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Beit Midrash Series P'ninat Mishpat

Chapter 290

Competition Between the Licensed and the Not Licensed

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(based around Shut Shoel U’Meishiv I:I:20)
P'ninat Mishpat (576)
Various Rabbis
289 - Switching the Sofer in the Midst
290 - Competition Between the Licensed and the Not Licensed
291 - Intellectual Property Rights Revisited
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[In a certain town, a Jew had a store, which was licensed by the government and for which he paid a tax, while another Jew had a competing store without a license or paying a tax (for some reason, the authorities did not stop him). The licensed store wanted to prevent the unlicensed store from operating, including possibly by complaining to the authorities about him.]

In general, even if one does not pay taxes, he has a right to compete with another proprietor if he lives in the city where the business is (see Shulchan Aruch, Choshen Mishpat 156:5). However, it is arguably different regarding a tax that is specifically on the right to open a store, and perhaps the idea of pasact l’chiyuta (you ruined my livelihood) applies.
Still, it seems that the complaint is valid only in a case where the authorities have decided how many stores of one type there will be and the unauthorized proprietor causes that number to be exceeded. Otherwise, if he is allowed to open a store, just that he should have to pay a tax, what impact does it have on the paying proprietor if the government has similarly made his competitor pay or not? Even if one would say that the competitor would not have opened if he had to pay a tax, we still can counter that someone else would have opened a competing store. In truth, it is not clear that the whole claim of pasact l’chiyuta is accepted regarding someone from the same city. It is ostensibly a matter of gerama (indirect damage), and if it cannot be proved that the competitor is damaging in a way that someone else would not have, he cannot be stopped. One cannot claim that the fact that he unfairly has a store prevents a third person from opening a store because there is no specific person who can make that complaint.
One circumstance in which the licensed storeowner can complain is if the unlicensed storeowner is charging cheaper prices. [Although usually one can charge lower prices,] it does not make sense to allow someone to do so when it is likely he can do so because he does not have the expense of paying a tax.
If the above is not the case, then to complain to the authorities about him is a case of mesira (causing the non-Jewish authorities to punish a fellow Jew), as follows from the Yerushalmi in the 1st perek of Peah.
According to the conclusion of the sugya in Bava Batra we do not accept the opinion of pasact l’chiyuta and the fact that we do not allow competition from outside the city is because of chezkat hayishuv (the rights of town dwellers). This does not apply here because they are both from the town. Within the town, each one can say, "I am working within my own domain." Only in a case like that which the Aviasaf discusses, where one puts his store at the entrance of a dead-end street when the competition is inside is it forbidden because it is considered directly damaging the other.
[There is further technical analysis of the sugya, but we will summarize that unless the unauthorized proprietor takes advantage of his situation to undercut the prices, he cannot be removed or reported to the authorities in order to cause him damage.]
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