The Challenge of Wealth

By Rabbi Dr. Meir Tamari

RESPONSA-Vayeitzei, Week of 5-11th Kislev, 5764.

Coercion in Marketing

The moral issue of coercion in marketing is one that takes many forms, over and above the use of blatant force or of power. All these forms in addition to the immorality inherent in their use disrupt the efficient working of the market mechanism.

Advertising exploiting ethnic or racial differences in order to convince or prevent consumers from buying goods or services has often been used by majorities to harm minorities economically, as anti-Semites have done to destroy the economic basis of the Jews. Ironically, minorities have often used the same advertising to protect themselves. Large firms in general, often exploit the small firms by delaying payments and when they are the sole suppliers or customers, they use the power of their size to obtain price or marketing advantages.

High pressure salesmanship, badgering consumers especially the elderly and the poor, and taking advantage of peoples ignorance of the market price or quality of goods and services are all widespread examples of coercive marketing techniques that while they may be legal, are immoral. Generally speaking free marketers have seen in the Roman dictum of caveat emptor- let the buyer beware-the answer to any moral dilemma in this regard. This places the full responsibility for verification on the consumer and is based on the assumption that all the players have equal access to information and equal power in the market. In reality, this is seldom the case and usually the seller has the advantage. The Halakhah that is generally supportive of the competitive free market and understanding of its legitimacy, has however, limited the free market and granted protection to all the parties to a transaction against coercion and the following responsum is an example of one of them.

QUESTION: (From the Av Bet Din, Akinou).

"Reuven has been conducting a business in our town for many years and now Shimon has opened a similar one. Shimon also has a store in one of the outlying villages, where in addition to his usual business, he has the monopoly of granting licenses to the peasants for collecting the empty cartridge shells from the army firing range, for sale to the smelters. Shimon has threatened the peasants that if they continue to buy from Reuven, then he will not grant them licenses.

ANSWER

"According to Rabbi Huna [ Bava Bathra, 21b], the original storekeeper cannot prevent newcomers from opening similar businesses, where this does not completely choke off the livelihood of the veteran.[This support of free entry of new firms is the halakhic norm. It recognizes peoples right to do as they see fit with their assets, acknowledges the benefits of free competition and generally does not recognize any restrictive rights accruing to a veteran simply as a result of being the first]. However, we cannot apply this to our case, because of the ruling of Ibn Migas restricting a seller from distributing gifts to children [non-price competition] in order to encourage them to buy from him in preference to another storekeeper. Ibn Migash ruled that in cases where such non-price competition effectively prevented the customers from buying from a competitor, we rule like Rabbi Yehudah and not like the Sages who permitted giving of such gifts; normally the halakhah in this regard would be like the Sages.

The restrictive law of fishermen having to distance themselves from one who had already spread his nets in a certain spot, could perhaps be used to prevent storekeepers from encroaching on an existing business. We could argue that just as the original fisherman was already certain of the fish in his territory, so too, the veteran storekeeper could be certain of his customers; therefore to permit newcomers would permit theft, just as in the case of the fisherman. That argument has not been accepted, since, unlike fish in the area of the net, one cannot be certain of the customers until a sale has actually been made, and therefore, the competition would be permitted (Ran-HaShutafim and also Rabbenu Tam, Kiddushin59a)

However, in our case none of these permissive arguments apply since the competitor competes through his threats not to grant the villagers their licenses for collecting the shells if they buy from the veteran.[ This is oshek- coercion, that is tantamount to robbery]. Therefore, he is not allowed to open the new store. Even if he promises not to threaten the villagers, he may not open the new store, since such a person cannot be trusted to keep his promise. However, if he were to sign such an agreement before the bet din, then he may open his store".

Teshuvot Avnei Nezer, 24; Avraham, Admor of Sochochow, 5668[1908].

