Does Islam permit bidding in auctions?

Question

Praise be to Allah.

Firstly:

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 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
(peace and
blessings of Allaah be upon him) took the slave and said, “Who will buy this slave
from me?” Nu’aym ibn ‘Abd-Allaah bought him, and he (the Prophet
(peace
and blessings of Allaah be upon him) handed the slave over to him.

Jaabir 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
(peace and
blessings of Allaah be upon him) took the slave and said, “Who will buy this slave
from me?” Nu’aym ibn ‘Abd-Allaah bought him, and he (the Prophet
(peace
and blessings of Allaah be upon him) handed the slave over to him.

Ibn Hajar said: Ibn Battaal replied that the words of
the Prophet
(peace and blessings of Allaah be upon him) in this hadeeth, “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.

2. ‘Ataa’ said: I met some people who saw
nothing wrong with selling booty to the highest bidder. (Narrated by al-Bukhaari in Kitaab
al-Buyoo’ (the book of sales), Baab bay’ al-Muzaayadah (Chapter:
selling by auction)).

Secondly:

Rational evidence:

In an auction, the vendor offers his goods for sale, and the purchaser
offers to buy them for a certain price. If the vendor does not accept that price, that is
the end of the matter and there is no transaction. The he will say, “Who will offer
more?” A second purchaser can then offer a higher price, and so on.

In this case, each offer is a separate and independent deal, and there
is nothing wrong with that.

Thirdly:

Some scholars, such as al-Oozaa’i and Ishaaq ibn Raahawayh, said
that auctions can be used only to sell booty and inherited goods. Their evidence was the
following hadeeth:

“The Messenger of Allaah
(peace and blessings of Allaah be upon
him) forbade anyone of you from seeking to outbid one another, except in the case of booty
and inherited goods.”

(Narrated by Ahmad, 5398; al-Daaraqutni, 3/11; al-Bayhaqi, 5/344;
al-Tabaraani in al-Awsat, 8/198).

The response to the view is:

The hadeeth is weak, because it includes ‘Abd-Allaah ibn
Lahee’ah.

The hadeeth of Jaabir is general, and the ruling remains general in
application.

Hence Imaam al-Tirmidhi said:

On the basis of the hadeeth of Jaabir, some scholars did not see
anything wrong with selling booty or inherited goods to the highest bidder.

Ibn al-‘Arabi (may Allaah have mercy on him) said:

There is no point on restricting auctions only to these two kinds of
goods. There is no difference between these goods and others; they are all the same.

(See Fath al-Baari, 4/354).

Fourthly:

Some scholars, including Ibraaheem al-Nakha’i, regarded this kind
of sale as makrooh. Their evidence was the hadeeth of Sufyaan ibn Wahb:

“I heard the Messenger of Allaah
(peace and blessings of Allaah
be upon him) forbid selling by auction.”

Response:

The hadeeth was narrated by al-Bazzaar, but it is weak, because it
includes Ibn Lahee’ah.

The hadeeth was narrated by al-Bazzaar, but it is weak, because it
includes Ibn Lahee’ah.

It is contradicted by reports which are more sound, as we have stated
above.

Fifthly:

There is no contradiction between auctions and a man outbidding his
brother, which is forbidden according to the hadeeth of Abu Hurayrah: “The Messenger
of Allaah
(peace and blessings of Allaah be upon him) forbade a city-dweller to sell to a
Bedouin, and he forbade us to inflate prices artificially and to outbid one another.”

What is meant by this hadeeth 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.

Sixthly:

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 hadeeth, “The Messenger of Allaah
(peace and blessings of
Allaah be upon him) forbade artificial inflation of prices.”

In conclusion: auctions are one of the types of sale
that are permitted according to Islamic sharee’ah. This is also the consensus of the
Muslims in their marketplaces.