Jewish civil law has not been in force for several centuries in most places in the world. (Israeli civil law takes note of precedents from Jewish law but is not bound by them alone.) As a result, in this area as in others, Jewish law has not kept pace with many aspects of the changes in the markets for goods and services since Talmudic and medieval times. Principles can be discerned in that earlier legislation, however, that could guide one to a theory of Jewish practice and even to a renewed and expanded body of law applicable to our contemporary situation. Reprinted with permission from Ethics in the Market Place: A Jewish Perspective, published by The Library of Jewish Law, 2000, where extensive notes supplement the text presented here.
Is Price Control Good?
In the Talmud, we find varying opinions on whether it is desirable to impose price controls. While the baraita [mishnaic statement from the early rabbinic period] that treats the subject establishes that
‘"market officers are appointed to [supervise] measures, but no such officers are appointed for [supervising] prices,"
it is followed by the opinion that
"market officers are appointed to [supervise] both measures and prices, on account of deceivers." (Babylonian Talmud Bava Batra 89a)
In Babylonia, the question of price controls was subject to a disagreement between the Exilarch [the political leader of Babylonian Jewry] and the [Talmudic] Sages. The Babylonian Talmud (Bava Batra 99a) tells that the Exilarch appointed market officers to supervise prices as well as measures. The Jerusalem Talmud (Bava Batra 5:5, folio 15a) relates that the Amora [that is, post-Mishnaic rabbinic sage] Rav was appointed as market officer by the Exilarch and that since he administered punishment for infractions concerning weights and measures but not for infractions of price controls, the Exilarch had him imprisoned.
An explanation of the opinion that market officers are not appointed to supervise prices may be found in the commentary of Rashbam [Rabbi Samuel ben Meir, twelfth century commentator from Northern France]:
“Market officers are not appointed to supervise prices and prevent merchants from selling high: it is logical that this is not necessary, for if one wants to sell at a high price, another who needs money will sell more cheaply, all the buyers will go to him, and the first will be forced to sell cheaply.” (Rashbam on BT Bava Batra 99a)
According to Rashbam’s explanation, this opinion holds that there is no need to interfere with the forces of the free market.
Concerning the opinion that market officers to supervise prices are needed because of the existence of deceivers, Rashbam offers several explanations:
“On account of deceivers who wait until one sells his merchandise cheaply, and then they sell high,” and “On account of deceivers who sell high, declaring they have added to the quantity, or those who place the better quality wheat on top and wheat of poorer quality on the bottom, or various other kinds of deception.”
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:
“The townspeople may compel each other to build a synagogue and to purchase a Torah scroll and the books of the Prophets. And the townspeople may stipulate prices, measures, and the wages of workers. They are permitted to impose penalties.”
Here the Tosefta teaches that the residents of a town may not only make stipulations among themselves but enforce them as well.
Although the passage discusses the residents of a town, it is cited in [the Babylonian Talmud] in connection with an agreement among artisans:
“There were butchers who made an agreement with one another that if one of them slaughtered an animal on another’s day, the skin of his slaughtered animal should be torn up. One of them actually did slaughter on another’s day, and the others went and tore up his slaughtered animal’s skin [which would otherwise be a valuable asset belonging to the slaughterer]. Those who did so were summoned before Rava [Rava, Rav Yemar ben Shelemiah and Rav Papa were Babylonian Jewish sages of the fourth century CE] and he condemned them to make restitution. Rabbi Yemar ben Shelemiah thereupon called Rava’s attention to [the passage of the Tosefta that says] that the townspeople may impose penalties for breach of their regulations. Rava did not deign to answer him. Said Rabbi Papa, ‘Rava was quite right not to answer him; this regulation holds good only where there is no distinguished man in the town, but where there is a distinguished man, they certainly have not the power to make such stipulations without his approval.’” (BT Bava Batra 9a)
The requirement that such agreements be approved by a “distinguished man” is explained in several sources as based upon the need to protect customers against increases in price.
