To Donate Click Here

Vayigash-When is Competition Permitted

 

Question

You wrote in the previous article that when I copied successful designs from stores and then sold my wares in competition with the stores I might have been guilty of violating the prohibition against taking away another person’s livelihood-yoreid le’umnos chaveiro. I plan to stop my practice anyway because of what you wrote in the previous article but I am interested to know if I actually violated this prohibition.

Answer

Before we address your question it is important to clarify the gravity of this issue.

In parshas Ki Sovo, the Torah lists eleven actions for which the perpetrator is cursed by Hashem. One of these actions is known as hasogas gevul – moving a boundary. This refers to a person who moves the physical demarcation line that separates his property from the property of his neighbor, thereby effectively stealing some of his neighbor’s land.

Many poskim understand the curse to include commercial boundaries as well. These opinions maintain that one who takes away a portion of another person’s livelihood in a prohibited manner is included in this curse. Among those who held this opinion are many recent poskim including the Aruch Hashulchan (156, 16), Rav Moshe Feinstein (CM 2, 40) and Rav Ovadia Yosef (Yabea Omer 9 YD 27).

Another reason for extreme concern is that many Poskim, including the Chasam Sofer (CM 79) who proves that this is the opinion of the Rama and many others, maintain that this action is also included in the Torah’s prohibition of stealing. Many later poskim, again including Rav Moshe Feinstein (ibid), also agreed.

We should note further that the Poskim (Maharshal res 37, Shearis Yosef 19) write that the fact that many people, perhaps even including people who otherwise act like religious Jews, regularly violate this prohibition does not change the law that makes it prohibited.

We should also preface our discussion by noting that Torah law, in general, is in favor of competition. The Gemara (Bava Basra 21B) cites the authoritative opinion of R. Huna son of R. Yehoshua who permits another inhabitant to establish a rival mill even adjacent to the first mill. He also says that even if the proprietor of the second mill is a resident of a different city he may still establish a rival mill in the same courtyard provided that he pays local taxes. On the other hand, if he does not pay local taxes, even if he is a local resident he may not open a rival mill.

Furthermore, the Gemara (BM 60A) encourages price cutting since it is advantageous to the consumers. Thus, the Mishna cites the authoritative opinion of the Rabbonon that we laud one who lowers the price if the competition is capable of lowering its price as well. As a result, the Rama (156, 7) rules that local merchants cannot object to competition from merchants from other cities if the latter sell at a price which is lower than what the local merchants charge but could charge, since the customers gain.

However, all the above is true provided the competition is fair. The same Mishna discusses whether a storeowner is allowed to offer children roasted grain or nuts (that was a delicacy for children in the time of the Gemara as we see in Pessachim 108A that one was supposed to make his children happy on Yom Tov by buying them these items) as an incentive to patronize his store. The authoritative opinion is that it is permitted.

It is crucial to note the reason the Gemara gives for allowing this practice. The Gemara says it is permitted because the competition is capable of offering children a different incentive. Many poskim explain that the fact that we only permit offering incentives because the competition can also offer incentives, in no way conflicts with the ruling that one may establish a mill adjacent to an existing mill since the first mill can compete fairly with the second mill, whereas if the competition could not offer incentives it could not remain competitive.

This principle manifests itself in the law governing where one may open a rival store. We mentioned before that one may open a competing store even adjacent to one that already exists. However, the Ra’avyo (cited by the Mordechai BB 516) whose ruling is cited by the Ramo (Darkei Moshe 156, 4 and res. 10) and serves as the basis for many subsequent decisions, rules that if a store is located inside a courtyard, another proprietor may not open a competing store near the entrance to the courtyard since it will take away many potential customers since they will necessarily pass by the second store before reaching the first store. Since the first store cannot compete we do not permit the second store to open up and if it does, beis din will force it to close. Note that we take into account the location of the first store and don’t tell the proprietor that he can remain competitive by relocating.

This principle also manifests itself in the laws governing pricing. We mentioned that the Mishna lauds merchants who lower their prices. However, when the Ramban and Rashba (in their commentaries to BB 22A) explain this statement of the Gemara, they write that the reason is because the other stores also can reduce their prices and remain competitive. Thus, a store is not allowed to reduce its prices to a level that other stores cannot reasonably match. Similarly, the Aruch Hashulchan (228, 14) writes that the praise that the Mishna heaped upon one who reduces prices is limited to those who sold grain that forced hoarders to sell their stock. (See Rashi BM 60B who explains the Mishna in this manner.)

In the world at large that does not follow Torah law, rival stores routinely engage in this practice and ruin the livelihood of proprietors of existing stores. Gigantic supermarkets open up in the vicinity of smaller stores and reduce their prices to a level that smaller stores cannot meet, forcing the smaller stores to close. Under Torah law this practice is prohibited and unless the smaller stores have some kind of advantage that will somehow allow them to remain competitive, the gigantic stores may not reduce their prices to a level that smaller stores cannot match.

Thus we have established the basic laws of competition. 1. The halacha permits and even encourages competition especially if it will benefit consumers. 2. Engaging in a practice which the competition cannot match is prohibited.

In your situation, you have much lower costs than your competition since you save on development costs and also you don’t pay taxes. If you took advantage of these savings and lowered prices to a level that the competition could not reasonably meet because they paid all these expenses, you violated the rules of fair competition and you are classified as a yoreid le’umnos chaveiro. We should note that this is true (and the Chassam Sofer CM 118 writes this explicitly) even if no one was forced to close his store since he had other products to sell. As long as selling the product you copied ceased being worthwhile you violated this prohibition.

Your situation is similar to one which was ruled upon by the Ma’amar Mordechai (res 11). In his case, residents of a town who produced and sold whiskey were charged local taxes. On the other hand, the residents of the surrounding villages were not charged taxes and they could sell their whiskey to the residents of the town at a cheaper price because they saved on taxes. In addition, the taxes that were paid by the whiskey producers benefitted the local Jewish community and therefore some of the townspeople objected because of the loss in tax revenue. The Ma’amar Mordechai ruled that the town’s merchants could force the outside villagers to cease their practice because, as we mentioned earlier, according to Torah law, the residents of the town can prevent others who do not pay local taxes to sell in the town. In his case, he ruled that the town’s merchants were even permitted, if necessary, to persuade the non-Jewish owners of the villages to force the Jews to leave the village if they continued their practice.

In the present situation, your competition probably is not very concerned about the loss in tax revenue and therefore, this will not serve as a basis to prevent you from continuing your practice. However, if you undercut prices to an extent that they could not compete, they would have been justified in forcing you to stop as a yoreid le’umnos chaveiro.

As we mentioned even if no one was forced to close but someone had to stop selling this item or sold it for very little profit, the Chassam Sofer (CM 118) rules that you violated the halacha and as we mentioned at the outset, according to many, you have the status of a thief and also would be included in the Torah’s curse for hasogas gvul. If you did not pass along your savings to your customers and charged a price that was in line with other merchants, you did not violate this prohibition. However, as we wrote in the previous article, there are other reasons to end your practice.

 

Leave a comment

Your email address will not be published. Required fields are marked *