#403: The Authorities Set the Price of Goods

Question:

Assalamualaikum ustaz. Is it permissible to put a high price and gain a lot of profit and is it permissible for the authorities or rulers to set the price for goods?

Answer:

Waalaikumussalam wrt. wbt.,

Alhamdulillah, praise and gratitude to Allah SWT for His countless blessings for us all. Praise and salutations to our beloved Prophet Muhammad PBUH, his family, companions, and all those who follow his footsteps until the Final day.

Basically, Islam doesn’t set a specific value or amount for profit in business. However, when it involves deception, oppressing others and excessively high prices for basic necessities, hence there the fiqh discusses the rights of khiyar (the choice of cancelling the akad) for the party that was deceived. In the following we state several examples according to the book al-Fiqh al-Manhaji[1] regarding the activity of wrongful price manipulation:

  • Talaqqi al-Rukban (intercepting traders): A trader who intercepts other traders that are travelling to his region. He deceives them saying that the stocks for the goods they are going to sell are in excess in his region and they are sold at a low price. The trader acts this way because his purpose is to buy the goods at a lower price than the original. The trade is valid but prohibited for there are elements of deception. When the outside trader arrives at the region to do business and learn the real market price as well as realise that they have been deceived (maghbunun), they have a right to demand a khiyar and cancel the previous trade. Narrated by Abu Hurairah RA, he said:


أَنَّ النَّبِىَّ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ نَهَى أَنْ يُتَلَقَّى جَلَبُ فَإِنْ تَلَقَّاهُ إِنْسَانٌ فَابْتَاعَهُ فَصَاحِبُ السِّلْعَةِ فِيهَا بِالْخِيَارِ إِذَا وَرَدَ السُّوقَ

“The Prophet (ﷺ) prohibited meeting the goods being brought (to the market). If someone were to meet them and buy them, then the owner of the goods retains the option when he reaches the market.” [2]

  • Ihtikar. It means buying the goods listed as basic food from the market during it time when it is desperately needed by consumers. The goods are then gathered and hidden for the purpose of increasing the price by several folds and then it is sold little by little exploiting the needs of the people. This is a prohibited act based on the hadith of the Prophet PBUH:

لاَ يَحتَكِرُ إِلاَّ خَاطِئٌ

“None withholds goods till the price rises but a sinner.” [3]

If there are a lot of people who are in need of basic food or it becomes a state of emergency, the person who is monopolizing the goods can be forced (by the rulers or authorities) to sell the goods at a reasonable price. If he refuses, a judge can sell the goods on his behalf and the profits are returned to him.

The permissibility for a ruler to set the price of goods

If there is an increment for the basic needs of society, is it permissible for the ruler to control or set the price of goods? There is a hadith narrated from Anas bin Malik RA, he said:


غَلَا السِّعْرُ عَلَى عَهْدِ رَسُولِ اللَّهِ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ فَقَالُوا يَا رَسُولَ اللَّهِ سَعِّرْ لَنَا فَقَالَ إِنَّ اللَّهَ هُوَ الْمُسَعِّرُ الْقَابِضُ الْبَاسِطُ الرَّزَّاقُ وَإِنِّي لَأَرْجُو أَنْ أَلْقَى رَبِّي وَلَيْسَ أَحَدٌ مِنْكُمْ يَطْلُبُنِي بِمَظْلِمَةٍ فِي دَمٍ وَلَا مَالٍ

“Prices became excessive during the time of the Messenger of Allah (ﷺ), so they said: ‘O Messenger of Allah! Set prices for us!’ So, he said: ‘Indeed Allah is Al-Musa’ir, Al-Qabid, Al-Basir, Ar-Razzaq. And I am hopeful that I meet my Lord and none of you is seeking (recompense from) me for an injustice involving blood or wealth.'” [4]

Syeikh Muhammad al-Zuhaili states: This hadith is evidence that it is prohibited for a ruler to set the price of goods according to the final opinion of the madhhab. A weak opinion states that it is permissible for a ruler to set the price of food during the times of ghala’ (turmoil). If the ruler set the price of goods and the sellers refuse to obey the ruler, then it is permissible for the ruler to sentence him with ta’zir. However, the ruling for the trade is sahih according to the asah (more sahih) opinion. [5]

Syeikh Muhammad Taqi Uthmani said: “Indeed tas’ir (setting the price of goods) cannot be implemented, except in extraordinary situations when people are in desperate situations due to excessively high price and people are in great need of them such as for food, drink and clothing. If it isn’t any of such situations, then the original ruling is to let the seller and consumer perform trade according to what they agreed on. Apparently, if there isn’t any ihtikar (monopolizing of goods) and there isn’t any price-fixing by cartel goods, [6], hence, this opens the opportunity for free competition in the market that sellers aren’t able to increase the price of goods more than the market price. Even if there is an increment, the vagueness is removed. Thus, setting the price of goods isn’t necessary.[7]

