Unfair Competition

From Halachipedia

Source

  1. Some say encroaching on someone's livelihood is a Torah Prohibition[1] while others say this is a rabbinic decree.[2]
  2. Even when competition is permitted, it may sometimes be preferable not to open a competing business.[3]
  3. See Dina D'malchusa Dina for when the countries laws diverge from Jewish law.[4]

General Guidelines

  1. It is permissible for a competing business to open near a preexisting business and sell the same products provided that the newcomer lives in or pays taxes to that city.[5]
  2. If the new business will charge lower prices or sell higher quality, some say that we cannot stop him from opening.[6]
  3. If the newcomer threatens to cut off the income of the original tradesman entirely, many rule that the incumbent has the right to prevent the competitor from opening his business.[7]
  4. One business may even advertise and offer incentives to attract customers.[8]
  5. Whenever the newcomer is permitted to enter the market, he is prohibited to compete in an unfair manner, such as by selling below cost.[9]
  6. If there is a specific day that is reserved for people to come and shop there, nobody can prevent anyone else from opening.[10]
  7. As a customer, some say that one should not buy from an establishment that opened when it was forbidden to do so.[11] Others argue that once the store is open, a consumer may purchase at either establishment.[12]
  8. Store owners cannot agree to forgo these laws and allow unfair competition.[13]

Exceptions

  1. Competition is not limited at all in the following areas:
    1. Teaching Torah.[14]
    2. Internet businesses.[15]
    3. Business districts in which the original business owner would benefit from a new business opening up (i.e. more customers will arrive).[16]
  2. Competition is not limited when non-Jews are not observing the law anyway.[17]
  3. Competition is only limited in retail markets, not wholesale.[18]

Stealing Clients or Employees

Ethical Imperative Completing the Deal

  1. If someone paid for a movable item and didn't yet take it neither the buyer nor seller should renege on the sale. If they do chazal enacted a particular curse called "mi she'parah" for engaging in such activities.[19]
  2. Someone who verbally agreed to a sale but didn't yet pay, it is proper to keep your word.[20]

Stealing Someone Else's Deal

  1. If someone is making an effort to acquire something there is a principle that a second person shouldn’t come to supersede him to beat him to that acquisition. This principle is called Ani Hamehapech Bcharara.[21] Our rabbis explained that anyone who takes the item from the first person is called a wicked person and there is a dispute if the bet din can extract the money from the second person.[22]
  2. The principle of Ani Hamehapech Bcharara applies equally to sales and rentals as well as applies to land, movable items, and workers equally.[23]

The Leniency of a Unique Deal

  1. If the second person can find a similar deal to buy or rent somewhere else he should not take it away from the first person.[24]
  2. If the second person is interested to buy a bigger quantity or a piece of real estate that is bigger land than that of the first person he could do so since he isn’t taking the first person’s deal.[25]
  3. If he can't find the same deal somewhere else some hold that he could try to supersede the first person to buy the item first,[26] while some forbid this.[27]
  4. If a person finds a good piece of real estate and someone else was already engaged to buy it there is a dispute whether it is right to try to acquire it first.[28]

At What Point Is It Forbidden to Interfere?

  1. Before the parties agreed upon a price it is permitted for someone else to interfere to acquire the deal.[29] Some say that the second person doesn't interfere even before the first buyer and seller agreed upon a price. [30]
  2. If the buyer left because they couldn't agree on a price the second buyer can interfere.[31]
  3. It is a pious practice for a second person never to interfere with an original buyer even if it technically isn't Ani Hamehapech Bcharara.[32]

Stealing Someone Else's Free Item

  1. If someone has made an effort to acquire a free item, some say it is wrong for someone else to beat him to it and "steal it."[33] Others permit this if there's only one of the kind of that free item.[34]
  2. Everyone agrees if the first person put in effort[35] to acquire the free item and he anticipated getting it the second one may not take it from him.[36]
  3. Sephardim hold that the second person shouldn’t even take a free item, while Ashkenazim hold that the second person could take a free item and the principle of Ani Hamehapech Bcharara only applies to sales or rentals.[37]
  4. According to Sephardim it is only relevant once the first person already put in effort to acquire the free item and not just if he saw it.[38]
  5. Even according to Ashkenazim, there is a principle of the second person not stealing the free opportunity from the first person if he already put in an effort and was confident that he would acquire it.[39]

