OWNING THE MARKET - The Bais HaVaad Halacha Center

Fair Trade and Monopolies in Halacha

By Rav Yaakov Rappaport

Long before the establishment of the Federal
Trade Commission, there were debates regarding trade regulations. Is the
government responsible to protect consumers, or is it the responsibility of
“buyer beware”? There is a plethora of government agencies that strive to
produce rules and regulations to produce a fair economy.

In a Jewish court of law, can the Bais Din
interfere with the practices of free trade? How far does the Bais Din’s
jurisdiction reach, according to Halacha?

Bais Din’s Jurisdiction in the Marketplace

The Gemara discusses regulations in the marketplace and
concludes that it is the Bais Din’s responsibility to ensure that the weights and
measures are accurate[1].
When it comes to price regulations, there is a disagreement in the Gemara, if the Bais Din should monitor pricing or not.

The Rishonim explain why it is not necessary to establish
safeguards for pricing in the marketplace[2]. In a fair and capitalized society, the market
creates its own fixed price. Based on
the rules of supply and demand, the price is determined to be fair.

Breaking the Monopoly

The opinion of Karna – one
of the Amoraim mentioned in that Gemara – is that we must worry about cheaters. He feels
that the exception to this fair pricing rule is if there is a monopoly. If one
person holds his stock until all of his competitors are sold out, then he is
the only option for the buyers. This could give him the leeway to price his
wares as high as he wishes. In this case, the Rambam[3] and
Shulchan Aruch[4], that
Bais Din has the right to appoint
officers to monitor the pricing.

The Tur adds a qualification to this rule, that Bais Din
may only get involved when there is a monopoly on items which are chayei nefesh – daily necessities. If the seller is driving up prices on food
and basic staples, the Bais Din should appoint an officer but not for fancy clothes
and cars.

By
forcing someone to pay more than he intended for essential items, the seller
is, in essence, stealing from the buyer. The buyer may be forced to pay for the
item, but he is not forgiving the extra sum to the seller[5].
However, if the seller is price gouging
on luxury items, the Bais Din should not get involved.

The Esrog Mob

In light of the above, let us examine the
following case. In a town in Europe, there were two families that held a
monopoly on the Esrog trade. Each year, these two
families sold their Esrogim for a minimum of
$150. One year, the families decided to raise their prices to $180 per Esrog. The
townsfolk were very upset at the new rate, but they had no other source for
buying Esrogim. They complained to their Rabbanim. The Rabbanim of the town asked a Bais Din if they were permitted to
get involved in commerce by forcing the Esrog dealers to lower the
price.

The first
determination would be, whether an Esrog is considered to be chayei nefesh. If buying an Esrog is
deemed a necessity, then according to the Tur, the Bais Din would be allowed to
interfere and force the Esrog dealers to lower the price.

It
would seem that an Esrog is deemed chayei nefesh. The
townspeople are not buying it because they desire a citrus fruit, rather it is
a mitzvah obligation. Therefore, the Bais Din would be
permitted to interfere in the town’s commerce. In truth we do not pasken like the Tur but rather like the Mechaber that does not differentiate between essential
or luxury items. However, according to the above, the Tur would also agree by
an Esrog that
the Rabbanim can get involved in fair
pricing.

Preventing Price Gouging

How
far can the Bais Din
go to prevent the price inflation? Can they tell the people not to perform the mitzvah? There are similar cases in Halacha, where the supply of an item used for a mitzvah was put out of reach.

One
example was during the times of the earlier Tzemach Tzedek. The Jews used to go to the marketplace on Erev Shabbos to buy fish in honor
of Shabbos. When the gentile fishermen realized this
trend, they began raising the prices of the fish, because they knew the Jews
would be forced to buy it. The Jews
asked the Tzemach Tzedek
for advice, should they continue paying outrageous prices for fish for Shabbos?

The Tzemach Tzedek quoted by Magen Av[6] rules
that the Jews should not buy fish at the higher rates. He cites an example from
the Mishna in Krisus[7].
During the times of the Bais HaMikdash, a woman who
gave birth was obligated to bring a Korban of two turtledoves.
The gentiles raised the prices for the birds, making it exorbitantly expensive
to bring the Korban.

There
is a general rule, that the rabbis have the ability to nullify a mitzvah, to a certain degree, if the situation calls
for it. Rabban Gamliel announced that the Jewish people should bring the bare
minimum – which truncated the practice of Korbanos. This led to a fall
in the sale of turtledoves, which eventually caused the price to go back down.

The Hagahos Tzemach Tzedek offered another proof from the following
example. There is a mitzvah of Pidyon Shvuyim – to pay a ransom to save a life.
Indeed, one who saves a person’s life has a great merit, and it is as if he
saved an entire world. However, the Mishna says that we do not
pay a large sum of money for ransom demands[8].
This is due to the fact, that if the gentiles realize that Jews are willing to
pay, this will cause an increase in kidnappings and high ransom demands.

In Conclusion

Does
the ruling of the Tzemach Tzedek apply to the case of
costly Esrogim? Can Bais Din decide that no one should
buy an Esrog until the price is lowered?

The Hagahos Chasam Sofer still opines that Bais Din is not able to do so. There is a major
difference, he explains, between the aforementioned examples and the case of
the expensive Esrog. While the Mishna does allow for the delaying of certain mitzvos, those are mitzvos which do not expire.
It is possible for a woman to delay bringing a Korban
until the price of turtledoves is lowered. However, it is not possible to delay
the mitzvah of shaking a Lulav and Esrog. Once Sukkos has passed, the mitzvah
opportunity is gone. The same with eating fish for the mitzvah of Oneg Shabbos.

Thus
we have a disagreement between the Tzemach Tzedek who says the Rabbanim have the power passively to prevent the
performance of a mitzvah if this will lower the
price while the Chasam Sofer disagrees unless the mitzvah can wait and will not expire.

Furthermore,
there is a concept of “hiddur mitzvah ad shlish”[9].
This means that a person should pay extra to beautify a mitzvah, up to one third more than the value. Even
though the item is overpriced, it is worthwhile to overpay for the mitzvah. If the Esrog price is changed from
$150 to $180, that $30 difference is below the one-third threshold, and one
would be obligated to pay extra in order to fulfill the mitzvah. This would be another reason for the Rabbanim not to advise the townspeople to refrain from
doing the mitzvah in order to lower the price
of the Esrogim.

[1]
Bava Basra, Daf 89A

[2]
Rashbam

[3]
Hilchos Geneiva 8:20

[4]
C.M. 231:20

[5]
Shu”t Galya Masechta, SIman 4

[6]
242:1

[7]
Daf 8

[8]
Gittin, Daf 45

[9]
Bais Hillel, 218