Competition: Justice and Mercy

Dr. Meir Tamari

Competition, in a moral perspective, is one of the most complicated area of all economic activity. Unlike most forms of dishonesty, oppression or physical damage, it is legal, efficient and usually beneficial, so that the ethical problems are obscured and often difficult to define or to discuss. However, some players in the marketplace, such as entrepreneurs, producers and workers, may suffer as a result of such competition. Conversely, in the absence of competition, consumers, new entrepreneurs and new entrants into the labor market often suffer. In both cases, a moral problem exists. Alternative solutions to the moral problems raised by competition are usually viewed as a balance between efficiency and equity. A Jewish perspective would perhaps rather see the whole issue as a balance between justice and mercy. This is a perspective that has consequences different from the usual academic view.

Justice

Throughout Jewish sources, the halakhic discussion seems to concern itself with the question of property rights. The very definition of competition in halakhic thought is that of hasagat gvul, encroachment on the boundary of another’s property. Considering the issue of free entry of new firms, the Shulchan Arukh rules that the veterans do not acquire a property right simply because they came first. However, where the incumbent has acquired a property right through licensing, medallion, natural resources, etc., competition is not permitted. Regarding the entry of foreign firms, the Rashbah rules that the local merchants do not enjoy a property right to monopolize trade, provided that the foreigners participate in the local tax burden.

This law exists even though halakhic authorities have always recognized the right of the local communities to prevent the entry of certain individuals (immoral people, informers, slanderers, etc.) who would spiritually harm the community.

Modern responsa, discussing the laws of copyright, which is be considered a restriction on competition, have made a distinction between the property right of the publisher and that of the author. The former is generally considered to have earned such a right through his investment in printing, binding, advertising, etc. The author, however, whose contribution is in effect an intangible asset, is often considered to have a less secure property right.

Zoning laws also often limit competition, because they restrict economic activity to certain areas or times. Over and above the insistence on the prevention of damage, the halakhic principle is that one may do in one’s property what one wishes to and others cannot prevent it.

Righteousness

Ethically, the real issue seems to concern those cases where the injured parties really do not have property rights but nevertheless suffer financial loss. In many responsa, the criterion for permitting or forbidding competition was the degree to which the livelihood of one of the parties would be destroyed, as distinct from a threatened decline in income. Competition resulting in the former was usually forbidden, while permitted or even encouraged in the latter.

In cases where there was no legal way to prevent competition, but ethical and moral considerations mandated it, the rabbis approved social or rabbinic pressure in order to force the potential trespasser to abstain from acting callously like the people of Sodom. For example, one case concerned a Jew who for years had maintained a liquor business which supported him and his large family. He was being threatened by competition from one of the wealthy men in the town. When asked to prevent the wealthy man from doing this, the rabbi of the town held that there were no legal ground for preventing the competition. Nevertheless he ruled against the new business, pointing out that the prospective owner had no dependents and already had an assured and lucrative livelihood. Righteousness demanded that he refrain from competing.

Price competition, as distinct from free entry, would seem to pose no ethical problem, because society benefits from the availability of cheaper goods. This is an expression of righteousness, in which the public welfare is given precedence over egotistical property rights. Such considerations, befitting the national communal character of Judaism, are indeed a major consideration in the halakhic decisions regarding not only competition but almost all aspects of economic behavior.

However, price competition too can result in injustice and suffering. In competition between unequal players, such as large multi-nationals or national chains, the larger company is able to force individuals and small firms out of business, simply by their command of financial, political or media power. As acts of Tzedakah, it seems that they would bear a responsibility (though limited), to assist the displaced entrepreneurs to reestablish themselves. In labor relations, the unequal power of workers versus the employer may lead to a depression of wages beyond reasonable living conditions. Here Judaism recognizes the right of unionization to improve the bargaining power of workers and the obligation of society to adopt macro-economic charitable policies.

Regarding basic food stuffs, competition between consumers can in times of scarcity drive prices so high so as to place these goods outside the reach of weaker sectors of society. In these cases, Rabbis will try to to force the businesses to lower prices. Even ritualistic requirements have been recast in order to protect society from exploitation of monopolistic pricing. The gentile fishermen in Moravia formed a cartel to force up the price of fish on the eve of the Sabbath. A ruling was then handed down that it was forbidden on that Sabbath to buy or eat fish. The cartel collapsed.

Halakhic sources are rife with provision of price controls, administrative acts and even subsidies to ensure access to these basic goods, knowing that such policies distort the market mechanism. It is often argued that such distortion causes a black market, yet it would seem that in a society which has accepted the moral justification for them, such restraints on price competition will minimize this danger.
Dr. Tamari is the former chief economist of the Office of the Governor at the Bank of Israel, and the founder of the JCT Center for Business Ethics and Social Responsibility.