The High Cost of Living in Halacha - Rabbi Yisrael Meatuf shlita

00:02 Speaker 1 You’re listening to “Lema’an Yishme’u,” a podcast from Machon Halacha Chabad.

00:09 Speaker 2 Today’s class is about the cost of living in halacha. A very interesting subject.

00:18 Speaker 3 It covers the whole range.

00:19 Speaker 2 Some of it... First of all, I hope the CEO of Osem, the CEO of Tnuva, and all those people are listening to—

00:26 Speaker 3 It’ll reach them too.

00:27 Speaker 2 Listening to the recording.

00:28 Speaker 3 They’ll change their ways. I want to [unclear].

00:30 Speaker 2 Right, so they’ll know the proper way to do things. Some of this is more theoretical—what ought to be done—and some of it is practical, things that are incumbent on them right now. This applies to the big companies, but there are also halachos that apply to individuals, to someone selling something. I didn’t bring handouts today because it’s a very broad subject. If we start reading through the sources, it’ll take—

00:59 Speaker 3 It’ll take a long time.

01:00 Speaker 2 It’ll take a long time. So we’ll learn the fundamentals from the presentation, and then break them down and see how they apply today. What are we going to learn? First, how do you set a price? There’s a concept called cost-based pricing, and another called market-based pricing. We’ll learn both today; they’re very, very relevant to halacha, as we’ll see. What oversight should there be over the market? How? You said something. What oversight should there be over the market? The ideal oversight—when Moshiach comes, with Hashem’s help, that’s what we’ll have. How do—how do you set a price when there’s no oversight, as is the case today? There’s limited oversight of a few specific things. Everything else is unregulated. Producer prices and consumer prices—we’ll learn the difference between them. And how do you raise prices? If I want to raise a price, what do I have to do? So let’s start with setting the price: cost-based pricing and market-based pricing. Cost-based pricing means a person works out his costs. Say he’s producing a book. He checks how much the book cost him: what he paid the writers, the editor, the proofreader. Printing—he takes all the expenses into account, advertising, everything. Then he considers how many books he wants to sell to cover his costs. Books are a little more complicated, because he sells some at first, and then keeps selling more and more. But let’s say it’s a table. He takes a table and checks how much it cost to make, along with all the related expenses. Then he decides how much he wants to earn on the product—a reasonable profit. That’s cost-based pricing. It asks: what price makes it worthwhile for me, given my expenses? What’s market-based pricing? It means I don’t look at what I spent; I look at the market. What is the market paying for a product like this? Now—

03:06 Speaker 3 It’s not the same thing.

03:06 Speaker 2 It’s not the same thing.

03:07 Speaker 3 He’ll lose money.

03:07 Speaker 2 He might lose money, and he might earn much more. There are cases where he’s incurred expenses—substantial expenses. I’ll give you an example. When COVID began, masks were very expensive.

03:23 Speaker 3 Twenty shekels.

03:24 Speaker 2 People came... What? They were very expensive. People ordered quantities and bought them, and each mask cost them a lot of money. Then so many masks were brought in that the price of all of them fell. Now, if he went by cost-based pricing, he’d say, “I bought each mask for ten shekels. I want to make at least two or three shekels. I’ll sell it for thirteen.” But when he tries to sell it, no one will buy. If he goes by market-based pricing, he’ll see that the market price has already fallen. Most of the time, though, it’s the opposite. Most of the time, the market price is higher than your costs. You have certain expenses. The most common example is glasses, although their price has also started coming down recently. The production cost is very, very low, but the market price is high. So the cost-based price is low, while the market-based price is high. Now, this isn’t just a concept—but we gave an example. We gave an ex—we also gave an example where you could lose money, or where things changed after the product came out.

04:26 Speaker 3 Yes. Losing money on it—that’s a podcast.

04:28 Speaker 2 No, most of the time it isn’t. Most of the time, that’s true. Most of the time, that’s true.

04:34 Speaker 3 That’s true of COVID. I also saw people who brought in a lot of [unclear]. The people who sold them—there was an expression—and then their credit cards were declined.

04:44 Speaker 2 Yes.

04:45 Speaker 3 So, halachically, if I want to price this table at a million shekels... You want [unclear]. You’re raising an angle here; now you’ve asked the question.

04:53 Speaker 2 Okay, that’s a good question.

04:54 Speaker 3 To me, it’s a museum piece.

04:56 Speaker 2 A good question, and we’ll talk about it shortly. Let’s look at the fundamentals, and then we’ll be able to break it down. In halacha, as we’ll soon see, there are two concepts related to prices. Two—and they appear in different sections of the Alter Rebbe’s halachos.

05:09 Speaker 3 Which halachos?

05:10 Speaker 2 The laws of ona’ah—overcharging—and the laws of price gouging. They’re two different laws, but both come into play when we want to set prices. Now, cost-based pricing and market-based pricing are directly connected to ona’ah and price gouging. I’ll try to make this simple. We’ll go slowly so we understand it. We spoke about it earlier; now I’ll put it briefly.

05:31 Speaker 3 In stores and things like that?

05:34 Speaker 2 Let’s see. Yes, it’s all connected. Let’s see. Cost-based pricing.

05:37 Speaker 3 Does this also include transactions involving an apartment?

