Profiteering and Price Fixing

Profiteering and Price
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By Rabbi Joshua Flug
Profiteering and Price Fixing
Introduction- Prices of gasoline, electricity and household goods are spiraling
out of control. Inflation on certain items is very visible. Products that
specifically target the kosher consumer are experiencing unusually high
inflation, especially Pesach products (see article). Additionally, there are
allegations that the price of gasoline is being manipulated by the supermajors
(Big Oil). This shiur is going to present some of the attitudes of Chazal
towards profiteering and price fixing and some of their methods to control
Special regulation of basic necessities
a. Profit caps on basic necessities- The Gemara states that on basic
necessities, one cannot profit more than a sixth. {1} Why is this different
than ona'ah?
i. Rambam- We are talking about a case where the seller discloses
his costs (nosei v'nosen b'emunah). If he discloses his costs, he
can profit as much as he wants. However, if these are basic
necessities, he can't profit more than a sixth. {2}
ii. Rashbam (1085-1158)- The retailer cannot profit more than one
sixth above what he paid on a wholesale level. However, if the
wholesale price rises after his purchase, even if it doubles, he can
sell based on the new wholesale price. {3}
1. According to Rashbam, if for example, an oil company
invests in oil reserves and then the wholesale price of oil
rises, the retail price can reflect the current wholesale price.
2. R. Yehuda Navon (1707-1761), Kiryas Melech Rav debates
whether Rambam would agree to this. {4}
b. Regulation of market prices- Gemara- Dispute whether beis din should
regulate prices of basic necessities. Shmuel says you should not regulate.
R. Yitzchak says that you should. {5}
i. Rashbam-explains both sides.
1. The opinion that you do not regulate is based on the fact
that the laws of supply and demand are sufficient to control
the prices in a free market. {6}
2. The Gemara says that the opinion that you do regulate is
out of concern for "rama'in".
Rashbam has two
explanations: {7}
a. They hold on to their supply until the competition
sells out and then they sell their supply for a higher
b. They sell at a higher price by saying that they put
more in the container or by placing the good kernels
on top and hiding the bad kernel underneath them.
3. Analysis of both opinions in Rashbam
a. According to the first opinion, one can actually
tamper with the laws of supply and demand and this
is what Shmuel was concerned about.
b. According to the second opinion, the concern is not
about tampering with supply and demand but rather
that some merchants actually cheat their customers.
ii. Rambam- regulation doesn't seem to be a function of the rama'in.
Rather, the purpose of the regulation is to enforce the law that one
cannot profit more than a sixth for basic necessities. {2}
1. It is interesting that Shmuel is the author of the statement
that one can't profit more than one-sixth and yet he didn't
think it was necessary to enforce it with regulations.
Maggid Mishneh doesn't tie to the two issues together. {8}
However, R. Isser Zalman Meltzer (1870-1953) is of the
opinion that the law that one may not profit more than a
sixth is strictly a guideline for beis din and an individual
can profit much more if there is no regulation set up. As
such, one must conclude that Rambam's mention of
regulation is unrelated to the dispute between Shmuel and
R. Yitzchak and that even Shmuel agrees that there should
be some form of regulation. {9}
c. Supply chain management
i. Beraisa- You can't "double profit" on eggs. Machlokes what this
means: {10}
1. One opinion is that you can't make 100% profit on eggs.
a. Tosafos- What is the difference between eggs and
other food items that the maximum profit is onesixth? {11}
i. Rivam- You can include "s'char tircha" and
profit more than one-sixth, but even s'char
tircha is capped at 100% profit.
ii. Rashba- The prohibition against profiting
more than a sixth only applies to middleman and not to the farmer.
b. Rashbam- Eggs seem to be an exception to the rule
because they are not as much of a basic necessity
and because there is a lot of work involved and the
profit margin for eggs is low (even without
regulations). {12}
c. Maggid Mishneh- Eggs are not items that are
considered basic necessities.
Therefore, even
though you can profit more than one-sixth, you can't
make 100% profit. {13}
d. Kesef Mishneh- Eggs must be considered basic
necessities because all food is considered a basic
necessity. Rather one must answer that either
Shmuel is not the author of the statement allowing
profit on eggs up to 100% or use one of Tosafos'
answers. {14}
2. One opinion is that you can't use two distribution steps in
supplying eggs to customers.
a. This purpose of this institution is to remove an extra
level of price markup. The question is: how does
this work practically?
i. If you force the initial distributor to sell
directly to the customer, he will charge extra
for his efforts. Nevertheless, the assumption
is that his additional charge will be less than
the price of the additional distributor.
ii. Rambam implies that you can use an extra
distributor and bar him from taking a profit.
{15} What this would mean is that he sells
goods that are not basic necessities as well
as basic necessities and only profits from the
non-basic necessities.