A far-reaching opinion on consumer protection can be found in the writings of Rabbi Menahem Ha-me’iri [the great Provencal Talmud commentator, 1249-1316]. Ha-me’iri holds that artisans do not have the authority to stipulate prices even with the approval of a distinguished man, since such practices cause a loss to the townspeople:
“It appears to me that the members of a particular trade are not permitted to set prices for their work without permission of the townspeople, since the townspeople would otherwise be forced to take an unfair loss.” (Bet Ha-behira [Ha-me’iri’s Talmud commentary] to BT Bava Batra 9a)
Who is the “distinguished person” with authority to approve agreements? There are a number of opinions. There are those who define “distinguished person” as the head of the community. Others hold that the distinguished person is the distinguished scholar of the town. A third opinion holds that the distinguished person must be both — a distinguished scholar and the head of the community.
The requirement that agreements among artisans be approved is codified by Maimonides:
“Artisans may make an agreement among themselves that one should not work on the day the other does, or the like, and that they will impose such-and-such a penalty upon him who violates the agreement. This rule applies only in a place where there is no distinguished sage to set the affairs of the locality in order and to make the life of its inhabitants prosper. However, if there is a distinguished sage there, the agreement of the residents is of no effect; nor may anyone inflict a penalty upon or cause a loss to him who does not accept the agreement unless he consented to the agreement and it was made with the approval of the sage. Hence, whosoever has caused a loss based upon an agreement made without the approval of the sage — must pay for the loss he caused.” (Maimonides, Mishneh Torah, Laws of Sale 14:10-11)
The regulation restricting profits was established by [the third-century Babylonian sage] Samuel (Sh’muel): “Samuel said…. One who profits may not profit more than one sixth.” Rashbam [see above] explains: “It is an enactment of the Sages that no one profit more than this.”
Maimonides rules accordingly:
“We have already explained that he who does business on trust and says, ‘My profit is such and such an amount,’ is not subject to the law of overreaching, and even if he says, ‘I bought this article for a sela and am selling it to you for ten,’ it is legitimate. The courts are obligated, however, to fix market prices and put officers in charge thereof, to the end that each merchant should not make all the profit he desires; indeed, the courts of law should fix a sixth as his profit and the seller should thus not profit more than a sixth.” (Maimonides, Mishneh Torah, Laws of Sale 14:1)
This regulation, however, was restricted to necessities:
“This rule applies only to articles that are necessities of life, such as wines, oils, and various kinds of flour. However, for spices such as costus root, frankincense, and the like, no market price is fixed and one may make as much profit as he desires.” (Maimonides, Mishneh Torah, Laws of Sale 14:2)
The Shulhan Arukh imposes additional limitations upon the restriction of profits:
“(1) When does this apply? When one sells all his merchandise together with no additional labor, but a shopkeeper who sells his merchandise a little at a time — we estimate his labor and his expenses and he is permitted a profit of one sixth on them as well. In other words, all this is considered part of the principal, and he is permitted to profit, one sixth on all, and this results in a greater amount than if he had profited one sixth only on the principal [before his labor and expenses were added].”
“(2) When does this [i.e., the restriction of profit to one sixth] apply? When the market value has not risen. When the market value has risen, however, he may sell it at the higher price.”
“(3) All this applies only where there is a court that compels merchants to sell at a uniform price. If, however, each one sells for as much as he can, he is not obliged to sell cheaply.” (Shulhan Arukh, Hoshen Mishpat 231:20)
Pronounced: MISH-nuh, Origin: Hebrew, code of Jewish law compiled in the first centuries of the Common Era. Together with the Gemara, it makes up the Talmud.
Pronounced: TALL-mud, Origin: Hebrew, the set of teachings and commentaries on the Torah that form the basis for Jewish law. Comprised of the Mishnah and the Gemara, it contains the opinions of thousands of rabbis from different periods in Jewish history.
Pronunced: TORE-uh, Origin: Hebrew, the Five Books of Moses.