12 Oct COMPETITION BETWEEN STORES
Opening Stores Next to each Other
In the larger Jewish enclaves, each neighborhood has many pizza and food stores, as well as many shuls and yeshivos. Are there any restrictions to opening stores, shuls and yeshivos in the same area? Does it make a difference if many similar stores are all located in one area, such as a garment district? What are the restrictions regarding opening up stores in the same neighborhood if the customer base is not large? In this issue we will discuss the topic of competition between stores and the like.
Please note these halachos are very intricate and we will present an overview of the halachos, but if one has a question he should present it to his local Rav.
Aside from the halachic aspect of this topic, there are moral reasons why someone should think carefully before opening a competing store in an area where he might cause someone a loss of money.
The Gemara counts eleven principles that Dovid Hamelech outlined. One of them is that one should not enter the profession of his friend and compete with him.
The Gemara says that one who makes someone else lose his livelihood is like a murderer.
The Rambam says that the business dealings of a talmid chacham are to be straight and he must be a man of his word. He addresses the issue of not entering the profession of one’s friend.
We believe that the money we are going to make each year is decreed on Rosh Hashanah. Therefore, if a competitor opens a store, one should feel secure that he will earn enough money.
Opening a store next to someone else is called “hasagas gevul.” This is borrowed from the Torah’s term of hasagas gevul, which refers to encroaching on someone else’s property (according to many in Eretz Yisrael).
The Gemara discusses competing stores, specifically opening a mill in the same mavuy (neighborhood). Rav Huna says that the first person can argue, “You are stopping my livelihood.” Rav Huna Brei D’Rav Yehoshua maintains that the second person can argue, “Whoever will come to me will come to me, and whoever will go to you will be your customer.”
How We Rule
The poskim maintain that we rule like Rav Huna Brei D’Rav Yehoshua since he is the latter opinion and it is in accordance with the view of the majority. However, this is not a blanket heter as will be discussed below.
Same Neighborhood / City
The above discussion is only true if the second person is from this city, but if he lives in another city he is not allowed. However, if he pays local taxes then there is no issue. The Gemara does not discuss whether there are any limits even if he pays taxes to the local municipality. Furthermore, the Gemara discusses a situation where they are from the same city but a different neighborhood, and it ends off without giving an answer. We are stringent. Therefore, one who lives in a different city but pays taxes cannot open in the same area, but can open in the same city.
The Gemara rules that once someone spreads fish nets, nobody else may place a net within a parsah (the distance to walk seventy-two minutes). Rashi explains that the fish that would have entered the first net will now enter the second net. In this case, the first person is definitely losing out. The Nemukei Yosef says that sometimes it will go from one trap to the other.
There are poskim who do not mention this halachah. The Rif and Rambam do not mention this either. However, it is brought in poskim.
A modern example of this would be someone who is trained by his employer, and uses his training to open a competing business. He has all the clients that he dealt with at his first employer, and will very likely put his employer out of business. This should not be done.
The Mordechai says that if a store is located at the back of a dead-end alley, then one may not set up a store in the beginning of that area, since people will go exclusively to this store. Others say that this is only if you hold like Rav Huna, but we hold like Rav Huna Brei D’Rav Yehoshua, so this case would be permitted. Nevertheless, even though we are lenient in general in most cases, in this case we hold like the Mordechai. The reasoning is that when there is a guaranteed loss of money, we follow the ruling of Rav Huna.
If the first store is located on a regular street, then it is permitted to open two stores since in this case the new store will not make the original store go out of business.
Eliminating Someone Else’s Parnassah
From the above, it is clear that one may not start a business near another such store if it will definitely destroy the other person’s business. This is even according to the lenient opinion of Rav Huna Brei D’Rav Yehoshua. If it will just decrease the first store’s profits, it is allowed.
Loss of livelihood is not defined by a loss of one’s home or the ability to put food on the table. It means interfering with his ability to afford as much as an average person in his times.
It is questionable if the there is room for both stores to survive but one is not run well, then it is possible then it would be permitted to have both stores in the same area.
Pursuing Someone Else’s Customers
One is not allowed to actively pursue another person’s customers. This is comparable to the fish nets. However, advertising your business is permitted, even if customers will leave the first store. Additionally, one may give out candies and other incentives to attract customers, since the competition can do so as well.
A common example can be found in Eretz Yisrael, where many people do not have cars and taxi cabs line up at bus stops and offer their services, thus causing the bus company to lose a customer. On the other hand, it can be argued that the taxi is offering a higher quality service, free of noise, disturbances, and frequent stops. In addition, many times the buses are not on time or there is no seats when it arrives. This issue is not a simple matter and one should ask his Rav.
If one is giving rides just for chesed purposes and not for livelihood then it may not be allowed. Others are lenient in this regard.
There is a discussion in the poskim if the halachah whether the restriction applies is applicable when the first store is owned by a non-Jew. One should be stringent in this regard.
People should not have to overpay for an item. Therefore, one may open a second store if he is going to charge less for an item. In addition, if the quality of the second store is preferable then he may open. This would be true even if a second storeowner were from a different city. This is common in certain areas where people are learning in Kollel and a store opens to provide them with cheaper prices then surrounding supermarkets.
If the first store was offering a competitive price, and he cannot go lower and still make a profit, the new competitor may not open.