05:40 Speaker 2 In principle, yes. Regarding land, it says there is no ona’ah for land. The question there is the distinction between what’s permitted from the outset and what happens after the fact. Okay, so let’s see. Cost-based pricing—I’m summing it up so we can move forward. It means expenses: production, advertising, and marketing. Incidentally, the Gemara also mentions advertising. There’s someone there who sold a barrel, and it says there was an announcer. There are two views of what that means—it refers to the announcement. Exactly: even the cost of making the announcement is included in the person’s expenses. And ultimately, he looks at the result; he asks whether the price is worthwhile for him, given his expenses. That’s the definition of cost-based pricing.

06:24 Speaker 3 Well, what, what—

06:27 Speaker 2 Market-based pricing. Market-based pricing means looking at the state of the market. I don’t look at my expenses; I look at the market, and ultimately I’d call it maximizing the price. I don’t ask what’s worthwhile for me in relation to what I spent, but how I can maximize my profits. That’s market-based pricing. Now, how does this relate to what Chazal say? I’ve put it into our own words here to make it easier to understand. The subject of ona’ah: ona’ah means don’t mislead the other person about the price. Don’t mislead him about the price. In other words, I’m not concerned with what it cost you or what your expenses were. What matters is the current state of the market. If you depart from the market price, sell for more than the market price, and don’t disclose that to the buyer, if the buyer is Jewish, that’s a problem. Why? Because it says, “You shall not wrong one another”—a fellow Jew.

07:21 Speaker 3 Not something like that. He can say, “What do you—this is the price I want.”

07:26 Speaker 2 This is the price I want.

07:27 Speaker 3 What’s the problem?

07:28 Speaker 2 Okay, now—

07:29 Speaker 3 Find someone else who...

07:31 Speaker 2 Right. Now, the question is whether you’re misleading him or not. Let’s give an example.

07:37 Speaker 3 How much did I mark up this product when selling it?

07:40 Speaker 2 Yes.

07:40 Speaker 3 Is it that he didn’t understand me, or that I charged him ten percent more?

07:44 Speaker 2 So let’s see. That’s it, that’s it. This, this—

07:45 Speaker 3 I have a friend with a store. Last week he told me that the price tag on a certain product was genuinely old. From before... The price tags—things like that affect his suppliers too. He gave that price, but—

08:00 Speaker 2 Yes, because of the law.

08:01 Speaker 3 Naturally, not to give it.

08:01 Speaker 2 Because of the law. That’s an important distinction. There are two levels to misleading a person, okay? One level is forbidden even when dealing with a non-Jew. Say I’m selling this book, and I tell him, “Listen, this book sells in all the stores around here—you’ll see—for a hundred shekels. I’m selling it to you at a special price of eighty.” In fact, it sells in the stores for fifty. That’s deception considered theft, and it’s forbidden even when dealing with a non-Jew. You’re actually stealing. It’s not just misleading someone; it’s taking his money.

08:37 Speaker 4 Half a shekel.

08:37 Speaker 2 Because it’s a shekel... It’s based on a shekel.

08:38 Speaker 4 Something along those lines.

08:40 Speaker 2 It’s...

08:40 Speaker 4 Most sales in Israel are the same thing.

08:43 Speaker 2 Now, there’s a second possibility. There’s a second possibility. Now...

08:48 Speaker 4 You’re not [unclear] what others are selling it for. And I’m saying, if he said—

08:51 Speaker 2 Yes, that’s right. Both of those. If you inflate the situation.

08:55 Speaker 4 That’s mine.

08:56 Speaker 2 Right.

08:56 Speaker 4 If he said [unclear]—if he tells you it’s his own sale price, there’s no problem at all.

08:59 Speaker 2 Right, but if he inflates it—if he raises the price before the sale and then holds a sale—that’s misleading people. It’s not ona’ah, but it is deception. Now...

09:09 Speaker 4 [Unclear] halacha. What people do is also very problematic. Bring your conduct into line with halacha and see what halacha says. Don’t make the actions fit the...

09:19 Speaker 2 Yes.

09:19 Speaker 4 Why are you saying “halacha”? Learn it.

09:23 Speaker 2 It’s good, it’s good to clarify what’s actually happening—how do you say it?—to compare it with halacha, and then you see which practices are right and which aren’t.

09:31 Speaker 4 We don’t adjust...

09:32 Speaker 2 Now, wait a moment, let’s get to your next case. Okay, I hope this has been becoming clear little by little. Now, let me give a short introduction. A person sells something to his brother—his actual brother. He sells him a phone that you can find on the market for 500 shekels. It’s new in the box, and he sells it to him for 700 shekels. Later, his brother discovers that he could have found it in stores for 500. How will he feel?

10:00 Speaker 4 Terrible.

10:01 Speaker 2 He’ll feel that his brother cheated him. “Did I tell you anything? Did I tell you what it costs? I’m charging 700.” No—you’re my brother. That’s not right. That’s the idea here. “Do not wrong one another.” The Torah says there is a Jew and there is a non-Jew. With a non-Jew, you can follow the accepted practices of commerce. With a Jew, more is expected of you. Just as you don’t lend a Jew money with interest, even though that’s a common practice. It says, “Let your brother live with you,” and you don’t lend him at interest. With overcharging, too, I’m not lying to him; I’m stating the price. Say I’m selling this book. I didn’t tell him what it costs in stores—whether it costs 50 or 100. I tell him, “It costs 80. Here, it costs 80.” We haven’t said anything else. That’s called ona’ah, overcharging. Why? Because when he comes into a store, he doesn’t do a checkup on every product he buys. He comes into the store and trusts you. He sees that you’re a Jew who knows him; surely you’re not, as we’d say, ripping him off. Okay?

