The Challenge of Wealth
By Dr. Meir Tamari
RESPONSA, BAMIDBAR.The week of 23 -29, Iyar.
The restrictions on competition in the case of Arunda or Marufiya were
applied in some areas while other Jewish community did not recognize
them. Even where they were recognized, any indication that they were not
in the interests of the community annulled them. We should realize that
such restrictions on competition exist throughout the modern world, in the
form of licensing, public utilities or natural monopolies. The attitude of
halakha to such modern forms remains the same. On the one hand there has
been an investment either in R.and D. or in capital infrastructure, that
has created a property right that has to be protected, while on the other
hand the freedom of others to do with their property as they wish and the
welfare of society have to be considered. The existence of such
restrictions should not blind us to the understanding that generally
speaking the halakhic attitude was in favor of free entry. This both
because everybody may do with their property as they wish as long as it
does not conflict with the rights of others and because the public good is
usually best served by competition. Where it was in the community's
interest, then monopoly rights were granted to individuals. For instance,
where the market for a certain kosher product or service was not large
enough for more than one supplier, competition would not be allowed. After
all, Torah is not an economics textbook, but has rather a religious, moral
and communal ideal.
"It is permitted for a person to set up shop alongside shop, bathhouse
alongside bathhouse, etc., and the existing firms cannot prevent it. The
new firm can argue that, "you conduct your business on your property and I
do the same" (Baba Bathra 21b). This was codified as law in all the Codes.
This ruling seems to contradict another ruling in the same source that a
fisherman has to remove his nets as far as fish can swim, from the net that
another fisherman had spread before him. Similarly, existing firms should
be able to prevent others from enticing their customers by establishing
similar businesses. Rabbenu Tam explained that, unlike fish, customers were
free to come and go and therefore the original storekeeper had, unlike the
fisherman, not acquired a property right in them.
The following three responsa come to discuss whether other considerations
may limit this principle of free entry, even where no issue of investment
Reuven signed an agreement with the newspaper Yediot Achronot to reprint
and sell books of the Talmud. The newspaper subsequently canceled the
agreement and made a similar deal with Shimeon. Reuven claims protection
against hasagat gevul. [Appearing in the Torah (Deuteronomy, 19:14), as an
injunction against moving or stealing a neighbors landmark, it became one
against infringing on another's livelihood.]
We have decided against Reuven as there is no justification for such
The Talmud in the case of a street that is closed on the three sides [with
limited economic possibilities] and a person opens a similar business to
one that is already there, he can be prevented from doing so. It is true
Rabbi Huna ben Yehoshua does not agree. However, where the customer has to
pass the new store to get to the old one, even Rabbi Huna ben Yehoshua [who
agrees to competition resulting only in a reduction in profit] agrees that
he can be prevented from opening it, as the livelihood of original
storekeeper is being completely cut of.
However, the Chatam Sofer has interpreted that this only applies to a
situation where there are objective conditions that prevent customers from
reaching the other store.(Teshuvot Chatam Sofer, Choshen Mishpat, section 79).
We have decided that this case is not similar to a street closed on three
sides and it is not clear that the plaintiff 's livelihood is completely
cut off. So Reuven cannot prevent the newspaper and Shimeon from carrying
out their project.
Piskei Din, Batei Hadin Harabbanim, Tel Aviv, 1957.
It is noteworthy that the court did not make any comment on the ethical
aspect of the newspaper breaking the agreement with Reuven. Even if this
was not relevant from a strictly legal point of view, there is a long
tradition of rabbinic authorities as judging the moral aspects of a case,
as behooves religious judges interpreting the Word of G-d. This is
especially pertinent in the case of broken contracts in view of the
biblical injunction, "Thou shall guard the utterances of thy mouth". A
framework of not keeping one's word is conducive to creating a general
dissipation of the individual's moral obligations and encouraging a wide
spectrum of immoral actions. So halakhic disapproval of voided contracts is
a bulwark against this. Rabbi Eliezer in the Talmud already said that a
person who changes their mind [and alters their agreements in economic
activities] is as heinous as one who worships idols (Mechilta, Shmot
22:27). These need not be a flagrant abrogation of contractual obligations
but may be shrewd and subtle subterfuges or insidious behavior. We can see
this in the comment of Rashi to the saying of Rabbi Eliezer as referring to
one who alters their voice in order to defraud. In keeping with general
halakhic behavior, this was not allowed to remain mere piety but was
translated into binding law. "One who reneges on the agreed transaction
[or contract even where no resulting monetary loss was caused] does an act
not befitting a Jew. This applies both to a buyer and to the seller.