Poaching Employees

 
  1. It is halachically permitted to hire a worker who currently works for another similar job if they have a special talent that you doesn't think he will find in another worker.[40] Regarding the legality of poaching employers from competitors see here and the article on Dina Dmalchuta Dina.
  2. It is forbidden to get someone hired by a employee if by getting the job someone who currently works there will get fired unless the employer either way was going to fire that worker. Doing so is an issue of "stealing" the first worker's job.[41]

Links

Sources

  1. ↑ The Gemara in Makkot (24a) derives the prohibition from the verse “he did not perform evil with his neighbor” (Tehillim 15:3), whereas the Gemara in Sanhedrin (81a) derives the same idea from the verse “he defiled his neighbor’s wife” (Yechezkel 18:6). The Gemara Yevamot 76b compares one who takes the livelihood of someone else away to a murderer. Shut HaRambam 273 and Shut Mahrshal Siman 89 base it on Devarim 27:17. Shut haRashba 1:664 says it is included in the prohibition of stealing.
  2. ↑ Terumas HaDeshen (Pesakim U'Kisavim 128) See Chazon Ish Emunah U’Bitachon 3:15 regarding the faith someone who is facing competition should have.
  3. ↑ Pitchei Choshen Hilchot Geneva ViHona’a 9:1, Mahrashdam C.M. 407, Shulchan Aruch Harav Hilchot Hefker Vihasagat Gevul Seif 13, Chavot Yair 42. The prohibition of being יורד לאומנות חבירו, literally “descending to another’s profession,” or illegal competition, is derived from two distinct verses. Chasam Sofer Bava Basra 21b based on Gemorah Makot 24a
  4. ↑ Shut Maharashdam C.M. 407 says that if the local law allows competition, we wouldn't be able to prevent someone from opening a store. Pitchay Choshen Hilchos Genaiva V'Onah 9:1 says this is especially true when it comes to a large city that can support many stores, a city square where people come from all over, or a city is growing. In these cases it wouldn't even be preferable to avoid opening a competing store.
  5. ↑ Pitchei Choshen Hilchot Geneva ViHona’a 9:2. The Gemara (Baba Batra 21b) addresses a situation whereby one operates a mill in a mavoy (alley), and another wishes to open a similar establishment in the same mavoy. Rav Huna asserts that the owner of the first mill may prevent the newcomer from opening, as the newcomer will interfere with the incumbent’s livelihood. Rav Huna son of Rav Yehoshua argues that the first miller cannot prevent the newcomer from opening as long as the newcomer is from that town or at least pays taxes to that town. Rashi d”h “Shani Dagim” explains that the competitor can claim that “Whoever will come to me will come to me, and whoever will come to you will come to you.” Rif (Baba Batra 11a in pages of Rif), Rambam (Hilchot Shechenim 6:8), and Rosh (Baba Batra 2:12) follow the latter opinion, and this is the ruling of the Tur and Shulchan Aruch C.M. 156:5. Rama (based on Tosafot Baba Batra 21b “vi’ee”) rules that an outside resident paying local taxes may open an establishment in a different mavoy of the city, but not in the same mavoy as the already existing business. Rabbi Chaim Jachter (Gray Matter Hasagat Gevul: Economic Competition in Jewish Law) writes that the modern day neighborhood is equivalent to the mavoy of the Gemara. However, Pitchei Choshen Geneva ViHona’a 9: note 2 explains that in the modern business environment, it does not stand to reason that if there is one store or business in town, that store should be given a monopoly on the entire town. This is especially true for big cities, where there is plenty of room for several stores and businesses to make a good income. Rabbi Aryeh Lebowitz (Hasagas Gevul - Unfair Competition on Yutorah) raises this argument as well. Rabbi Chaim Jachter (Gray Matter Hasagat Gevul: Economic Competition in Jewish Law) quotes that Rav Soloveitchik thought that the laws of competition do not apply in America but didn’t explain why he felt that way.
  6. ↑ Tur 156 explains that the Chachomim didn't protect the seller at the expense of all the consumers. Aruch Hashulchan 156:11, Pitchei Choshen Hilchot Geneva ViHonaa 9:8, Mishpitei Hatorah 2:10. This is based on the Rosh (Baba Batra 2:12), quoting the Ri ibn Megash. Although the Beit Yosef quotes that the Ramban disagrees, the Rosh is mentioned as a yesh omrim in the Rama 156:7. See Rabbi Moshe Sternbuch (Teshuvot Vihanhagot 1:800) on opening a competing restaurant.
