A reader writes:
As a recent businessman in the buying and selling of items on eBay, I have taken interest in the practice of buying low, selling high, and making profits.
Okay, well, as a reseller, you wouldn’t be much of a businessman if you didn’t make a profit by selling higher than what you bought an item for. So far so good. You’re providing a service to your customers by finding out and then purchasing things at a lower price so that they don’t have to do this themselves. The profit you take is your compensation for being willing to go to this effort.
A recent debate began on a forum when a person was wondering whether it was morally acceptable to buy an item for Price X at the store, then resell it for Price Y on eBay..
I believe it is okay as buyers accept the price (either as a pre-set Price Y or a bid up to Price Y) without force and it is their choice if they want to order it online or get it in stores. People may know how much it sells in stores, but they like the convienence of online shopping or they don’t want to wait in line or for the stores to get it back in stock. Likewise, they may not know how much it sells in stores and think that Price Y is the "normal" price.
I would think it depends on an individual purchaser. In some cases, they might not know how much it sells for in their local stores, but maybe they do. I may know that a particular DVD sells for $14 on Amazon but I could get the same thing a the BestBuy across town for $12. Which is the better deal for me?
The answer will depend on questions like (1) how much disposable income do I have? (2) how keen am I on seeing this DVD as soon as possible? (3) how much time do I have on my hands, given that I would have to invest more in driving across town, finding it in the store, standing in line for who knows how long, and driving back rather than clicking a few buttons, and (4) how much is the gas it would take to drive there and back?
Though the copy at the local BestBuy is somewhat cheaper in terms of its sticker price, I might very well conclude that it is worth the $2 to me to order it on Amazon with just a few clicks, save myself the time and gas of going across town and back, and just waiting an extra week or so to get it in the mail.
What’s more, if I know that Amazon and the local BestBuy are generally within an acceptable range of each other, it may be worth my while to simply buy it on Amazon without even spending the time to call BestBuy, wade through their voicemail system to talk to a human, and find out if they have it in stock and–if so–how much it costs. It may just be easier (i.e., worth it to me) for me to buy online without even checking the local BestBuy.
In the current market, it will almost always be possible for me to find something at a cheaper price–if I’m willing to keep researching, or haggling, or taking a risk with a shady seller. But at some point it just isn’t worth it to me to keep trying to find a better deal, and it’s better for me to just go ahead and buy somewhere.
(NOTE: The latter is a technological limitation that I suspect will be cleared up in a few years. We’re already seeing technological convergence of information on this through price comparison sites and local "in stock"/price services. Soon I’ll be able to find out if the local BestBuy has it in stock and, if so, for how much–given no more clicks than it takes me to find out what Amazon wants for it, because both my local store and Amazon will be listed on the same site.)
So far I’m not seeing anything that raises alarm bells. You’re not in a position to know why a particular eBay bidder is bidding the way he is, and it’s reasonable for you to find things at Price X and then sell them for a markup so that the bidder doesn’t have to go to the trouble of finding them for Price X himself.
The reader goes on to write:
The debate however enters Catholic territory from this sections of the CCC:
"2409 Even if it does not contradict the provisions of civil law, any form of unjustly taking and keeping the property of others is against the seventh commandment: thus, deliberate retention of goods lent or of objects lost; business fraud; paying unjust wages; forcing up prices by taking advantage of the ignorance or hardship of another.191
The following are also morally illicit: speculation in which one contrives to manipulate the price of goods artificially in order to gain an advantage to the detriment of others; corruption in which one influences the judgment of those who must make decisions according to law; appropriation and use for private purposes of the common goods of an enterprise; work poorly done; tax evasion; forgery of checks and invoices; excessive expenses and waste. Willfully damaging private or public property is contrary to the moral law and requires reparation."
This raised the question of whether the seller was obligated to inform people of the fact that it can be purchased for a lower price elsewhere (in stores) so as to not take advantage of potential ignorance. This too me seems a bit of a stretch. That to me would seem like one business that sells something for Price A being forced to tell constumers another store sells the same item for Price B (or likewise lower their own price accordingly). This to me would seem to force sellers to do research that consumers should do themself, but it was argued that regardless of what research is required of buyers, it is never o.k. to take advantage as a seller of a buyers ignorance.
The arguement is not whether buyers should do research themselves as that was agreed upon, but about what steps if any the sellers need to take to prevent "taking advantage of ignorance." To sum it up, would a good Catholic be morally required to list how much an item can be purchased for elsewhere? Likewise, as a good Catholic buyer, if they are purchasing something they know is worth a lot more (at a garage sale for instance) then asking price, are they required to inform, not barter for lower prices, or pay the seller a higher price due to this knowledge to prevent taking advantage of the sellers potential ignorance? I think this assumes ignorance when there may be none, but still to error on the side of doing good what does the Catholic Church teach?
Ultimately what is most desirable is an clear explanation of what the CCC means with regards to those paragraphs.
I’d like to provide such an explanation, but I don’t know that I can. The CCC contains a substantial amount of material on economic matters that is not easy to cash out (pardon the pun) in concrete terms.
Part of the reason for this is that we are at an intersection between basic moral principles and how they are to be applied to real world situations in a way that requires the use of discernment. Part of the problem also is that the Church does not presently have a detailed theology of economics; it has a piecemeal system in which some matters are clearer than others, which has been developed over the course of time to address particular economic situations.
A fundamental problem, though, is that the folks in the hierarchy are not economists and are doing their best, based on real economic concerns, to provide pastoral guidance in an area that they don’t have extensive familiarity with. The result is that they often write in an unclear manner.
