Price Regulation in Jewish Law
Jewish law provides for government intervention in the markets for goods and services through price controls, limits on profits, and perhaps even allowing cartels to operate.
The law as codified is that prices must be supervised, and
“…if anyone raises market prices or hoards fruit in the Land of Israel or anywhere that Jews are in the majority, it is equivalent to his lending money for interest [which is strictly forbidden].” (Maimonides, Mishneh Torah, Laws of Sale 14:1, and Shulhan Arukh, Hoshen Mishpat 231:20)
Price Cuts -- How Low Is Too Low?
In the tractate Baba Metzia [in the Mishnah] (4:12), in the context of overreaching [overcharging] and misrepresentation, we find the following disagreement between R. Judah and the Sages concerning sale at less than the market rate:
“R. Judah said: ‘A shopkeeper must not distribute parched corn or nuts to children, because he thereby accustoms them to come to him;’ the Sages permit it. ‘Nor may he sell below the market price;’ but the Sages say: he is to be remembered favorably.”
The law was decided according to the opinion of the Sages, both as regards distribution of parched corn and nuts and as regards selling below the market price:
“A shopkeeper is permitted to distribute parched corn or nuts to children… in order to accustom them to come to him; and he may sell below the market price in order to increase the number of his customers, and the merchants of the market cannot prevent him, for this is not considered deception.” (Maimonides, Mishneh Torah, Laws of Sale 18:4, followed by Shulhan Arukh, Hoshen Mishpat 228:18)
Nevertheless, the law permitting sale below the market price was restricted in a number of ways. The author of Arukh Ha-shulhan (Yehiel Michal Halevi Epstein, late nineteenth century) restricts this regulation to situations in which sale below the market value will not affect competition adversely:
“It seems to me that this applies only to grain, where if one sells cheaply all others will sell cheaply, thus, the owners of large supplies will sell cheaply (Rashi). But drastically lowering the price of merchandise is completely forbidden, for this destroys commerce and causes loss to others (as demonstrated in [BT] Baba Batra 91a); and I found that an important authority has written this.... It is permitted to do only what others are also capable of doing.” (Arukh Ha-shulhan, Hoshen Mishpat 228:14)
Price -Fixing Pacts and Cartels
The legality of the establishment of minimum prices by associations of manufacturers and suppliers of services is also discussed in Jewish law. A detailed discussion of the authority of various bodies to enact regulations is beyond the scope of the present study. Here we confine ourselves to two main points: (1) Jewish law recognizes the possibility of price setting by associations of manufacturers and suppliers of merchandise and services; (2) such price fixing must be approved by communal authority. In the Tosefta [a collection of materials from the three centuries ending about 200 CE, not included in the Mishnah itself], Bava Metzia 11:23, we find:
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