  7. ↑ See Pitchei Teshuva 156:3 at length. Aviasaf (cited by the Mordechai, Bava Batra 516) rules that it is forbidden for somebody, even if he lives locally, to open a store at the entrance to a mavoy satum (a dead-end alley), if a similar establishment is already located within the mavoy. The reason for this is that opening such a store will bring the original shopkeeper’s business to ruin. Potential customers will see only the new store upon entering the alley, and the original establishment will go unnoticed. The Beit Yosef C.M 156 explains that the ruling of Aviasaf follows the opinion of Rav Huna, which is not according to Halacha. Thus, it would seem from Shulchan Aruch C.M. 156:5 that one may not prevent another business from opening nearby even if it will certainly eliminate his own business. This is the ruling of the Beit Ephraim C.M 26. The Rama (Darchei Moshe 156:4) however, explains that according to the Aviasaf, all opinions agree that it is prohibited to open a new business if this will cause the original business (the one inside the mavoy) to collapse. In other words, cases of “definite damage” do not fall into the principles above, and it is forbidden for one business to cause “definite damage” to another.On the other hand, the Pitchei Teshuva 156:3 quotes the Chavos Yair that even the Rama thinks this is only in the opinion of Rav Huna, and we don't follow his opinion. Therefore, even if the incumbent would go out of business, he cannot prevent a competitor from opening. In a teshuva, the Rama (Shut Siman 10) brings this Aviasaf among other arguments and rules that it is forbidden for a second publisher to publish an already published work (in this case the Mishneh Torah of the Rambam), if this will inevitably bring the first publisher to ruin. Shut Chatam Sofer (61:79) also rules like this Aviasaf on a similar question where the incumbent business would be forced to close down. Rav Moshe Feinstein (Iggerot Moshe C.M. 1:38) brings several arguments including the Aviasaf and concludes that a new shul could not open because they would ruin the income of the rabbi of the existing shul even if the shul will still have a minyan. Rav Moshe Feinstein (Iggerot Moshe CM 2:31) wouldn’t allow a second Seforim/Judaica store to open in a place that couldn’t support two. He adds that the incumbent must reimburse the competitor for his expense. Pitchei Teshuva 156:3 quotes Shut Masat Binyamin 27 that if there is a law that only allows one store, a second one may not open and force the initial one to close. He notes that the Masat Binyamin doesn’t quote the Aviasaf and must think that this is even for the Rishonim who disagree with the Aviasaf. Rav Moshe Feinstein (Iggerot Moshe C.M. 1:38) writes that loss of livelihood is not defined by a loss of one’s home or the ability to put food on the table. It means interfering with his ability to afford as much as an average person in his times.
  8. ↑ S”A CM 228:18, Rabbi Eli Mansour Dailyhalacha.com, Pitchei Choshen Hilchot Geneva ViHona’a 9:3. However, one may not speak lashon hara about his competitor’s product (Chafetz Chaim Hilchot Lashon Hara Klal 5: Halacha 7). See Advertising and Promotional Activities as Regulated by Jewish Law by Rabbi Dr. Aaron Levine
  9. ↑ Pitchei Choshen Hilchot Geneva ViHona’a 9:3, Aruch Hashulchan 156:11, Erech Shai 228:18. Rav Moshe Feinstein (Iggerot Moshe Y.D. 3:134) says that if the original store is overcharging, it is not a problem to open a new store and charge the proper (lower) price.
  10. ↑ Shulchan Aruch C.M. 156:7 based on Bava Basra 22a about Yom HaShuk. Rashi explains that on this day people come from all over, so the residents of the city don't have priority. Rabbi Wasserman applied this same concept to areas like the diamond district as well.
  11. ↑ Shut Maharik Shoresh 187. Pitchei Choshen Hilchot Geneva ViHona’a 9:1 quoting from Shut Harama 10
  12. ↑ Shut Nachalah L'Yehoshua 29
  13. ↑ Pitchei Choshen Hilchot Geneva ViHona’a 9:1 quoting from Shut Chavot Yair Siman 163 that cannot agree to violate this prohibition just like by lending/borrowing with interest or going to secular court