3. L'halacha, Rambam {15} follows the opinion that you can't
use two distribution steps. Shulchan Aruch sides with
Rambam, but quotes the other opinion as a yesh omrim.
{16}. Nevertheless, some of the questions regarding the
first opinion are still relevant:
a. Are eggs considered a basic necessity? If no, what
is the definition of basic necessity? How does this
apply to meat or to prepared foods? How does this
apply to gasoline?
b. What is included in s'char tircha?
c. Does Rashba's exemption of the farmer from the
one-sixth profit rule extend to anyone in the
manufacturing sector?
d. When Rashbam exempts eggs from the one-sixth
profit rule, does this apply to other items that meet
the same criteria as eggs? (i.e. they are not a fullfledged basic necessity and the profit margin is low
compared to the labor involved)
d. Supply regulations
i. Beraisa- You can't store basic necessities. {17}
1. This does not apply if you are storing during the shemitah
2. During a famine, you can't store anything.
3. Rashbam- The problem is that by storing, the price will go
up because of the diminished supply. {18}
a. It seems that Rashbam is not talking about people
who are hoarding the supply in order to profit from
the hoarding.
Rather we are dealing with
speculators who think that the price will go up
regardless of their involvement.
b. Nevertheless, one can read the Rashbam in a way
that implies that we are dealing with hoarders.
ii. Beraisa- You can't export basic necessities out of Israel. {19}
What moral lessons do we learn?
a. The distinction between a Jewish marketplace and a national marketplace
i. Gemara Megillah- The reason why Birchas HaShanim (the beracha
for parnasah) is the ninth beracha in Shemoneh Esrei is because
there is a reference to the evil mafki'ei she'arim (profiteers) in the
ninth perek of Tehillim. {20}
1. Rashi explains the derivation from Tehillim. {21}
ii. The reference to mafkie'ei she'arim seems to be different than the
institutions and regulations that apply to basic necessities.
1. This seems to apply to Jews and non-Jews. The institutions
of basic necessities only apply to Jews. {18, 22}
2. This seems to apply to all items and not just basic
3. Rambam compares those who store basic necessities to
those who lend with ribbis. {23}
a. S'ma- The comparison is that both are a violation of
v'chai achicha imach. {24}
i. In the business world, a return on capital is
taken as given. An interest free loan is
viewed as a loss. In Jewish law, we view an
interest free loan as a mandatory act of
tzedakah that one Jew must perform for
another Jew. It is permissible to lend or
borrow from a non-Jew with interest.
ii. Similarly, it is forbidden to perform business
transactions in the Jewish marketplace that
will negatively impact other Jews, based on
the verse v'chai achicha imach. By storing
basic necessities, you are violating v'chai
achicha imach.
iii. The distinction between the mafkie'ei she'arim that we refer to in
Shemoneh Esrei, and the institutions on basic necessities seems to
be that in Shemoneh Esrei we refer to those who intentionally
disturb the economic equilibrium that normally exists in a free
market with the intent of taking advantage of others. However,
those who store extra produce, or profit more than a sixth etc.,
don't intend to disturb the entire system. They are just trying to
make a little more money.
1. Maharal-The reason why mafki'ei she'arim are considered
resha'im is that they disturb the teva ha'olam. This could
mean that they disturb the economic teva ha'olam (i.e. the
laws of supply and demand). {25}
2. Storing extra produce is only prohibited in a Jewish society
where there are certain tzedakah requirements that don't
necessarily violate the morals of a free-market economy. It
is a function of the Jewish community's obligation to look
after one another. As such, these acts of tzedakah only
apply to basic necessities.
Historical cases of price control
a. Mishna Kerisus- Rabban Shimon ben Gamliel was able to lower the price
of kinnim by decreasing the demand for them. {26}
i. Magen Avraham, you see from the Mishna that the rabbi can
pasken that certain things are optional in order to lower the
demand of an item, thereby lowering the price. Therefore, if the
price of fish is too high, you can pasken not to eat fish on Shabbos.
b. Shmuel- The Mishna quotes a dispute between R. Yishmael and R. Tarfon
regarding the validity of haddasim with a broken tip {28}. The Gemara
proves that Shmuel follows R. Tarfon because he told the merchants that if
they don't lower their price, he will encourage people to follow R. Tarfon.
i. If everyone follows the opinion of R. Tarfon, there will be an
increase in supply because if you can use cut haddasim, the yield
of haddasim will be many haddasim per stalk.
ii. Tosafos- If Shmuel holds like R. Tarfon, why did he threaten the
merchants? Why didn't he just tell the people to follow R. Tarfon?
