Fair Profits

The issues

Which basic Torah laws must a businessman know about with regard to making and calculating profits?

The Jewish Perspective

A. The Torah lays down no limits on how much profit may be made by a seller on an item he sells. Even if all the sellers of the same type of goods decide to sell them at a 100% profit or more, the Torah does not prevent them from doing so. The laws of Ona'ah (overcharging) only apply when one seller is charging upwards of 16% more than the market rate for that kind of product in that place.

B. Our rabbis have decreed that a person may not charge more than 16% net profit for basic food staples such as bread, oil and dairy products. This decree only applies where all sellers of such goods are under the jurisdiction of a Rabbinical Court (Beis Din) and that court has powers of enforcement in these matters. Accordingly, in most societies today, this decree is not applicable. However, the Torah prohibition of Ona'ah remains on these items, as it does on all other goods.