Whoever reneges on an agreement even if they only paid part of the purchase
price [so that the deal may be considered not to have been completed]
becomes liable to the rebuke of Misheparah.[A publicly
administered ceremony whereby it is affirmed that the same G-d who exacted
payment from the generation of the Flood, the people of Sodom and the
people of Egypt for not keeping their promises, will not let a person who
does not keep their word, go unpunished]"(Shulchan Arukh, Choshen Mishpat,
section 204, sub-sections 1-4).
Sometimes the competition takes the form of taking away the existing firm's
workers. In the heyday of the high-tech industry the war for led to a rapid
turnover of skilled employees. This raises moral questions in addition to
the economic one's, over and beyond the question of the knowledge that the
workers may take with them.
Our question concerned the owner of a button factory who wished to prevent
a competitor opening a similar factory and using his employees. The Rabbi
who forwarded the question sought to prevent the competition on the grounds
that it was forestalling. One who intervenes in negotiations and offers
better conditions is known as an evil-doer.
Forestalling is forbidden only where the original parties would otherwise
have completed their transaction. However, as long as the seller does not
want to sell to the original buyer or a buyer does not want to buy from the
seller, there is no forestalling. It is also wrong to see the competitor as
lacking in Divine Providence for taking the workers. After all, the
workers had never agreed to work forever nor had the original employer
agreed to retain them forever. However, the hiring was on a contingency
basis so that if either of them wished to employ others or to go to work
for another, they are not lacking in faith, as would be the case of those
who broke an agreement.
Just as in the case of the new storekeeper who can say to the veterans,
"whichever customer comes to you will do so and whosoever comes to me will
do so", so too, all employers are fully free to employ these workers. This
is not similar to the case where both parties to a transaction have already
agreed, so a third party cannot intervene, because without his intervention
the transaction would have been completed.
The complaint that the new workers may be less skilled or more expensive is
also not tenable. We know that one is free to hire a more skilled teacher
and dismiss the present one [so it is permissible to compete for the more
Avnei Nezer, [Chassidic Admor of Sochochow, !9th Century, Poland], Choshen
Mishpat, section 17.
Some of the founding members of a synagogue have left to form a new one
nearby. The Rabbi argues that this will leave him without a livelihood. To
sell the building would entail a substantial loss while to renovate it
would be exorbitant.
Neither the members nor anybody else has the right to establish a new
synagogue in close vicinity. This is a clear case of hasagat g'vul.
The argument that, "I am free to do with my property as I desire and you to
do with your property as you desire", that justifies competition, does not
apply where the injured party has their livelihood destroyed. (Rashi
considers that even a reduction in the standard of living of a competitor
would not be allowed, not merely a mere loss. The Chatam Sofer, would
prevent the entry of a new firm if it would reduce the established firms
earnings below the average of their peers]. Furthermore, competition would
be allowed if a substantial loss would be suffered by the new entrants, if
they were denied free entry. Here no such commercial loss is going to be
suffered by preventing the establishment of a new synagogue.
In spiritual matters we have a ruling that whereas it is possible for
another Rabbi to gather pupils, in order to spread Torah, this is
restricted to those cases where there is no infringement on the livelihood
of the Rabbi already entrenched in the community.
Iggrot Moshe, Choshen Mishpat, section 38.Rabbi Moshe Feinstein, 1895-1986,
Copyright © 2002 by Rabbi Meir Tamari and Project Genesis, Inc.
Dr. Tamari is a renowned economist, Jewish scholar, and founder of the Center For Business Ethics (www.besr.org) in Jerusalem.