10:56 Speaker 4 If you set your own price.

10:58 Speaker 2 Nevertheless, that’s the point here. Nevertheless, because you’re selling above the market price, and you know he can get it at any of the other stores for 50, yet you sell it to him—

11:07 Speaker 4 I know.

11:08 Speaker 2 Yes, I know.

11:10 Speaker 4 He doesn’t know.

11:11 Speaker 2 He doesn’t know. You don’t... I said earlier that...

11:12 Speaker 4 If you know, then it’s obvious.

11:13 Speaker 2 You know, and you sell it to him at a higher price.

11:15 Speaker 4 Every product has some sort of market price.

11:16 Speaker 2 Ah, and that’s today’s point: how hard it is nowadays to apply the laws of ona’ah. Now, I... So there’s less confusion. Omer, we’ll get to the details. Let’s turn for a moment to the subject of price gouging, and then we’ll go into more detail—as much as we can get through today. So the first prohibition is misleading someone about the price; that’s called ona’ah. A second prohibition concerns pricing essential products.

11:45 Speaker 4 Bread and...

11:45 Speaker 2 We’ll soon see what’s included. It’s not limited to just the bare basics as we think of them today. Foodstuffs—that’s where price gouging comes in. Price gouging means this: here we don’t look at the market price. We tell you how much you may earn. For example, take flour. In the big city, flour costs ten shekels a kilo. Now, let’s say you’re the only seller here in the village. There’s no market price here; you’re the only one. You can sell it, and there’s no ona’ah here because there’s no market. So how much are you supposed to earn? The Gemara says not to take a profit of more than a sixth. That means a profit of one-sixth above what you paid, and here we do take your expenses into account.

12:39 Speaker 5 On all... up to a sixth?

12:41 Speaker 2 Foodstuffs.

12:42 Speaker 5 Huh?

12:43 Speaker 2 Foodstuffs. We’ll soon see what that means. It depends. The Alter Rebbe adds a new point. He says the sixth is calculated from the outside, not the inside—a fifth of the original cost. That means twenty percent.

12:56 Speaker 5 Twenty percent is a sixth.

12:57 Speaker 2 Twenty percent—that’s the sixth. That’s the Alter Rebbe’s insight. I infer it from the Gemara.

13:00 Speaker 5 From the outside—so, for example, it costs 100 shekels, and you charge 120?

13:03 Speaker 2 Yes.

13:04 Speaker 5 120, and not what? What does—

13:06 Speaker 2 If I bought it for 100, you sell it for up to 120, no more.

13:10 Speaker 5 What does “from the outside” mean? From the outer amount, so to speak?

13:13 Speaker 2 Yes. Meaning that after I add the markup, I calculate it and arrive at a sixth.

13:18 Speaker 5 From the inside.

13:18 Speaker 2 From the inside would be sixteen point six-six-six-six percent.

13:24 Speaker 5 So what’s the difference?

13:26 Speaker 2 Now, it’s not a matter of rounding; it’s a matter of the...

13:27 Speaker 5 Another ten.

13:28 Speaker 2 Now—

13:29 Speaker 5 That’s a twenty percent profit.

13:36 Speaker 2 Here we’re going into his pocket, so to speak, and asking him, “How much did you pay for it?” That includes all your expenses—everything is included. Expenses like we mentioned, advertising and all the rest, everything. Add a profit of a sixth—twenty percent—and that’s the most you can earn. They instituted this to protect the market, so that food wouldn’t become too expensive.

13:58 Speaker 5 That’s not food.

13:59 Speaker 2 Exactly.

14:00 Speaker 5 They treat it differently, not like milk and eggs.

14:03 Speaker 2 So let’s see. Now we’ll go through the rules, and afterward we’ll get to Osem and Tnuva and everyone else. Ona’ah: what does ona’ah mean? What does it mean to mislead someone? There’s also the issue of a sixth, which we mentioned earlier. Here it says that if you sold it for less than a sixth above the market price, the difference is waived. There’s no problem after the fact, but the Alter Rebbe says that, ideally, a person who fears Heaven should not sell it for even a little more.

14:35 Speaker 5 More than a sixth.

14:36 Speaker 2 More than the market price—even a little more than the market price. But a sixth is already forbidden. It’s forbidden to sell for a sixth above the price.

14:43 Speaker 5 And how does that work with buildings?

14:45 Speaker 2 That’s different. Buildings and land are a separate matter. If it’s more than a sixth—once you’ve gone beyond a sixth—the buyer, whom you sold it to for much more, can come back and return it to you. “I’ll cancel the...”

14:57 Speaker 5 A person who fears Heaven shouldn’t sell it. He’s not allowed to make a profit.

15:00 Speaker 2 Right, here’s the point. With ona’ah, it has nothing to do with how much you spent; it has to do with the market price. Incidentally, when I started studying ona’ah, I had that same question. I sat down with someone who had studied it and asked him, “What, everyone can only make a profit of up to a sixth?” He told me, “Yes. What can you do? That’s how it is in Judaism.” But when you study it more deeply, you see that’s not the point. If—

15:22 Speaker 5 No, but you said it can be less than a sixth.

