Hasagat Gevul - Economic Competition in Jewish Law by Rabbi Howard Jachter

5757/1996

Introduction

            In the past few years, many accusations of Hasagat Gevul, unfair business competition, have been brought before the rabbinic courts in the New York metropolitan area.  These cases often arouse much controversy, especially since Halacha is sometimes at odds with the general American society's basic assumption that competition in necessarily good.  We shall see that there are two basic trends among contemporary halachic authorities regarding this issue.  It is hoped that this will provide some insight into how rabbinic courts today adjudicate this difficult area of Halacha.  We chose Parshat Vayishlach to discuss this issue, as the later section of this parsha, speaks of the spheres of influence of various groups and individuals.

 

Aggadic Background

            Before we begin to examine Halachic text which addresses this issue, we will first examine two Aggadic texts regarding business competition.  Although Aggadic passages are not halachically binding (see the Encyclopedia Talmudit entry    ), they nevertheless set an additional tone that the rabbis adopt regarding a particular issue.

            The two questions we will look at are as follows:  The Talmud in Yevamot 78b equates eliminating an individual's ability to learn a livelihood with murder.  The second passage appears in Makkot 24a.  The Talmud there records that King David outlined eleven fundamental principles of halachic life.  One of these rules is not to compete with another individual's business.  These passages are to a great extent the reason why one school of Halachic adjudication favors restricting business competition to a great extent, despite the fact that the Halachic sections of the Talmud regarding our issue seem to allow unfettered business competition.

 

Talmud and Rishonim

            The primary Halachic discussion of Hasagat Gevul is found in Bava Batra 21b.  The Talmud there records a disagreement regarding the power of an individual who has set up a handmill in an alley to prevent another individual from setting up another handmill in the same alley (an Israeli Rabbinic court found that a "neighborhood" is the contemporary halachic equivalent to the Talmudic term "alley" (Piskei Din Rabbaniyim - the collection of the rulings of the Rabbinic Courts of the state of Israel - VI:3).  Rav Huna asserts that the owner of the first handmill may prevent the newcomer from doing so because the newcomer would be interfering with the first man's livelihood.  Rav Huna the son of Rav Yehoshua, on the other hand, adopts the position that the potential competition may claim "whoever will come to me will come to me, and whoever will come to you will come to you."  The Talmud indicates that the position of Rav Huna the son of Rav Yehoshua accords with the view of the majority (see Tosafot to Bava Batra 21b s.v. )

            Following the principle that we follow the majority opinion (   ), virtually all the Rishonim rule in accordance with the view of Rav Huna the son of Rav Yehoshua.  These Rishonim include the Rif (to the aforementioned discussion in Bava Batra 21b); Tosafot (ad. loc. s.v. ); Rambam (Hilchot Shecheinim 6:8); and Rosh (Baba Batra 2:12).  The Shulchan Aruch (Choshen Mishpat 156:5) and its commentaries (see Aruch Hashulchan C.M. 156:6) rule in accordance with these authorities.  It would seem then that Halacha sanctions unrestricted free enterprise.  However, two schools of thought have developed regarding this issue from the time of the Rishonim until this day, disputing to what extent halacha permits unrestricted competition.

 

The Two Schools of Thought

            We will first present the school of thought which believes that even according to Rav Huna the son of Rav Yehoshua the Halacha restricts competition.  This school developed from four rulings by major authorities from the twelfth century to the twentieth century.

            The first ruling is that of the Raavya (cited by the Mordechai Baba Batra 51b) who rules that all agree that one may not open a store at the entrance of a  (similar somewhat to a contemporary cul-de-sac) if a store offering the same product is already located further down the cul-de-sac.  The Rema apparently believes that Rav Huna the son of Rav Yehoshua would forbid competition in a cul-de-sac since it would ruin the business of the original store owner.  Potential customers would see the new store before the established store.  The second ruling is that of Rav Moshe Isserles in a responsum in which he adjudicated a famous sixteenth century dispute about competing Italian publishers who both printed editions of the Rambam's Mishneh Torah.  Rema ruled against the publishers of the second edition by stating that all opinions agree that a competitor could be prevented from opening a new store if it were clear that the competitor seeks to ruin the original entrepreneur.  Rema ruled that the second publisher should not be patronized since it was obvious that he sought to ruin the original publisher.

