All in the Name of Competition

All in the Name of Competition
by Rafi Youngerwood

Competition in some sectors has reached a point where ethics has been totally ignored.

The door bell rings, I answer to be faced with a pleasant looking representative from London Electricity. She informs that she is merely conducting a survey of electricity use in the area and as an aside to inform me of London Electricity's cheap tariffs. She converses in polite conversation and seeing that I am Jewish asks about some of our customs. After this she skillfully brings the conversation back to business and tells me that if I want to get more information about how much I could save I will need to sign a paper. It was a few days later that I took a closer look at this paper I had signed to find out not that I had made a request for more information but rather I had signed a contract and was now a customer of London Electricity. Being foolish and signing something without taking a proper look at it is not yet a crime but there must be something wrong in how I was duped?

Companies have long had the policy of turning the other cheek to such tactics and it should therefore have come as no surprise that matters had deteriorated to the stage where Virgin Energy had to sack 14 sales agents. Theses agents were discovered in public library forging on energy supply contracts the signatures of dead individuals named on the electoral register.

The consumer watchdog Energywatch, which exposed the incident, said it was just the latest example of Virgin Energy employing disreputable tactics in an effort to win more customers.

Other complaints include Virgin Energy conning consumers into signing up for supplies by pretending to offer discounts and vouchers for other Virgin products such as CDs and airline and train tickets.

Everyone will agree that the above practices are totally immoral. The law may say that I am bound by the contract signed but it is ethically unjust. These actions are signs of the external pressure created but fierce competition amongst the energy suppliers. However, one does not need to go to such extreme examples to find unethical behaviour - rubbishing the competition is used by big companies and is not a method monopolised by unscrupulous door-to-door salesmen. Fierce competition among Britain's electricity companies has produced a number of doorstep sales teams who use unscrupulous methods to sign up new customers - amongst their most potent weapon is that of rubbishing the competition. It is common practice amongst phone companies to compare their tariffs to rivals in order to prove that they are the cheapest. However British Telecom have complained, stating that smaller phone companies have used BT's expensive tariffs as a basis for comparison when cheaper alternatives were on offer.

The most high profile case involving rubbishing the competition was between British Airways and Virgin Atlantic. On January 11, 1993, Lord King, then BA chairman, and British Airways paid Richard Branson and Virgin Atlantic £610,000 in damages plus the entire cost of the libel action, estimated at £4.5 million. Branson had sued BA for saying that his claims of a "dirty tricks" campaign being conducted against his airline were untrue. BA admitted in the High Court that its "disreputable business practices" had included "passenger poaching, document shredding, and obtaining access to computer information about Virgin Atlantic. In addition, BA admitted trying to plant 'hostile and discreditable' stories about Virgin and Richard Branson in the press.

The Jewish Response

There are three issues that need to be addressed when looking at this subject

  • Making disparaging comments that are untrue about a competitor.
  • Making disparaging comments that are true but where their relevance is questionable.
  • The issue of exaggerated statements for promotional purposes.

False Claims

Jewish law is very clear on the first issue. The Torah tells us to stay away only from one characteristic and that is falsehood (Exodus 23,7). Furthermore in Deuteronomy we are told "to do what is straightforward and right" (6,18) and the Shulchan Aruch ( 228.6) clearly states that it is prohibited to deceive people in commercial dealings or to mislead them - there must be full disclosure.

This would relate to the electricity board case mentioned above where salesmen were making false claims about competitors in order to win contracts - a clear example of placing a stumbling block before the blind as most consumers will have no idea what competitors' prices are.

True But Harmful Claims

An example of the second issue may be found in the case of the phone company comparing their prices to the most expensive tariffs of their rivals.

Jewish law does not permit any form of misleading.
A Jewish salesman's duty is clear, whether one is selling from door to door, or trading in stocks and shares for a large conglomerate - there is no allowance for misleading speech.
On a personal level, speaking disparangingly but truthfully about an individual would equally be forbidden as 'Lashon Hara' (evil speech) unless it was clearly in the interests of and relevant to helping the consumer.

Exaggerated Statements

The issue of propriety in making exaggerated claims depends primarily on the customs of the society in which they are made. The Talmud in Nedarim states that if the type of exaggeration is generally accepted as part-and-parcel of normal commercial activity, such as in advertising where companies proclaim their product to be the best in the market, then it is acceptable. This has to be sharply distinguished from statements that denigrate your competitor's product. It is an interesting fact that up to a few years ago companies did not rubbish the competition by making misleading comparisons or the like. Negative advertising, which disparages rivals as opposed to praising your product (without explicit comparison), invites a tit-for-tat strategy and potentially exposes your company to the sort of negative publicity that arose with the media slanging matches between British Airways and Virgin. This strategy has only come into force the last few years when competition on every consumer service from telephones to electricity has become so much more fierce. A famous rabbi was walking with a friend when they saw two children playing on a flight of steps. One of the children pushed the other down a step so that he could be higher. The rabbi turned to his colleague and said that the child who pushed the other down would not amount to anything in life. This child, to achieve his aim of being taller, could have gone up a step instead of pushing his friend down. The message clearly translates into the realm of competition. Success comes from making yourself better, not from seeking to denigrate your competitor and this coincidentally corresponds with Jewish ethical behaviour.