15:25 Speaker 2 Correct, correct. What does “less than a sixth” mean? Above the market price. Meaning—

15:29 Speaker 5 Above the price.

15:29 Speaker 2 I bought this book from the manufacturer for ten shekels. The market price is 50, and I sell it for 50. I’m making far more than a sixth; I’m making 40 shekels. There’s no problem at all.

15:39 Speaker 5 Not more than 50.

15:40 Speaker 2 Not more than—

15:41 Speaker 5 He’s happy with that.

15:42 Speaker 2 Yes, not more than the market price.

15:45 Speaker 5 Not more than a sixth above the market price.

15:47 Speaker 2 Right. So a sixth above the market price is already forbidden. Less than a sixth—the Alter Rebbe says that a person who fears Heaven shouldn’t do that either. Ideally. After the fact, the difference is waived, but he shouldn’t do it in the first place.

15:59 Speaker 5 And 55.

16:00 Speaker 2 So now, regarding what they asked here: every item...

16:06 Speaker 5 If it’s, if it’s...

16:11 Speaker 2 And what? Okay. Something unique—we’ll talk about that. We’ll talk about unique items. Now let’s talk about the market, about the price. What happens today isn’t quite like it used to be. In the past, the market really was like an open-air market today; that’s how they sold everything. A person would come to the market, and a seller would hear what the neighboring seller was charging, and what another seller was charging. Each day, a more or less uniform price would emerge. You can see it today wherever we still have a market—for example, the market for aravos. Every year it settles at some price, depending on how many sellers there are. When there are only a few sellers, they’ll sell them... They start—

16:55 Speaker 5 That’s when they make a killing [unclear].

16:56 Speaker 2 Right. They start out expensive—seven shekels, okay? Now, assuming many more aravos sellers don’t show up, the price will stay there, because they see they have the field to themselves. But once more and more and more sellers arrive, the price gradually drops. They see one seller lowering his price, then another and another, and a price emerges. Today, stores don’t operate like a market. Each store is on its own. Try checking prices now—it takes time to find out what they are. Right. And it also depends on the product: food, or less frequently purchased items like clothing and electrical appliances.

17:35 Speaker 5 There’s a law in Israel that every store that grows too large has to make it possible to know what every...

17:43 Speaker 2 What its prices are.

17:43 Speaker 5 Yes, there are the regulations about...

17:45 Speaker 2 Right, right, you can do that. But in practice, an ordinary person doesn’t check all the time; he walks into a store. Yes, sometimes he does. Sometimes he does. There’s Zap, where he checks the price and sees roughly what the going rate is. Now, with electrical appliances, for example, there’s a price range. There isn’t one exact price; there’s a range. So the question is: where do I calculate that sixth from—the top or the bottom? That’s an issue. You won’t find someone who can give you a clear-cut answer about how it works today. Take a particular product, a particular model of washing machine. It has a different price in every store.

18:23 Speaker 5 All right, so you move to a more expensive model, and you’re out of it.

18:26 Speaker 2 The seller—no, I’m talking about the seller. The seller wants to sell it without violating the prohibition of ona’ah. What price should he charge? Now, I hope you can see this properly. Here it is—maybe you should turn off the light, because right now it’s a bit...

18:42 Speaker 5 We can see it fine.

18:53 Speaker 2 Notice, in the middle is the price, assuming there’s an exact price like there used to be. An exact price. Then above it is the one-sixth mark. Okay? Once someone sets a price above that, the sale can already be canceled. If he crosses that limit, the buyer can cancel the sale. The same applies below it, by the way. If someone buys a product from someone else, say secondhand—and secondhand is different; it’s a market where prices are hardly ever clear—but let’s say he’s selling something new. He bought it and doesn’t know how much he paid; he doesn’t remember. You’re buying it, and you know he’s selling it to you too cheaply. You’re also obligated to tell him it’s too cheap. The same rules apply below the price: one-sixth and less than one-sixth.

19:36 Speaker 5 Not if a merchant makes a mistake?

19:37 Speaker 2 Even if a merchant makes a mistake.

19:38 Speaker 5 Even if a merchant makes a mistake?

19:38 Speaker 2 Even if a merchant makes a mistake, yes. It says that even a merchant, who generally knows prices, can say he made a mistake and sold it too cheaply, and cancel the sale.

19:49 Speaker 5 If someone suddenly gives you the wrong price like that—with flights to America and things like that—isn’t that okay because it was a mistake?

19:56 Speaker 2 Generally, according to halachah, if it’s clear that a mistake was made, the transaction is reversed. But with a non-Jew, it’s different: one may benefit from a non-Jew’s mistake. With a Jew it’s straightforward—you have to tell him, “You made a mistake.” You come into a store and see it. By the way, there’s that law we mentioned earlier: if they put a label with a low price on an item, they have to sell it at that low price. That’s the law, right. According to halachah, that isn’t correct. According to halachah, it’s a mistake, and they should sell it at the regular price. But what? It isn’t theft if you really go by the law, because when he opened the store and everything, he took that law into account. But it’s a sort of—[unclear]. I don’t know how far that applies. It’s a kind of local commercial practice. Still, if the person is doing it under pressure, it’s proper to tell him. It’s proper not to take advantage of that loophole. It’s similar to other cases, like a lost object. We spoke about a lost object: a person lost it and gave up hope of recovering it, but nevertheless, beyond the letter of the law, you return it. Why? He gave it up under duress. Here too, he’s selling it because that’s how the market works, but he didn’t—he made a mistake, poor guy. It certainly seems reasonable to tell him. I’m not saying now that it’s obligatory, but there’s certainly reason to let him know.

