Question # 440: Assalaamu alaykum wa rahmathullaahi wa barakaatuhu. Does Islam permit bidding in auctions?
bismi-llahi r-raḥmani r-raḥīm,
Assalamu ‘laikum warahmatullahi wabarakatuh,
All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).
First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.
Shorter Answer: Sale by Auction is permitted according to the most correct and well-known opinion of the scholars. However, the Messenger of Allah (صلى الله عليه و سلم) forbade najsh (artificial inflation of prices aka ‘price rigging’) with a fraudulent intention, whereby the buyer is tricked into the vendor’s trap to buy at inflated price.
As for internet auctions, some websites charge a small fee/deposit like subscription or price of bidding token for every bid from the bidders, such a method is the essence of gambling and therefore forbidden; this is because the money is paid for subscription and not for obtaining information (terms and conditions brochure). For the auction to be Islamically valid, the deposit must be returned to all the bidders who did not win the auction and it must be deducted from the selling price for the highest bidder. Lastly, sales on internet should meet the following requirements and conditions: offer and acceptance, item should be lawful and possessed by the seller who is able to deliver it to the buyer, item should be fully described to show its quantity, type and features leaving no room for uncertainty.
Long Answer: Islam permits selling by auctions and does not forbid it, according to the most correct and well-known opinion of the scholars. This is based on the following evidence:
- Jaabir (رضي الله عنه) said: A man had decided that a slave of his would be manumitted after his death, but later on he was in need of money, so the Prophet (صلى الله عليه و سلم) took the slave and said, “Who will buy this slave from me?” Nu’aym ibn ‘Abd-Allah bought him, and he (the Prophet (صلى الله عليه و سلم) handed the slave over to him. (Narrated by al-Bukhari and Muslim). Al-Bukhari included this hadith in a chapter titled “Baab bay’ al-Muzaayadah (Chapter: selling by auction).”
Ibn Hajar said: Ibn Battaal replied that the words of the Prophet (صلى الله عليه و سلم) in this hadith, “Who will buy this slave from me?” indicate that he was offering him to the highest bidder so that the needs of the bankrupt man for whom he was selling him could be met. (Fath al-Bari)
- ‘Ataa’ said: I met some people who saw nothing wrong with selling booty to the highest bidder. (Narrated by al-Bukhari in Kitaab al-Buyoo’ (the book of sales), Baab bay’ al-Muzaayadah (Chapter: selling by auction))
The Kuwaiti Encyclopedia of Fiqh reads: “The scholars excluded the sale by auction from the category of overriding a sale transaction. It means that the commodity is put up for sale and the potential buyers offer their prices until the seller accepts one offer (the highest price). This sale transaction is valid according to the consensus of Muslims. The Hanbalis underlined the permissibility of such a transaction and declared it a valid transaction and did not regard it to be disliked. The Shafi‘is stipulated that there must not be an intention of harming others and that the intention of buying the commodity must be present; otherwise, offering a higher price in this situation would be unlawful because it falls under the category of Najsh. [see below for definition]”
[However,] a man outbidding his brother… is forbidden according to the hadith of Abu Hurayrah (رضي الله عنه): “The Messenger of Allah (صلى الله عليه و سلم) forbade a city-dweller to sell to a Bedouin, and he forbade us to inflate prices artificially and to outbid one another.” (Narrated by al-Bukhari and Muslim)
What is meant by this hadith is when the vendor and purchaser have come to an agreement and are bargaining over the price, and a third party comes and tempts the purchaser to cancel the transaction. But this does not apply to auctions, because in an auction it is the vendor who cancels the transaction by asking who will offer more; the people who are present at an auction are already involved, and everyone is aware that anyone may increase the price.
[Most importantly,] the warning against engaging in najsh (artificially inflating prices with a fraudulent intention). In Arabic, the word ‘najsh’ means provoking, and is also used to refer to the action of prodding a bird to enter a trap. It refers to pushing the purchaser to fall into the vendor’s trap so that he buys at an inflated price. This is achieved by having another man attend the auction and make bids without wanting to buy, in order to raise the price. Whether this is done by agreement with the vendor or not, it is prohibited by the hadith, “The Messenger of Allah (صلى الله عليه و سلم) forbade artificial inflation of prices.” (Narrated by al-Bukhari and Muslim)
[As for internet auctions, some websites charge a small fee/deposit like subscription or price of bidding token for every bid from the bidders, such a] method …is forbidden and it does not fall under the lawful auction sale, since the money is paid for subscription, not for obtaining information. Moreover, [if] the paid money is not returned to the person who is not the highest bidder, this is a sort of gambling because the sale involves inevitable loss for potential gain. Indeed, this is the essence of gambling. In the resolution of the Islamic Fiqh Academy, when listing the conditions of the permissibility of sale by auction, it is stated: “Requiring a deposit from those wishing to enter the auction sale is permissible. The deposit must be returned to all the bidders who did not win the auction and it must be deducted from the selling price for the highest bidder.” [Furthermore,] the Decision of the Islamic Fiqh Academy about auction sale reads: “It is permissible in Shari’ah to charge admission fee (to the auction) – which is the price of the terms and conditions brochure – provided it is not more than its actual cost.”
Moreover, it should be noted that sale on the internet is permissible on condition that it meets the sale’s requirements and conditions. The sale’s requirements include offer and acceptance between the seller and the buyer on the item to be sold for the price suggested. The conditions are: the item should be lawful, pure, of benefit and possessed by the seller who is able to deliver it to the buyer. The item should be known by seeing it, or fully describing it in a manner that shows its quantity, type and other features, which leave no room for uncertainty.
(The above reply is based on the following resources:
- Islamweb.net, a web site belonging to the Ministry of Awqaf and Islamic Affairs in the State of Qatar
- Various answers provided by Shaykh Muhammad Saalih al-Munajjid on similar topics)
Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.