Competitive Intelligence vs Intelligent Competition

Q. I'm interested in finding out if I can effectively compete in a certain market. Can I do a surreptitious survey of the level of price and service by pretending to be a potential customer or investor?

A. Competition for customers helps bring out the best in firms, motivating them to provide the best product at the lowest cost. The Talmud states, “Competition among scholars expands wisdom,” and the same principle applies in other fields as well.

But competition in the marketplace, like that on the playing field, has to be sportsmanlike. Otherwise, everyone loses. And the kind of competition you are contemplating -- sending out a fake survey -- involves a number of ethical problems.

The most severe is the problem of deceit: the bogus survey is a way of tricking your competitors into revealing information they would like to keep secret. This is one kind of “geneivat da'at,” meaning “stealing confidence.” Acquiring information in this way is scarcely better than breaking into their office and stealing price lists. In addition, they are investing a certain amount of effort into preparing a response, and this effort is being expended on your behalf to the detriment of the seller.

We also must not forget that your survey letter is an outright lie. “The seal of the Holy One is truth.” It's true that business often requires a degree of concealment; that's why your competitors want to keep their capabilities and prices secret! But the legitimate practice of concealing some private information from your competitor or bargaining counterpart is far removed from deliberate untruths.

Finally, the Talmud tells us that there is an additional, human dimension here. Whenever a businessperson suggests a deal to a prospective customer, he or she has some legitimate hope and expectation of making a sale. Of course merely inquiring about prices or services doesn't obligate you to buy from a particular merchant, and it is ethically permissible to shop around. But if you inquire about the terms of sale of a particular business, you must intend to give them a fair chance at getting your business. Otherwise, you are guilty of causing them distress and disappointment. A bogus survey improperly raises false hopes.

What about asking a current customer of these businesses to provide this information from his own knowledge? That depends on what agreement he has with them. If the contract or customary, implicit agreement with his suppliers stipulates that the customer is forbidden to reveal his terms with other parties, this agreement should be respected. If you induce the customer to contravene his agreement, you violate the Biblical mandate, “Don't put a stumbling block before the blind” (Leviticus 19:14) -- don't cause someone to stumble spiritually by transgressing.

One option that is open to you is to actually decide to make a purchase. Then you may make an honest inquiry of competing businesses. For example, if you are thinking of opening up a haberdashery, you can decide that you are going to go out and buy a hat. Then you may go out and do some comparison shopping.

Even in this case, you have to be careful of the three ethical problems we mentioned:

To avoid deceit and unfair disappointment, you should plainly state that you are shopping around for the best deal. Most customers will go to at most two or three shops before deciding, so if you are doing a broad survey you should let the merchant know, so he can decide if it is worth his while to invest a lot of effort in selling to you. Likewise, you need to restrict your research to a particular type of item. It's not fair to ask a merchant to take out his entire inventory in order to have a one in ten chance of selling one item.

And to maintain truthfulness, you should not make up a cover story, for example hinting that you are looking for a birthday present etc. (Even if you do intend to give the hat away, that's not your main object.)

Of course it is also necessary to actually give the business to someone at the end of the day.

Success in business sometimes depends on keeping some of your knowledge concealed. So you don't have to inform your prospective competitors that you are planning to go head to head with them. But for this exact reason you need to respect their right to keep their service and price information under wraps and to disclose it only to serious prospective customers.

SOURCES: Babylonian Talmud Bava Batra 21a, Shabbat 55a, Bava Metzia 58b. Shulchan Arukh Choshen Mishpat 228:4, 6.

As the New Year approaches, I would like to thank all "Jewish Ethicist" readers and subscribers for their ongoing involvement which is so fundamental to the success of the Jewish Ethicist. Of course it is you the readers who provide an audience; the column also depends on readers' questions and is immensely improved by your many comments and insights. But beyond that, the "Jewish Ethicist" is enriched by the profound ethical sensivitivity and the exalted moral standards of its readers, which constantly serve as an inspiration for the column as well as for my own personal conduct.