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Overpriced!

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A week after Hurricane Sandy, the Blums still had no electricity. They had run extension cords to a neighbor’s house to power some basic items, like the fridge and telephone, but the protracted living without power was taking its toll on the family.

“I’ve just about had it,” Mrs. Blum said to her husband. “We need to buy a generator! I saw them in the store two weeks ago for about $750.”

Mr. Blum drove to the store but couldn’t find any generators. He inquired with the manager, who said: “I’m sorry, but we sold out last week.”

Mr. Blum tried a second and third store, but everywhere he went, the answer was the same: “We sold out last week, and won’t get restocked for at least another week.”

“We can’t keep going on like this,” Mrs. Blum said to her husband. “We’ve got to do something!”

That afternoon, Mr. Blum saw in an advertisement that someone had procured a limited stock of generators and was selling them. He immediately drove over to the address listed.

As he entered, Mr. Blum saw a sign: “The generators are being sold for $1,500 each. We apologize for the high price. No returns.”

“What?!” exclaimed Mr. Blum to the seller. “That’s twice the cost of local stores. Why so much?”

“It is much more than the stores here, but I can’t sell for the regular price,” said the seller. “I had to buy these from a store very far away and transport them here. That added a lot to my cost and labor.”

“That may account for adding 50 percent to the price,” said Mr. Blum, “but it doesn’t justify charging double!”

“I’m not interested in bargaining,” said the seller. “This is the price that I’m charging. You want to buy for $1,500, fine; you don’t want to, don’t.”

“But overcharging like that is a violation of the prohibition against ona’ah (price cheating),” argued Mr. Blum. “It even jeopardizes the validity of the sale!”

“How am I cheating you?” asked the seller. “I’m not deceiving you about the cost; I acknowledge the price is high.”

Feeling he had no choice, Mr. Blum bought the generator. On Shabbos, he met Rabbi Dayan and related what happened. “Was the seller permitted to charge way more than the generators were worth?” asked Mr. Blum.

“In general, there is a prohibition of ona’ah to overcharge an unknowing customer,” replied Rabbi Dayan. “Depending on the amount overcharged, the customer may be entitled to a refund or to cancel the purchase.” (See C.M. 247:2-4)

“What if the seller stipulates ‘No return’?” asked Mr. Blum.

“Even if the seller stipulates that the customer should have no ona’ah claim, the customer does not relinquish his legal redress if the seller did not state he is overcharging,” replied Rabbi Dayan. “However, if the seller states he is overcharging and says: ‘This item that I’m selling for 200 is worth only 100; I am selling on condition that you have no ona’ah claim’ – then the customer has no redress.” (227:21)

“Does the seller have to specify the true cost?” asked Mr. Blum. “What if he just states that he is charging more than the item is worth, on condition that there is no ona’ah claim?”

“This seems dependent on whether a person can forgo an undefined sum,” said Rabbi Dayan. “According to the Rambam one cannot, so it is necessary to specify the amounts; according to the Tur one can, so it is not necessary to specify.” (See SM”A 227:39, 232:16; P.C., Ona’ah 10:35)

“But still, is stating that the price is high sufficient to permit the seller to overcharge?” asked Mr. Blum. “What about the prohibition of ‘lo tonu‘ – do not aggrieve?”

“If the seller specifies the amount he is overcharging there is no prohibition,” answered Rabbi Dayan. “It also seems that there is no need to formally stipulate, ‘on condition…’ since the customer is clearly agreeing to forgo the amount overcharged. Since the seller is transparent about overcharging, but only willing to sell for this price, and the customer decides that it’s worthwhile for him to buy nonetheless – the seller has not cheated him.” (See Nesivos 264:8; Pischei Choshen, Ona’ah 10:34)

“I still feel somewhat taken advantage of,” Mr. Blum commented.

“Note that in this case, there is another important factor that could justify the high price,” replied Rabbi Dayan. “Market price is determined by supply and demand. Since stores had sold out and there was a great demand and minimal supply, many people were now willing to pay this high price – so that even double the regular cost is likely considered a fair market value now.”

Mr. Blum thanked Rabbi Dayan for having clarified the matter. “I feel better now,” he said.

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About the Author: Rabbi Meir Orlian is a faculty member of the Business Halacha Institute, headed by HaRav Chaim Kohn, a noted dayan. To receive BHI’s free newsletter, Business Weekly, send an e-mail to subscribe@businesshalacha.com. For questions regarding business halacha issues, or to bring a BHI lecturer to your business or shul, call the confidential hotline at 877-845-8455 or e-mail ask@businesshalacha.com.


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