Tosafos answer that non-cut haddasim still fulfill hidur mitzvah
according to R. Tarfon. If the market was stable, Shmuel would
have preferred that everyone buy non-cut haddasim. However,
when he felt that the market was being tampered with, he
threatened to do away with hiddur mitzvah in order to lower the
prices. {30}
1. In this way, Shmuel's actions were very similar to Magen
Avraham's case where a "hiddur" in Shabbos is suspended
in order to correct the price.
‫מראה מקומות‬
‫‪ .1‬בבא בתרא צ‪.‬‬
‫‪ .7‬רשב"ם בבא בתרא פט‪ .‬ד"ה מפני הרמאין‬
‫‪ .2‬רמב"ם הל' מכירה יד‪:‬א‬
‫‪ .8‬מגיד משנה הל' מכירה יד‪:‬א‬
‫‪ .3‬רשב"ם בבא בתרא צ‪.‬‬
‫כגון חנוני הקונה יין ופירות מן הסיטון הרבה ביחד כדי‬
‫למכור מעט מעט אל ישתכר יותר משתות [וכגון שלא‬
‫הוקר השער אבל אם לקח בשעת הגורן ועכשיו הוקיר‬
‫ישתכר אפילו כפליים כפי שהשער הולך ותקנת חכמים‬
‫היא זו שלא ישתכר יותר]‪.‬‬
‫‪ .9‬אבן האזל הל' מכירה יד‪:‬א‬
‫‪ .4‬קרית מלך רב הל' מכירה יד‪:‬א‬
‫‪ .5‬בבא בתרא פט‪.‬‬
‫‪ .6‬רשב"ם בבא בתרא פט‪ .‬ד"ה ואין מעמידין‬
‫‪ .11‬בבא בתרא צא‪.‬‬
‫‪ .11‬תוס' בבא בתרא צא‪ .‬ד"ה חד אמר‬
‫‪ .12‬רשב"ם בבא בתרא צא‪ .‬ד"ה בביצים‬
‫‪ .14‬כסף משנה הל' מכירה יד‪:‬ב‬
‫‪ .13‬מגיד משנה הל' מכירה יד‪:‬ב‬
‫‪ .15‬רמב"ם הל' מכירה יד‪:‬ג‬
‫‪ .16‬שלחן ערוך חו"מ רלא‪:‬כב‬
‫‪ .17‬בבא בתרא צ‪:‬‬
‫וכל המפקיע שערים או שאצר פירות בארץ או במקום‬
‫שרובו ישראל הרי זה כמלוה ברבית‪.‬‬
‫‪ .24‬סמ"ע חו"מ רלא‪:‬מג‬
‫‪ .25‬דרך חיים ב‪:‬יד‬
‫‪ .18‬רשב"ם בבא בתרא צ‪ :‬ד"ה אוצרי‬
‫שקונין בשוק לאצרם למכור ביוקר וגורמין שמתייקר‬
‫השער ואיכא הפסד עניים ונראה לי דבעיר שרובה‬
‫ישראל מיירי‪.‬‬
‫‪ .19‬בבא בתרא צ‪:‬‬
‫‪ .21‬מגילה יז‪:‬‬
‫‪ .21‬רש"י מגילה יז‪ :‬ד"ה שבור‬
‫‪ .26‬מש' כריתות ח‪.‬‬
‫האשה שיש עליה ספק ה' לידות וספק ה' זיבות מביאה‬
‫קרבן אחד ואוכלת בזבחים ואין השאר עליה חובה ה'‬
‫זיבות ודאות וה' לידות ודאות מביאה קרבן אחד‬
‫ואוכלת בזבחים והשאר עליה חובה מעשה שעמדו‬
‫קינין בירושלים בדינר זהב אמר רבן שמעון בן גמליאל‬
‫המעון הזה‪ ,‬לא אלין הלילה עד שיהיה בדינרין בסוף‬
‫נכנס לב"ד ולמד האשה שיש עליה ה' לידות ודאות ה'‬
‫זיבות ודאות מביאה קרבן אחד ואוכלת בזבחים ואין‬
‫השאר עליה חובה ועמדו קינין ביום ההוא ברבעתים‪.‬‬
‫‪ .27‬מגן אברהם רמב‪:‬א‬
‫‪ .28‬מש' סוכה לד‪:‬‬
‫‪ .22‬רמב"ם הל' מכירה יד‪:‬ה‬
‫אין אוצרין פירות שיש בהן חיי נפש בארץ ישראל וכן‬
‫בכל מקום שרובו ישראל שהרי מגיע מדבר זה צער‬
‫‪ .23‬רמב"ם הל' מכירה יד‪:‬ו‬
‫‪ .29‬סוכה לד‪:‬‬
‫‪ .31‬תוס' סוכה לד‪ :‬ד"ה ולדרוש‬