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Shabbat Parashat Shemot 5775

Ask the Rabbi: Immoral Commercial Practices?

Rav Daniel Mann

Question: I want to ask about two elements of my business venture. 1. Our products have a large profit margin (often five times their cost to us), but this is in accordance with their market price on the US market. 2. Like many others, we use high-pressure sales tactics in our marketing. Are these ethical/halachic problems?

 

Answer: We are very pleased that you care and ask about the propriety of business tactics that apparently are earning you significant money. We will discuss some basics, which you can try to apply to your business, and/or you can ask us more specific questions.

1. The gemara (Bava Batra 90a; Bava Metzia 40b) states that a salesman should not have a profit margin of more than one sixth above the price at which he received the product. This is surprising considering that the prohibition of ona’ah (mispricing) focuses on straying significantly (a sixth) from the market price; profit margin does not arise in that context.

Actually, several classical statements limit the scope of the restriction on profit margin. The gemara points out that the said profit margin is applied after one factors in expenses and the intensity of the salesman’s labor. The Rambam (Mechira 14:1) limits the restriction to staple foods, as opposed to luxuries (an attempt at itemization is beyond our scope). More fundamentally, he says that the profit margin is not an obligation of the individual but of beit din to enforce proper pricing policy. The Ramah (Choshen Mishpat 231), following those lines, says that if beit din is unable to enforce their goal price, then an individual proprietor is not restricted to a price level that his competitors are not following. On the other hand, the Aruch Hashulchan (CM 331:20) says that if beit din feels that by some merchants conforming, others will be forced to follow suit, they should demand compliance from those who will listen.

2. There is a parallel to high-pressure sales tactics– someone who pressures the owner of an object who does not want to sell it to do so. This practice is actually forbidden by the last of the Ten Commandments – lo tachmod (do not covet). The desire to have someone’s object, which culminates in pressuring him to sell it, even at a fair price to which he agrees, is forbidden (Shulchan Aruch, Choshen Mishpat 359:9). Some claim that the prohibition applies in the opposite direction – to pressure someone to buy that which he does not want to buy (Pitchei Choshen, Geneiva 1:(26), article by prominent business ethicist, Rabbi Dr. Aaron Levine). I find it somewhat difficult to accept that we can make an exact comparison between the cases without classical sources, especially considering that the prohibition begins with the desire for his counterpart’s specific possession (e.g., his wife). However, it seems perfectly logical that on, some level, there is an overlap in the impropriety.

There are classical sources that forbid practices that have a strong comparison to high-pressure sales techniques. It is forbidden to trick someone into buying something he otherwise would not want by making it look better than it really is (see examples in Bava Metzia 60a-b; Shulchan Aruch, CM 228:9), apparently even when the product is not overpriced (see Pitchei Choshen, Ona’ah 15:15). Thus, psychological techniques that cause one to buy something that, when left to his own better judgment, he would refuse is forbidden. This should apply to high pressure as well.

The combination of the two factors about which you ask is particularly troubling. One wonders why the forces of supply and demand do not lower the profit margin. One answer is that the prevalence of manipulation artificially raises the price, which is, in many cases, forbidden (see Shulchan Aruch, CM 231:21), and should bother someone of your moral sensitivity. However, if you can sell the items at the standard, albeit high, price without pressure, it is permitted. If you sell at a modestly lower price, you likely will be able to sell enough to make a healthy living without moral/halachic problems.

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