When Competition Crosses the Line: Jewish Business Ethics and the Boundaries of Fair Trade

In Jewish law, earning a livelihood isn't just about economics; it's a matter of ethics. Halacha (Jewish law) addresses not only theft or fraud but also what we might call unfair competition: entering someone else’s profession in a way that threatens their ability to earn a living.

Competition 101

If a person enters the same line of work or opens a competing business in the same market, Jewish law may give the original professional the right to object. The concern is straightforward: regular customers may shift their business to the newcomer, reducing the original person's income. For this reason, local residents may also prevent outsiders from entering their town to sell goods.

Halachic literature uses strong language: someone who “descends into another’s trade” is called a rasha, a wrongdoer, and the community is expected to object to this behavior.

The reasoning behind this prohibition is debated among the early halachic authorities. Some say it falls under the biblical curse “Cursed is one who moves his neighbor’s boundary” (Deuteronomy 27:17). Others view it as a form of theft, while some consider it a rabbinic prohibition instituted for the sake of social stability. Even in cases where such competition is technically permitted, such as when both parties live in the same alley, Jewish law encourages restraint. The verse “Lord, who may dwell in Your tent?... he who has not wronged his fellow” (Psalms 15) is interpreted as a call to avoid harming another’s livelihood.

There are practical exceptions. If someone has a temporary job, such as a teacher hired for a set term, it is permitted for another to seek employment with that employer once the term ends. In another case, if a non-Jew enters a trade historically performed by a Jew, such as printing books, Jewish law prohibits purchasing the competing goods from the non-Jew in order to protect Jewish labor.

Locals, Outsiders, and the Marketplace

Halacha distinguishes between locals and outsiders when it comes to competition. If two people live in the same neighborhood or city, one cannot prevent the other from entering the same trade. In today’s cities, where all residents share access to streets and markets, this right is even more broadly applied. Everyone may open a business anywhere in town.

However, if someone from another city tries to set up shop, the locals may object. This applies to both professionals and merchants. Yet, if the outsider offers different or better goods, the locals cannot stop him.

What happens when outsiders offer lower prices than the locals? Some halachic opinions say the townspeople may block them, even if it causes a loss for consumers. Others argue that the benefit to buyers takes precedence and competition should be allowed.

On official market days, locals cannot prevent outsiders from selling in the city. If an outsider sells on credit and stays in the city to collect payments, he may continue selling until he collects what is owed, though he is limited to what he needs for his livelihood. Furthermore, if merchants from another town had an established presence or precedent to sell in a particular city, the locals may not block them.

Someone who rents a home in the city and seeks to become a resident also gains the right to do business there. A Torah scholar who relocates to the city is considered a full resident and may conduct business without restriction.

Drawing the Line Between Strategy and Exploitation

Not all competitive strategies are forbidden. For instance, a shopkeeper may hand out nuts or candies to children to encourage them to bring their parents to the store. If competitors object, he may respond: “Just as I give out nuts, you can give out almonds.” This is considered fair business practice.

However, where the market price is fixed, such as with produce or basic goods, one vendor may not sell at a significantly lower price. Undercutting the established rate harms the other vendors and disrupts the balance of the market, and is therefore prohibited.