All the Codes [Rambam, Mishneh Torah; Yechiel ben Asher, Arbah Turim and Yoseph Karo, Shulchan Arukh] include coercion in their definition of gezel-robbery; "Thou shall not oppress your fellow and you shall not rob"(Lev. 19:13). Furthermore, they trace it to coveting and lusting after the property of others.

"One covets the servant or the house or the equipment of another and wishes to buy them from him but the latter does not wish to sell [even at market price]. Then the buyer pesters him or uses his friends and relatives to bring pressure on the reluctant seller [perhaps like pressure on shareholders in a hostile takeover]. Such a one transgresses the negative commandment, "You shall not covet" (Ten Commandments, Exodus, 20:14).

Even if one lusts after another's assets so that one plots in his heart ways how one can buy them [since the owner refuses to sell], one transgresses the commandment, "You shall not covet and you shall not lust after a neighbors house, nor a field ..nor anything that belongs to your neighbor" (in the Ten Commandments in Deut.5 :18). That lusting leads to coveting, the coveting leads to robbery in those cases where the neighbor refuse to sell despite the buyer's raising the price or bringing social pressure on seller, and to murder when the owner resists" (Mishneh Torah, Hilkhot Gezeilah, chapter 1, halakhot 3,9, 10 and 11).

There is a further negation of coercion in the protection granted halakhically through the concept of a just price, onaah, whereby a transaction at a price differing from the market price by more than 1/6th may be cancelled or the price differential refunded. This is usually seen as protection against price fraud, but in reality should be seen as protection from price oppression resulting from the ignorance of either of the parties to a transaction-either buyer or seller-or the use of undue influence by either of them. Full disclosure of market conditions pertaining to a transaction obviating for instance insider trading, would seem to be the only way to overcome the protection of ona'ah.

Onaah derives from the biblical verse "When you sell to your neighbor or buy from your neighbor's hand you shall not oppress one another" (Lev.25:14). In most places where the word ona'ah is used in the Torah, it refers to the exploitation of status or strength as for instance in the commandment "and a stranger you shall not oppress (Exodus 22:20). Furthermore, all the commandments forbidding theft or robbery are understood to include non-Jews as well, whereas ona'ah applies only to Jews. Thus it cannot be understood as fraud or theft but rather as an extra duty devolving on the Jew to refrain from taking advantage of a position of say, non-disclosure.

Price Onaah does not apply where both parties are made aware of market conditions. "He who buys or sells in good faith cannot be guilty of ona'ah. If the seller says, " This article which I am selling at 20 is sold in the market at 10 ", there is no ona'ah" (Mishneh Torah, Hilkhot Mechirah, chapter 13, halakhah 4 based on Bava Metziah 51b). It does however apply where one of them claims that while he knew of the overcharge and agreed to it, nevertheless he only did so under duress. This is based on the Talmudical story of one, who fleeing from enemies who wished to kill him, agreed to the overcharging by a ferryman. When they arrived on the shore, he demanded a refund of the overcharge under the law of Onaah, since he agreed only under duress. The Rabbis upheld his claim. Subsequently, based on this Talmudical ruling, a rabbi upheld the claim of a clothing manufacturer to protection of Onaah, since, under pressure of fulfilling a major contract for army uniforms, he had agreed to the overcharge by his supplier.

"You may ask in your heart, how is it possible in our commerce not to try to persuade the buyer of the uniqueness of the article and its value? Remember that one must distinguish between 2 different things in this respect: It is both good and honest to do everything necessary in order to show the buyer the real value and beauty of the article [through proper advertising and attractive packaging]. However, for us to hide and cover defects [in information and pricing], is nothing less than deceit and is forbidden" (Ramchal, Messilat Yesharim, chapter 21)

Copyright © 2003 by Rabbi Dr. Meir Tamari and Torah.org.

Rabbi Dr. Tamari is a renowned economist, Jewish scholar, and founder of the Center For Business Ethics (www.besr.org) in Jerusalem.