21:16 Speaker 6 What about the countries?

21:18 Speaker 2 Let’s see. We won’t go into too much detail. We’ll follow what we have here. So what happens today? A price has a bit of a range. It isn’t that narrow or clear-cut. There’s a range. Do I measure the one-sixth from the upper and lower ends of that range? The answer is simply no. So what do we do? What I’m about to tell you is something I saw from a contemporary author. He draws on a principle in the book Aruch Hashulchan and builds his theory on that principle, and it works out very nicely. So I’ll share it. I’m not saying it’s definitely the halachah, one hundred percent, but it organizes things very nicely. He says this: “Ultimately, every product has a price.” If you go to an appraiser—for example, partners need to break up a company and divide all its products between them—what do they do? They bring in an appraiser. The appraiser will ultimately determine a price for each item according to the rules of appraisal. A price for this, a price for that, a price for the other thing. In principle, everything has a price. But sometimes the market sells it for more or less than that price. So he says: “As long as you’re within the market range, everything is fine.” The range may have widened so much that it extends more than a sixth above and more than a sixth below—a really wide range. But as long as there are stores selling at that price, you’re within the range, and that’s fine. Once you go outside it, though, I can’t give you another sixth above the range. That entire range was already an extension of the price. I calculate from the actual price, from the midpoint. From that midpoint I calculate a sixth. So it could

23:09 Speaker 2 be—notice—that here, for example, the range of prices has widened, but the one-sixth mark won’t be—once the price goes more than a sixth above the midpoint, it has already crossed that mark. And here the price range has widened so much that as soon as you go even a little outside the range, you’ve already crossed the one-sixth mark. That’s what would seem to follow. Okay, now here are the permitted cases. I won’t emphasize them too much. If a person tells someone exactly what the real price is, it’s permitted. He says, “Listen, I’m selling this for ten shekels more than the market price. If you want it, buy it; if you don’t, don’t.” Someone asked about that earlier. That’s fine, because he isn’t misleading him. He tells him, “It’s above the market price.” He doesn’t just say, “It’s expensive.” Saying it’s expensive isn’t enough. You say “It’s expensive,” and he thinks you mean by a shekel; he doesn’t know by how much. You tell him, “Listen, the market price is twenty shekels less, but this is what I’m selling it for.” That’s permitted. Or a second possibility—

24:05 Speaker 6 It isn’t obligatory.

24:06 Speaker 2 Right, right, but we’ll see in a moment. We’ll see in a moment when. What you’re describing now is the next possibility: he says, “The market price doesn’t interest me. I already know what it is. I’m not telling you the market price. Let’s both set it aside. I’m telling you what I paid. I want to make my profit. I bought it for fifty; I want to make thirty. Do you agree?” That’s called doing business on a basis of deception—on a basis of trust, sorry, not deception, trust. In other words, he tells him what he paid and what he’s selling it for.

24:40 Speaker 6 And that can work too.

24:42 Speaker 2 And I don’t care how much you go over. Go over by as much as you want, but I know. Okay, I won’t go into the other points. Now we’ll move to the subject of price gouging that we mentioned earlier, and then we’ll put the two together and see what the situation is today. Price gouging. We have this: intermediary markups. Maybe we’ll take each slide separately. Intermediary markups—meaning how much a person can earn as a middleman. So here we said twenty percent of the purchase price. What does that apply to? All foods and beverages, but specifically necessities of life, and I plan to expand on that a little. The Rambam writes this halachah as follows. He says that “wine, oil, and fine flour” are necessities of life, and one may not profit more than twenty percent on them. But, he says, “costus and frankincense”—things used for fragrance, for perfume—on those you can make as much as you want.

25:46 Speaker 6 That’s water.

25:48 Speaker 2 Yes, it’s for enjoyment; it isn’t food. Now, what about everything in between? There are things in the middle. They aren’t wine, oil, and fine flour, but they aren’t fragrances either. All those things in between.

25:57 Speaker 6 They’re food.

26:00 Speaker 2 Exactly. So the Beis Yosef understood it this way: everything that’s food is subject to this limit. Anything that isn’t food isn’t subject to the limit. That’s how he understood the Rambam. But the Maggid Mishneh understood it differently. He says some foods are basic necessities, while others are already—

26:21 Speaker 6 Luxuries.

26:21 Speaker 2 Luxuries. And not just luxuries—he gives spices as an example: cumin, peppers, and things like that. On those, you can already make as much profit as you want. Okay. Then the Alter Rebbe comes along and takes something of a middle position, a sort of ruling between the two, and says this: “Wine, oil, and fine flour have a twenty-percent limit. Costus and frankincense, things for fragrance, things that aren’t food—you can charge as much as you want. Things that are used in preparing food, like spices and the like—up to double.”