  14. ↑ The Gemara (Baba Batra 21b-22a) states that even Rav Huna permits unrestricted competition in the area of Torah education, since competition fosters improved Torah knowledge (kinat sofrim tarbeh chochmah). Chazon Ish (Emunah U'Bitachon 3:1) says that this logic limits the application to when it will improve Torah knowledge and is in the communities best interest. Rabbi Jachter writes that this doesn’t apply to other mitzvot. Therefore, he quotes Rabbi Ezra Basri (Shaare Ezra 2:131) that these laws of competition would apply to selling chametz before Pesach. Similarly, Rav Moshe Feinstein (Iggerot Moshe CM 2:31) wouldn’t allow a second Seforim/Judaica store to open in a place that couldn’t support two. On the other hand, Pitchei Choshen Hilchot Geneva ViHonaa 9: note 1 quotes the Levushei Mordechai CM 12 that this does apply to other mitzvot. Accordingly, he allowed a new mikveh to open even though it would force the first one to close.
  15. ↑ Rabbi Jachter. Similarly, S”A C”M 156:7 based on Baba Batra 22a rules that the restriction on outside competition does not apply to a market day, when people from outside the town come to shop. Rabbi Yehoshua Pfeffer (Opening Shop? Laws of Hasagas Gevul on dinonline.org) applies this in a general sense to malls and large shopping centers, which attract shoppers from out of town.
  16. ↑ Rabbi Jachter quoting Rav Moshe D. Tendler and Rav Basri, since the original storeowners benefit from the newcomers. Rabbi Aryeh Lebowitz (Hasagas Gevul - Unfair Competition on Yutorah) brings the same argument.
  17. ↑ Shut Maharashdam C.M. 407 and 441 explains that there is no purpose of you losing when the law isn't being observed either way
  18. ↑ Tur C.M. 156 and Beit Yosef 156 explains that this is the nature of the wholesale market and restricting it would destroy the market.
  19. ↑ Shulchan Aruch 204:1
  20. ↑ Shulchan Aruch CM 204:7
  21. ↑ Kiddushin 59a
  22. ↑ Pitchei Choshen Geneva 9:12 cites the Hagahot Maimoniyot as holding that bet din can’t extract the money whereas the Nemukei Yosef holds that the bet din can. It seems that the Maharsham holds that the bet din can’t extract the money.
  23. ↑ Pitchei Choshen Geneva 9:14
  24. ↑ Bet Yosef 237, Pitchei Choshen Geneva 9:15
  25. ↑ PitcheI Choshen Geneva ch. 9 fnt. 29 citing Chikrei Lev CM 103
  26. ↑ Rama CM 237:1
  27. ↑ Shach 237:3 argues on the Rama based on the Ramban. Avnei Nezer CM 17 sides with the Rama, while the Aruch Hashulchan 237:1 accepts the Shach.
  28. ↑ Pitchei Choshen Geniva 9 fnt. 36 writes that it is unclear if a person in real estate finds a house on sale and it seems that it is a good deal and it is a big effort to find something similar whether he can supersede someone who already is going for it. He writes that it seems to be a dispute between the Maharshal and Sharit Yosef but he doesn't offer a resolution.
  29. ↑ Mordechai Bava Batra 551 writes that there isn't an issue with the second interfering with the first until the first buyer and seller agreed upon a price. Rama 237:1 codifies this.
  30. ↑ Prisha 237:1 writes that even if the first buyer and seller didn't agree on a price but would have agreed had they been left to work it out themselves the second person shouldn't interfere. Aruch Hashulchan 237:1 and Pitchei Choshen Geneva 9:16 cite the Prisha.
  31. ↑ Perisha 237:1
  32. ↑ Pitchei Choshen Geneva 9:16
  33. ↑ Rashi Kiddushin 59a s.v. ani, Ramban Bava Batra 54b. See also Rashbam Bava Batra 54b
  34. ↑ Tosfot Kiddushin 59a s.v. ani
  35. ↑ Masat Binyamin 27 writes that the amount of effort necessary for it to be considered forbidden for the second to take the free item is only if the first person anticipated that he would certainly get it. See Chatom Sofer 79.
  36. ↑ Mordechai Kiddushin 524, Ritva Kiddushin 59a
  37. ↑ Shulchan Aruch CM 237:1 quotes Rashi and Rabbenu Tam and Rabbenu Tam as second. Rama sides with Rabbenu Tam.
  38. ↑ Pitchei Choshen Geneva ch. 9 fnt. 30
  39. ↑ Pitchei Choshen Geneva 9:13 based on Rosh
  40. ↑ Tosfot Kiddushin 59a concludes that based on Rabbenu Tam it is permitted for someone person to hire a teacher who is already hired by someone else because he can claim that this teacher is unique and can do the best job. Shulchan Aruch CM 237:2 codifies this as the halacha.
  41. ↑ Tosfot Kiddushin 59a, Shulchan Aruch CM 237:2
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