It would be helpful if they provided examples to illustrate what they are talking about in passages like this, but either due to the concision with which the Catechism needed to be written or due to the fact that they had trouble thinking up clear and indisputable examples, we don’t have any.
Neither does turning to parallel texts, like the Bible verses cited in the footnote or the Compendium of the Social Doctrine of the Church or the Compendium of the Catechism of the Catholic Church, help.
As far as I can tell, the clause in blue is simply de novo to the Catechism. It’s a first-pass attempt at expressing this, without clear parallels (at least ones that I’ve been able to find) in other relevant documents. (There may be some in papal encyclicals, but since these aren’t cited in the footnote, I don’t know where to look them up, and I am under an economy of time in composing blog posts, so I can’t just go read all the economic-related encyclicals and addresses.)
Taken in its most sweeping sense, the statement in blue could mean that the seller must either lower his asking price to that of his lowest competitor or must inform potential customers of what the lowest competitor sells for.
But this seems problematic for several reasons, among them the fact that this would put a burden on the seller to do research on what all of his competitors are selling for. While knowing what your competitors’ asking prices are is–to an extent–just good business practice, this is not where the burden of doing research fundamentally falls. It ultimately falls on the consumer to try to find the best price so that he can use his money wisely. It isn’t the seller’s job to do that for him.
Second, taking there may be reasons why a particular seller can’t lower his price to that of his lowest competitor. His lowest competitor may be much larger than him and able to buy in bulk and thus at even cheaper prices. Further, the competitor may even be taking a loss on the product (i.e., using it as a loss leader) in hopes of making more money on other things. Insisting that all sellers match their lowest competitor’s price thus would be destructive to the free market as it would tend to lead to market centralization and even monopolies, as the small sellers are unable to match the savings offered by the big ones.
The Church certainly doesn’t intend that.
What about informing customers of the cheapest competitor’s prices?
Again, this does not seem to be what the Church intends, and it would have the same effects of driving sales away from the smaller sellers to their larger competitors, again leading to market centralization and even monopolies. It would thus be anticompetitive.
It seems to me, therefore, that the statement in blue must be intended with some narrower sense than this.
On its face, it looks like it is a statement directed not toward typical business conditions but to atypical ones.
It includes, for example, reference to not just the buyer’s ignorance but to his hardship. That makes it sound like it is directed to the so-called "price gouging" that occurs when commodity prices rise in response to natural disasters.
It is also easier (for me, at the moment) to think of atypical situations in which one could gain a higher price by "taking advantage of the ignorance" of a buyer–or seller.
For example, if I am at a yard sale and discover that the impoverished people holding the yard sale are in possession of a Stradivarius violin that they want $5 for. If I am well of and I buy it for $5 from impoverished people who are in great need of money, this would seem to be contrary to the virtue of charity. Instead of buying it myself, I should tell them what it’s worth since they need the money more than I do (or at least I should set up some kind of profit-sharing thing with them).
I could set up a similar instance in which it is the seller who has the information about the truth worth (or worth-less-than-the-impoverished-buyer-thinks-ness) of a item, but the same principle would apply.
These situations–natural disasters, finding a Stradivarius at a yard sale, knowing for a fact that something will not do for your customer what he thinks it will–are exceptional cases and not normal business activity.
Hopefully at some point we’ll get some further doctrinal development on the matter at issue, but for the moment the clause in blue is unclear as to meaning and its plausible constructions are open to challenge.
For example, if we take the reference to the hardship of another as a statement regarding raising prices on particular commodities in times of natural disaster then the law of unintended consequences is likely to kick in.
For example, if hotel owners cannot raise their prices when a hurricane forces an evacuation then even bigger problems will result.
Because the hurricane–not the hotel owners–has caused a spike in demand for hotel rooms, and if that increased demand is not managed by price then it will be managed by something else, like who gets to the hotel first.
If I’m one of the first people to flee the hurricane and I bring my family with me then, if the hotel owner can’t raise his prices to anticipate increased demand, then I can rent one room for me and the wife and another room or two for the kids (depending on how many kids we have) and we will not be forced to economize by staying in a single room or stay with relatives or drive an extra few miles to find a cheaper hotel further from where the hurricane is going to hit.
The same applies to all of the other early arrivers.
So when the late arrivers get there, the hotel will be sold out and there will be "no room at the inn."
Whereas, if the hotel owner started raising his prices to meet anticipated demand then the finite resource of hotel rooms will be distributed more justly as those fortunate enough to be able to leave early won’t hog all the rooms with no restraint on this hoarding behavior. Instead, they may choose to rent fewer rooms or to stay with nearby relatives or to drive further.
I could discuss this further, and might in future posts, but ultimately it seems to me that the passage in the Catechism is unclear and needs further development to be cashed out in concrete terms.
It does not strike me that it is intended to apply to normal market conditions and that it is of potentially limited usefulness in atypical ones.
I also agree that whatever ethical constraints apply to the seller apply also to the buyer.
Ultimately, it does not strike me that a seller should scruple over a buyer’s motives or level of knowledge. If it is blatantly obvious that someone wants to buy a weapon to commit murder or if it is blatantly obvious that a poor person is using his money unwisely because he doesn’t know of a better deal, fine. Those are atypical situations in which the law of charity would suggest acting in an unbusinesslike manner. But as long as this kind of thing does not apply then the seller does not have a duty to advertise his competitors’ prices. Instead, he should assume that the customer knows what he’s doing, not try to second guess him, and let the market work out what the appropriate price range is for an item.
After all, we have no better method of determining the current "best price" for something than what it will fetch in a free and competitive market.