26:52 Speaker 6 Up to?

26:52 Speaker 2 Up to double, up to a hundred percent.

26:54 Speaker 6 Up to a hundred.

26:55 Speaker 2 Yes. That’s what he says. However he arrived at it, that’s what he says. Now, in our times. We’re talking about Osem and Tnuva and all that. Let’s take an example where they want to raise the price of a product. You always have to look at both the question of overcharging and the question of price gouging.

27:15 Speaker 6 So according to that, they’re all, uh, cheats, and they’re all causing trouble.

27:18 Speaker 2 Let’s take it step by step. On the subject of overcharging—there are more details, and we’ll get to them later. First, I don’t want us to reach the end without getting to the practical side. We’ll go through the practical side, and if there’s time left, we’ll add more details and expand on it. Let’s start with overcharging. Overcharging means you mustn’t mislead someone about the market price. That means there has to be a market price. Now let’s talk for a moment about a manufacturer. A manufacturer, as we said earlier, makes a unique medication that isn’t available on the market.

27:51 Speaker 6 Medication?

27:51 Speaker 2 A unique medication.

27:53 Speaker 6 Something...

27:53 Speaker 2 No. It doesn’t matter. It doesn’t matter. By the way, it doesn’t specifically matter whether it saves lives or not. The point is that it’s something unique. It has no market price. I’m essentially the only one here. It’s like that seller who’s alone in a village. So seemingly, he sets the price.

28:10 Speaker 6 He creates the market.

28:11 Speaker 2 Right. Now, do the laws of ona’ah, overcharging, apply to him or not? If it’s food, the prohibition against excessive pricing applies. That would seemingly include medicine, even though it isn’t written here, because all the more so, it’s a matter of life itself. So with excessive pricing, you check how much it cost him—all the expenses, the research and everything—how much it cost him, roughly how much he needs to sell it for to cover his expenses, and he adds twenty percent to that. That’s the rule against excessive pricing. But if it isn’t medicine, if it isn’t food, if it’s a completely different product—

28:46 Speaker 6 A cell phone.

28:47 Speaker 2 A cell phone. The rule against excessive pricing doesn’t apply to it at all. We move on to the subject of ona’ah. What do we do about ona’ah? I’m the only one here. On this, there’s a dispute between the Beis Yosef and the Rema. Now, it doesn’t appear in the Shulchan Aruch—that’s what’s interesting. It appears only in the Beis Yosef. The Beis Yosef is a work he wrote on the Tur, where he goes into more detail, with all the sources and so on, but there he focuses less on ruling on the halachah. In the Shulchan Aruch he gives the halachic rulings. So this dispute appears there. The Beis Yosef says, “No market price, no ona’ah.” That’s what the Beis Yosef says.

29:23 Speaker 6 He can make as much profit as he wants.

29:25 Speaker 2 As much as he wants. That’s what the Beis Yosef says. The Rema, in his work Darkei Moshe, and several other authorities as well—yes. Except—wait, if it’s food, if it’s food, then that’s... Now.

29:38 Speaker 6 If it isn’t food?

29:40 Speaker 2 Right. It’s very hard to decide that now. On the face of it, it’s like a condiment. It would seemingly be treated like a condiment. Now, it’s very hard to decide about every item. You mentioned cottage cheese and cheese and things like that earlier. On the face of it, those are food. Seemingly.

29:57 Speaker 6 Foods or not.

29:59 Speaker 2 Desserts [?].

30:01 Speaker 6 Chocolate, chocolate.

30:05 Speaker 2 Now, there’s something else I didn’t mention about excessive pricing, and it’s very, very important and highly relevant in practice. Keeping prices in order is, in principle, a responsibility both of the individual and of a beis din, which should oversee prices and make sure everyone complies, so that prices remain regulated. But what happens if the market is already unregulated? There’s no beis din, no oversight, like today. Do I have to be the one righteous man in Sodom? Everyone else makes as much profit as they want, and I’m the one who has to keep prices down? The Alter Rebbe says I don’t have to.

30:37 Speaker 6 Wow.

30:38 Speaker 2 This is what he says: “All this applies when the community leaders supervise prices, and so on. But if they do not supervise this, and everyone sells and profits as he wishes, even one who fears the word of Hashem need not be the only one to sell more cheaply than all the other sellers, whether they are Jews or non-Jews. Nevertheless”—and this is relevant to raising prices—“he must not sell at a higher price than they do, but rather in the manner explained.”

31:05 Speaker 6 Every moment, someone else comes along.

31:08 Speaker 2 What? So this is what it means: you don’t have to be a tzaddik and sell for less than everyone else. Sell at the same price as everyone else, but be—meaning, it follows that if, let’s say, Tnuva sells cheese, cheese isn’t a unique product. There’s Tnuva cheese and cheese from other companies. Now, if all the companies are already selling at a high price, Tnuva can sell at a high price too. But if there’s an established price and Tnuva is the first to want to raise it, this is food. If it’s food, let’s check how much profit you’re making. Don’t just raise the price. We’ll check the expenses; you may add up to twenty percent, no more. And this applies even nowadays.

31:47 Speaker 6 That’s the expense. We’ll make some kind of [unclear] with the...

31:54 Speaker 2 What, in practice?