Lowering prices for a short period of time, like a grand opening sale, is not considered unfair pricing.
The entire discussion of opening a competing store next to an existing store is if the two stores will be selling the same items. If the second store will be selling many other items which are not sold in the first store he may open. This is even if he lives in a different city.
A second food store that offers a higher standard in kashrus may be opened even if the first one cannot survive.
Manhattan is famous for its different business districts, such as garments and diamonds. Every store in that district sells the same thing. It is permitted to open a new store in the district (even if they are all Jews) since this is the address for this item. This helps business since customers come from all over to these places. This can be true for streets which thousands of people pass daily (such as Avenue M and Avenue J in Brooklyn as well as Central Avenue in Long Island, and Cedar Lane in Teaneck N.J. and other such locations) and have multiple pizza stores and bakeries (in many cases even on the same block). The rational for this is that since people come from all over to shop at these stores, it is known to be the place to buy all kinds of items and competition between opening other stores does not apply. In addition, these stores for the most part of located in areas where there are so many people passing that there is enough business for everyone to go around. As opposed to small communities which may not have enough people to support multiple pizza stores, bakeries etc.
Internet / Insurance Agents
These restrictions do not apply to opening a competing website, since the marketplace is so large on the web that it is not likely the second website will put the first website out of business.
Wholesale and mail order businesses, or any business which does not serve the local population exclusively but attracts customers from afar, may compete anywhere.
In addition, someone from a different city may advertise his business in a local paper even if there is already the same store in the city where the paper is sold or given out if it is a cheaper price or offers delivery etc which is not done by the original store in the area.
This also applies to insurance agents since they are not based in neighborhoods.
Even according to the stringent opinion, it is permitted to open a yeshivah close to another one. We apply the rule “kinas sofrim tarbeh chachmah,” and each yeshivah will work harder with their students due to the competition. This is true even if the first yeshivah has to go out of business.
Harav Moshe Feinstein zt”l was asked whether it is permitted for people to break off and open another shul within close proximity of another shul. Their complaints were that the first shul has a different nusach and they do not like the rav’s ways. He rules that if the neighborhood cannot afford two shuls, and the rav of the first shul will lose his livelihood, then it is forbidden, even if the complaints are valid. In many communities there are numerous shuls and there is no loss of livelihood for any of the other shuls. In addition, the more shuls in a large community the better it is since it is appealing for people who wish to move into a specific area.
The same is true for a community Kollel which wishes to build next to an exisiting shul.
Harav Ephraim Greenblatt zt”l holds that is prohibited for the Kollel to invite congregants from the shul to come and daven in the Kollel. In many places this can lead to the eventual closing of the established shul. It is preferable for the Kollel people to daven in the shul and have a positive influence on the congregants. Harav Schachter shlit”a also maintains that it is preferable that the Yungeleit pray in the established shul. If the people feel that the pace of the davening is too quick in the shul, then it would be appropriate to start another minyan where the davening is at a slower pace. This second minyan, however, should be located in and be part of the same shul, cautions Harav Schachter shlit”a.
When there is a local Va’ad Hakashrus in a town, another person cannot open up a different Va’ad if it will put the first one out of business. Many times there are a few local Rabbonim who work in a community and certify manufacturing companies, and there is a lot of room for all to make a living.
If a neighborhood has a sefarim store, a second store may only be opened if the neighborhood can support two sefarim stores. In many communities there are numerous sefarim stores and all can make a nice living, but it is obviously dependent on the size of the community.
It is common for a community to have many playgroups and one may open an additional one near a already established one. Each playgroup has different qualities to offer and it is not considered an issue of opening a competing one in the community.
One can walk into any community and see hundreds of doctors offices. One is allowed to open a practice next to already existing one. Each doctor has what to offer patients and it is not included in the issue of opening a store next to another.
One Stop Shop Supermarkets
It is very common place to have a one stop shop supermarket where there is fish, bakery, take out and other services. Many times other smaller stores will go out of business if these one stop shops open since they can’t compete with the service etc. However, since the supermarkets sell other items which the local deli etc does not sell such as groceries and other items, it will not be considered the same kind of store in which case there is no issue with the one stop shop supermarket selling his deli items. One should consult with his Rav if this situation arises.
Yom Tov Food Distribution
Before Yom Tov, it is very common for chesed organizations to give out a lot of meat, potatoes, and other food and non-food items to make it easier to get through the Yom Tov expenses. This is permitted even if the one giving out the food etc does not live in the city and it may cause a bit of loss of revenue to the local stores. The intent is not to have the stores loss just to give presents to the locals who can’t afford the costs in the store. In addition, this is not considered opening a store within a community that already has a store.
It is very common for one to go window shopping in a store. As long as one did not actually decide to buy something a different store owner who sells the same items can ask the potential customer to come to his store for the item the one who is window shopping is not considered the customer of the store yet.
Even in cases where it is permitted to open a competing store, the Shulchan Aruch Harav rules that it is a pious act not to do so. However, if both stores can survive, then there are no reservations.
If it is the same kind of store, if the second store owner is from another city, and if the second store is near the first store, the second person may not open.
Chasam Sofer C.M. 79; Pischei Teshuvah C.M. 237:3.
Aruch Hashulchan 156 and end
Shearim Metzuyanim B 62:5