            The third ruling was that of the great early nineteenth century authority, the Chatam Sofer (C.M. 79 cited by Pitchei Teshuva 156:3).  He asserts that Rav Huna the son of Rav Yehoshua permits competition only in a case in which the new store would merely decrease the money earned by the original proprietor.  Competition would not be permissible if the new store eliminated the fist store owner's ability to earn a livelihood.  Rav Moshe Feinstein (Igrot Moshe C.M. 38) penned the fourth responsum in the series of rulings we are discussing.  First, Rav Feinstein rules in accordance with the Chatam Sofer who refuses to allow competition that would result in the loss of the first businessman's livelihood.  But Rav Moshe defines the loss of one's livelihood far more broadly than does the Chatam Sofer.  According to Rav Feinstein, losing one's livelihood is not a question of losing one's home or one's ability to put food on the table.  Instead, losing one's ability means losing the ability to earn as much as the average individual in one's socioeconomic class.  While the Chatam Sofer's concern in financial ruin, Rav Moshe's concern extends to financial indignity as well.

            Many authorities, however do not subscribe to this school of thought.  Rav Yosef Karo sharply criticizes the Raayah in his Beit Yosef (C.M. 156) commentary to the Tur.  The Raavyah is also not cited in the Shulchan Aruch or its major commentaries.  In fact, the Pitchei Teshuva (C.M. 156:3) cites the Teshuvot Beit Ephraim (C.M. 26) who writes that the Halacha has rejected the opinion of the Raayvah.  Two contemporary authorities (Rav Yaakov Breisch, Teshuvot Chelkat Yaakov II:65, and Rav Ezra Basri, Teshuvot Shaarei Ezra II:131) as well as the Tel Aviv district rabbinic court (Piskei Din Rabbaniyim V1:3) have issued rulings contrary to the Raavya's view.

            The dispute, accordingly, remains unresolved.  Pragmatically speaking, the ruling on a particular issue regarding Hasagat Gevul will depend on who are the rabbis who hear the case and which school of thought regarding this issue that they believe to be correct.

 

The five exceptions

            There are at least five exceptions to these rules, some of originating in the Talmud and others of more recent vintage, of which we will now outline.

 

Predatory Pricing

            The Rema rules (C.M. 156:7) that a new competitor may not be restricted if his prices or quality of merchandise are more advantageous to the consumer than those of the established proprietor.  The Aruch Hashulchan (C.M. 156:11) cautions that this would be the case only if the new competitor is not engaging in predatory pricing.

 

Necessary Monopolies

            Chatam Sofer (C.M. 79) rules that communities should insure monopoly protection to industries requiring such protection to remain economically viable.  Rav Moshe Feinstein (Igrot Moshe C.M. 38) rules in accordance with the Chatam Sofer.  Dr. Aaron Levine (a major authority in the area of Economics and Halacha who serves as chairman of the Economics Department at Yeshiva University) writes in his book "Free Enterprises and Jewish Law" (pp. 19-20) that power companies and urban transit companies are contemporary examples of industries requiring monopoly protection in order to survive.  One may add that, similarly, kosher restaurants in certain small communities need monopoly protection in order to survive.

 

Teaching Torah

            The Gemara in Baba Batra (21b-22a) states that even Rav Huna agrees that unrestricted competition is permitted in the area of Torah education.  In that case, according to the Talmud,    , competition fosters improved Torah knowledge.  This is not always necessarily the case, Rav Feinstein notes.  For instance, that competition between kashrut supervision services is sometimes undesirable because of the chaos and competition that would ensue.

 

Business Districts

            Many contemporary authorities believe that a competing store occasionally enhances the business of the first store owner.  Under certain circumstances, the new store helps transform the area into a center for particular items.  Residents of Manhattan, familiar with a garment district, a flower district, a furniture district, and other specialized commercial areas, can readily identify with this phenomenon.  Rav Ezra Basri, the head of a judicial section () in the Jerusalem district rabbinic court, told this author that he believes this approach to be correct.

 

Contemporary Neighborhoods

            It should be noted that changing patterns in the geography of business have an impact on Halachic discussions of competition.  Many businesses today do not serve only the neighborhood in which they are located.  The Tel Aviv district rabbinic court has written that competition between insurance agents should not be restricted according to all opinions; because the insurance industry is not a neighborhood- based field.  In insurance one agent cannot encroach inappropriately on the neighborhood of another agent (Piskei Din Ravaniyim V 1:3).  Thus, even though even Rav Huna the son of Rav Yehoshua believes that someone from a different neighborhood cannot intrude on the business or the other neighborhood, today each business must be individually evaluated to see if this rule is still relevant for that particular industry.

 

Conclusion

            It is hoped that our presentation has shed light on this controversial area of Halacha.  What should be clear is that a rabbinic court must delicately weigh an entire array of variables in order to reach an appropriate conclusion.  Ultimately, though, the goal in resolving Hasagat Gevul" disputed is to balance both societal and individual needs.  For a further discussion of this issue see Rabbi Simcha Krauss' essay on this topic that appears in the Spring 1995 issue of The Journal of Halacha and Contemporary Society.

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