32:00 Speaker 6 Ninety percent of the products in these [unclear]. It doesn’t matter what’s written. It’s all [unclear]. Whether it’s twenty or—doesn’t matter.

32:10 Speaker 2 If the—

32:12 Speaker 6 It’s the same competition among themselves.

32:14 Speaker 2 If—if he’s on his own, if he’s the only one in the market, let’s say, yes? Then he certainly has to observe these rules.

32:24 Speaker 6 You can stretch the market.

32:25 Speaker 2 Yes, there are cartels, there are all kinds of things. There are also agreements they make among themselves to raise prices.

32:30 Speaker 6 Recently they’ve started making demands to disclose what the profits were over the past year or two, to see which way things are going.

32:40 Speaker 2 Yes.

32:40 Speaker 6 All those big companies.

32:42 Speaker 2 Okay. Now let’s go back to ona’ah and finish the discussion about this product. Someone has a unique product, yes? We spoke about an ordinary product and a unique product. He has a unique product. Here the Beis Yosef and the Darkei Moshe, the Rema, disagree: do the laws of ona’ah apply to it or not? According to the Beis Yosef, there is no ona’ah. It’s a unique product, so there is no ona’ah. If it’s food, the rules against excessive pricing apply. If it isn’t food, sell it freely for whatever price you want. According to the Rema, even this has a price. What price? An appraisal. Bring in an appraiser, even though you have a unique product. Let’s take soup croutons as an example, okay? Soup croutons—I don’t know exactly about Osem’s and other brands—but let’s say Osem’s soup croutons are something people are willing to pay more for because they really taste much better. Still, if the competitors’ cost five shekels and Osem’s taste better, people won’t pay fifty shekels for them. So yes, your product is unique, but there’s still some reasonable estimate of its actual price. What? Yes. Now, their production costs and expenses matter to me only when it comes to food. But let’s say we’ve moved beyond food. Let’s say soup croutons aren’t considered food; they’re a condiment. You can make a profit.

34:01 Speaker 6 A unique medicine.

34:02 Speaker 2 Yes.

34:03 Speaker 6 That isn’t food.

34:06 Speaker 2 Right, so I said that it speaks here about foods that are essential to life.

34:10 Speaker 6 So yes, it is permitted to sell it for...

34:13 Speaker 2 So seemingly, a lifesaving medicine would be [unclear] with foods, and perhaps the rules against excessive pricing would have to be observed. Now, those rules limit the profit you can make over your expenses. What did you want to say?

34:28 Speaker 6 Misleading people is [unclear], because the sense of taste is the...

34:33 Speaker 2 Right.

34:33 Speaker 6 That’s the deciding factor.

34:36 Speaker 2 Yes, it’s like—it’s something special.

34:37 Speaker 6 Even if they ask me how much I...

34:40 Speaker 2 Okay, now, even if it’s special, there’s what the Rema says. The Rema says to bring an appraiser to determine how much that special quality is worth. It’s not that because something is special, you can do whatever you want. There is an appraisal, an estimate of what you can charge, and if you sell it for more, you’re misleading people. But, but what?

35:00 Speaker 6 In Eretz Yisroel they don’t sell [unclear]. There’s no interest on anything.

35:05 Speaker 2 Right, that’s why we’re waiting for Moshiach to come. There are a lot of things that need to be...

35:09 Speaker 6 Not at all.

35:10 Speaker 2 In their time.

35:12 Speaker 6 Prices will [unclear].

35:13 Speaker 2 Ah, right, that’s part of it. It helps bring Moshiach. It’s also written that if the entire generation is guilty, Moshiach comes. Everyone who commits transgressions is... So what emerges is that a unique item does have a price according to the Rema. If you want to raise the price—let’s say Osem wants to raise its price now—what does it do? If it does what companies do today and announces to everyone that it’s raising the price, tell me: does that help with regard to ona’ah? Does it help with regard to excessive pricing? With ona’ah, what is the issue? You mislead the public. So if you announce, “I’m raising prices now; until now the price was this, and I’m raising it,” the public knows. From the manufacturer’s standpoint, from the manufacturer’s standpoint.

36:03 Speaker 6 There’s a different problem with...

36:05 Speaker 2 Okay, that’s true. That’s misleading people, it’s deception. Ah, right, that’s what I’m saying. Right, they write it. Right. If they don’t—right. If they do it without writing it, that’s deception.

36:15 Speaker 6 New packaging—they write the quantity on it, but even then...

36:19 Speaker 2 Right, they sometimes write “new quantity.” No, but I think they write it underneath. They have to write, for a certain period, that this has replaced that. There’s something like that in the law.

36:28 Speaker 6 You have to know not to change the quantity. “New quantity.”

36:34 Speaker 2 That’s why, in the law, they get into—

36:35 Speaker 6 Word games.

36:36 Speaker 2 Sometimes the law even tells you what font size you have to use to write it. They know all these tricks.

36:41 Speaker 6 They know all the tricks. Like lawyers, but they have tools.

