Unfair Competition

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  1. There is a lot of discussion in the poskim regarding opening a competing business.[1] Nowadays, although it may sometimes be preferable not to open a competing business[2], it is permissible for a competing business to open near a preexisting business and sell the same products. One business may even advertise and offer incentives to attract customers[3] , provided that the newcomer lives in or pays taxes to that city.[4]
  2. However, 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.[5]
  3. Furthermore, even when the newcomer is permitted to enter the market, he is prohibited to compete in an unfair manner, such as by selling below cost.[6]
  4. If the new business will charge lower prices or sell higher quality, some say that we cannot stop him from opening.[7]

Exceptions

  1. Competition is not limited at all in the following areas: teaching Torah[8], internet businesses[9] , and certain business districts in which the original business owner would benefit from a new business opening up (i.e. more customers will arrive).[10]

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. Rambam (Teshuva 273) says you are in violation of מסיג גבול רעהו (Devarim 27:17). Maharshal Teshuva 89 also applies this pasuk to the concept of encroaching on someone’s business unfairly. Terumat Hadeshen (128) writes that this is a rabbinic prohibition, but Chatam Sofer (CM 79) says it is from the Torah. See Chazon Ish Emunah U’Bitachon 3:15 regarding the faith someone who is facing competition should have.
  2. Pitchei Choshen Hilchot Geneva ViHona’a 9:1, S”A 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.
  3. 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
  4. 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 S”A 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.
  5. See Pitchei Teshuva 156:3 at length. Aviasaf (cited by the Mordechai, Baba 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 S”A 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. In a teshuva, the Rama (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. Sh”t Chatam Sofer (Siman 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. Pitchei Teshuva 156:3 quotes Sh”t 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.
  6. Pitchei Choshen Hilchot Geneva ViHona’a 9:3, Aruch Hashulchan 156:11, Erech Shai 228:18.
  7. 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.
  8. 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). 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. Based on that he allowed a new mikveh to open even though it would force the first one to close.
  9. 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.
  10. 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.