about the Kosher food distribution industry.

    Seeing these guys indicted will not teach me anything, just prove to the world what has been going on for a long, long time. And yes, things like this do increase the consumers prices, but there are lots of others things that increase prices, even for honest companies.

  21. Anonymous

    Once again, there is only a possible antitrust violation if you agree with X not to deal with Y; and then only possible. A unilateral refusal to deal to protect another customer is legal.

    I do not pretend to know what goes on in the kosher cheese industry. I am merely asking if you have any evidence for your charge that the OU is involved in antitrust violations, and you have only come up with a perfectly legal practice from 40 years ago.

    And it is hearsay, unless you have personal knowledge of the practice or if somebody with personal knowledge swore to it in a court proceeding. Merely talking to somebody who has personal knowledge does not make it non-hearsay when you communicate that conversation to another person.

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