36:46 Speaker 2 Now, when—

36:47 Speaker 6 They’re not right, but they don’t—

36:48 Speaker 2 When the manufacturer announces a price increase, there’s no problem of price deception, because they haven’t misled you—they’ve announced it. The manufacturer, right? Now, with excessive price increases, I didn’t say an announcement helps. It doesn’t. The rule means: don’t raise prices. If your profit is twenty percent now, don’t increase it beyond that. So announcing it doesn’t help. Some people ask: If Osem announces that it’s raising prices, is that all right or not? It depends on what it’s selling. If it’s selling a product classified as a basic foodstuff, all its announcements won’t help. Someone needs to check—or the company itself needs to check—whether its profit is twenty percent or more. If it’s more than twenty percent, it may not raise the price. But if it isn’t a basic foodstuff, the announcement helps. That’s regarding the manufacturer. Now, regarding the store: when a customer comes into the store, the question is how much they can rely on the announcement Osem made. But let’s say someone wants to raise a price independently. One store wants to raise its price on its own. If everyone is selling at a certain price and that store wants to charge more, it would seemingly have to put up a sign saying, “The price has gone up by two shekels.” Now, suppose the supply in the market—let’s take electrical appliances—has fallen because shipments were delayed and so on, demand has risen, and prices ought to go up. How will they go up? After all, there are laws against price deception. How will prices rise? The first sellers to do it might act improperly: they’ll raise their prices in violation of the law, and gradually a new market price will emerge. That’s one possibility. Another possibility: let’s say everyone is righteous. Then the first sellers to raise prices will announce it. They’ll announce, “I’ve raised the price by this much.” They’ll announce

38:34 Speaker 2 it either on a sign or verbally, and gradually everyone will announce it, and announce it, and announce it, and the price will rise.

38:40 Speaker 6 Excessive price increases are also forbidden.

38:41 Speaker 2 For excessive price increases, announcing it doesn’t help. That’s what keeps market prices from rising like that. Questions? Does anyone have one?

38:51 Speaker 6 Actually, what’s considered a product...

38:54 Speaker 2 [unclear] custom?

38:55 Speaker 6 Yes.

38:56 Speaker 2 So simply, what does “custom” mean? It means personalized. There’s something about it that’s... Nowadays, that’s how it is. Nowadays, it’s unique.

39:05 Speaker 6 It’s a basic product when you—

39:07 Speaker 2 So here we’d apply what the Rema says: some kind of assessment of what it’s worth on the market.

39:13 Speaker 6 On the black market.

39:14 Speaker 2 Now, excessive price increases aren’t relevant here; this isn’t food. So they might buy it in India for a hundred shekels and sell it here for five thousand shekels—that’s not my concern. What concerns me is the market price. Once the market price has unfortunately risen, everyone can sell it at that price. You want the market price to fall? Get a few people to bring it down. That’s how it will fall, and there’s nothing you can do about it, because no one is being misled: that’s the market price now.

39:41 Speaker 6 How do we determine the price?

39:43 Speaker 2 By what people customarily charge. And this needs to be emphasized: it says, “You have only its place and its time.” You can’t say, “In Rechovot it costs this much, and there it costs that much.” Every place has its own prices.

39:59 Speaker 6 So that applies to rent too?

40:01 Speaker 2 Rent.

40:01 Speaker 6 That makes sense. That makes sense.

40:04 Speaker 2 It all makes sense. Everything written in halachah makes sense. Some of it is also a decree of Scripture. Now, regarding apartments.

40:10 Speaker 6 Yes, what about apartments?

40:11 Speaker 2 Regarding apartments, yes—rentals and sales. In general, the laws of price deception don’t apply to real estate. Why? Because a particular property may be worth more to someone; they might want to be close to home and so on. Still, the Ramban writes in his commentary on the Torah that the rule that price deception doesn’t apply to real estate refers to after the transaction. Once you’ve sold it, no one can come to you with a claim and ask for a refund or to cancel the sale. Up to twice its value, by the way—up to twice its value. If someone sells it for more than twice its value, then the laws of price deception do apply. But the Ramban says that from the outset, those laws apply to real estate too. So someone renting out or selling an apartment needs to know roughly the range of prices, and according to the Ramban, they may not set a price above that range from the outset. Now, that’s a little hard to say, because often, as we discussed with a unique product, right? I renovated my home, and there’s something special about it that makes it worth much more. A buyer who comes along wants to pay much more for it. That’s where the concept of an appraiser comes in. Now, not the appraisers of today. Today, when someone buys something and then goes to get a mortgage, the appraisers generally value it below the market price. Appraisers have a more realistic price. You need an appraiser who will take the market price into account. So let’s say a four-room apartment costs X, and you think yours is better because it has special air conditioning—I don’t know what it has, all sorts of things like that. The appraiser will look at it and tell you, “You can increase the price by this much.” Okay? The question is how necessary that is. Seemingly, a person can assess it themselves too, as long as they think it’s fair. But they shouldn’t come along and say, “I can ask for more, so I’ll ask for more.” Seemingly, that’s forbidden unless they

41:59 Speaker 2 announce it. And you’ll announce it? Try announcing it—it won’t go over. So, to sum up, what we need to keep in mind is this: it’s forbidden to mislead someone about the price of anything compared with the market price. No matter what the product is, you may not mislead them. If you announce the price difference, there’s no problem. It’s forbidden to raise prices on basic foodstuffs, and there, announcing it doesn’t help; nothing helps. With basic foodstuffs, you may not make more than twenty percent profit. But if everyone is selling at a high price, you can raise yours to match theirs, but not beyond that. So a company raising prices on basic foodstuffs will have a problem if the increase brings its profit above twenty percent.