Abstract
This chapter presents the principles of free market and competition, with a particular focus on Australian policy, and continues with an exposition of Judaic ethical and legal parameters for competition and for the intervention in the economy. It sets out circumstances under which curbs on competition would be legitimate. It shows how Jewish law affords a safety net where one side in the vendor–consumer relationship does not have proper knowledge, limits the profit margin on basic commodities and forbids predatory pricing that is destructive of competitors.
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Notes
- 1.
It seems to the present writer that this might be revealed through investigation of the factors in the price of the monopoly item, where the prices of those factors are individually known in competitive market conditions for those individual factors. A sense of the role and price of factors and the notion of a ‘reasonable profit’ is expressed in responsum (#9:1) of Rabbi Yaakov Avraham Cohen, printed in Mischar k’halachah—Hilchot ono’ah u’mekach to’os, 5762. He writes that ‘where all but one seller get together to bring down prices and drive that individual out of the market, and that solitary seller, calculating his costs and income, sells at reasonable price, one who bought from that solitary seller, cannot accuse him of ono’ah [because his price is significantly above the market price]’. In other words, just as there is a reasonable profit (which permits an individual not to participate in a price war without being liable for overcharging vis-a-vis the new market price), perhaps we can argue that there can be an identifiably unreasonable price and profit—calculable from the comparison of costs and income—which is unacceptable when this is upheld through monopoly or cartel conduct. As noted below, vendors can only come together to enforce a minimum price, when this is done with the approval of responsible public figure (which in secular terms would be called a regulator).
- 2.
Rabbi Wahrhaftig (1988) writes: ‘Although an agreement among merchants or members of a worker’s organization will usually concern only internal affairs, there may also be external ramifications. This is true where merchants fix a minimum price, beneath which no merchant is permitted to sell. The possibility exists that they will fix a high price without economic justification. This problem is more severe today when the consumer is apt to find himself facing a giant corporation, perhaps a monopoly, and therefore is in need of protection from arbitrary price fixing. Although the Talmud did not face the phenomenon of monopolistic corporations, it attempts to deal with this problem by restricting the power of guilds to regulate themselves. The Gemara (Bava Batra 9a) requires the assent of the local ‘important person’ [Note: There is a difference of opinion concerning the identity of the ‘important person’, whether the leader of the community, a Torah scholar, or both. cf. Shita Mekubetzet, ad. loc.] in order to validate the internal regulations of a guild. This is meant to secure an objective review, which takes into account other concerns, such as the public interest, aside from the interest of the members of the guild (cf. Ramban, ad. loc.). From the Meiri (BB ad. loc.), it appears that even with the concurrence of the ‘important person’ regulations which are injurious to the community are invalid if they have not been agreed to by the citizens themselves’.
- 3.
Rabbi Wahrhaftig (ibid) continues, in this scenario: ‘On the other hand, if there is no local ‘important person’, there is no review of the decisions of the guild. How then, can the consumer’s interests be protected? This question also exists where there has not been a formal enactment by the members of the guild, as they can always form a monopoly or voluntarily cooperate among themselves in order to fix minimum prices, at the expense of the community. There are many forms that this can take, and it is quite prevalent today. The halachic remedy to this situation is to take countermeasures, either by inviting merchants or tradesmen from the outside to break the monopoly, or by organizing a consumer strike (Responsa Mabit, 1237; cf. Responsa Maharival, 1115; Lechem Rav, 216; Dr. N. Rakover, Haganat HaTzarchan, (Studies in Mishpat Ivri, v. 16), p. 30.) Practically, this is very difficult to organize successfully. The Halacha is able to enforce a consumer strike by use of a compulsorily binding agreement among the townspeople’.
References
Adlerstein, Y. (1987). Price controls and consumer advocacy. Journal of Halacha and Contemporary Society, 13.
Ariel, Y. (1989). Tachrut mischarit b’ir u’bich’far, Techumim (Vol. 10). Israel. (Machon Tzomet, Alon Shvut).
Levine, A. (2005). Goldfarb’s 15-Year turf war in his moral issues of the marketplace in jewish Law. NY: Yashar.
Wahrhaftig, I. (1980). Hagonas ha’tzorchan l’or ha’halachah. Techumim, 1, 476–477.
Wahrhaftig, I. (1988). Consumer protection: Price fraud (Vol. 2). Gush Etzion: Crossroads. Zomet (A translation of an article which originally appeared in Techumim, Vol. 2).
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King, S., Cowen, S. (2016). Economic and Ethical Foundations of Fair Pricing and Fair Trading: Contemporary Practices and Jewish Tradition. In: Ben-Avie, M., Ives, Y., Loewenthal, K. (eds) Applied Jewish Values in Social Sciences and Psychology. Springer, Cham. https://doi.org/10.1007/978-3-319-21933-2_13
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