Syeikh Yusuf al-Qaradawi in his book al-Halal wa al-Haram fi al-Islam stated, that this hadith emphasized that interfering with the freedom of the affairs of an individual without any need is an oppressive act, where the Prophet PBUH wants to meet Allah SWT in the future where he is free from any oppressive acts. However, when interference in the market occurred and it is abnormal such as when there is an activity of hiding goods by some traders or price-fixing in the market, then at this time the benefit of the general public is prioritized over the freedom of an individual. At this time, it is permissible to set the price of goods to fulfil the needs of the general public. Furthermore, this is also to protect them from the greedy oppressors by doing something that contradicts their meaning and purpose that has been set by the methodology and usul. [8]

Abu Walid al-Baji stated that the setting of the price for goods by a ruler is to protect and maintain the well-being of both consumers and traders. It means, that if the price of goods isn’t set at a certain amount, then it will harm the general public. [9]

Syeikh al-Islam Taqiyuddin Abu al-Abbas Ibn Taimiyah stated: From here, it is clear that oppressive price isn’t permissible and fair price is permissible. It is prohibited to set the price of goods if there is elements of oppression towards others and forcing them to buy something violating their rights of buying something at the price he agreed to pay or preventing them from something that Allah has made halal for them. When setting the price of goods contains elements of fairness, such as forcing sellers to sell their goods at a fair price and preventing them from increasing the price excessively, then it is permissible. It is even obligatory. [10]

Ibn al-Qayyim also stated its permissibility in order to attain the fairness that is obligated by Allah SWT to be implemented. In other words, Ibn Qayyim said, setting the price for goods is an obligation in order the protect the wellbeing of people and if there isn’t any other way to prevent harm except by setting the price for goods. [11]

Imam Abu Ishak al-Syirazi stated in al-Muhazzab[12]: “Whoever buys goods, then it is permissible for him to sell it at the price he bought it, at a lower or higher price, according to the hadith from ‘Ubadah bin Samit, the Prophet PBUH said:

فإذا اخْتَلَفَتْ هذِه الأصْنافُ، فَبِيعُوا كيفَ شِئْتُمْ

“If these classes differ, sell as you wish if payment is made on the spot.” [13]

Hence, Imam al-Ghazali explained in his book Ihya al-Ulum al-Din[14] that the original ruling of ghabn (disguising the pricing in trade). The reason is the purpose of the trade itself is profit, which involves ghabn, even if it is a little. He said some scholars limit profit to one third of the price of the good, if more than that, then khiyar is permissible, however, it is not the opinion of madhhab al-Syafie. It is just an ihsan limit. However, this permissibility is on the condition that there isn’t any oppression and deception.

However, if the goods are not necessary goods and don’t involve oppression and price monopoly, then it is permissible to set the price as the seller wanted. This is strengthened by two facts from the action of Rasullullah PBUH and his companions:

  • From `Urwah Ibn al-Ja`d al-Bariqi RA he was given one dinar by Rasullullah PBUH to buy a goat. ‘Urwah then managed to buy two goats and sold one of them for one dinar, making the profit 100%! When he gives it back to the Prophet PBUH, the Prophet PBUH was happy and supplicated blessings for him. Due to the supplication, when he went to trade in the market, he was successful in generating up to 40,000 dinars in profit. [15]
  • Al-Zubair bin al-`Awwam RA once bought a plot of land in the jungle at the price of 170,000 dirhams, afterwards, his son Abdullah RA sold it after the death of al-Zubari at a price of 1,600,000 dirhams. The total is 9 times the original price. [16]

Conclusion

To conclude, we state that making several folds in profit in trade is permissible as long as it doesn’t lead to oppression and abuse. The reason is the characteristic of profit itself is relative and cannot be absolutely compared with the market price after the cost of the seller is deducted to get the net profit.

We are also inclined toward the opinion that states in desperate situations, a ruler is permissible to set the price for the necessities such as food, drink and other necessities in life. If such situations don’t occur, then the original ruling is to just let the seller and consumer trade as they like. However, we’d also like to advise the sellers to increase their charity in purifying the wealth obtained as stated by Rasullullah PBUH:

يَا مَعْشَرَ التُّجَّارِ إِنَّ الشَّيْطَانَ وَالإِثْمَ يَحْضُرَانِ البَيْعَ فَشُوبُوا بَيْعَكُمْ بِالصَّدَقَةِ

“’O people of trade! Indeed, the Shaitan and sin are present in the sale, so mix your sales with charity.'” [17]

Syeikh Syams al-Haqq al-‘Adzim Abadi in his commentary said: Usually, in trade, there is unbeneficial speech. It is also said that in trade, there are words spoken mindlessly and useless such as the chirping of birds. Hence, purify this trade with charity, for this could prevent the wrath of Allah SWT. [18]

For our final advice, we end with a hadith narrated by Jabir bin Abdullah R.Anhuma, where the Prophet PBUH said:

رَحِمَ اللهُ عَبْدًا سَمْحًا إِذَا بَاعَ , سَمْحًا إِذَا اشْتَرَى سَمْحًا إِذَا اقْتَضَى

“May Allah have mercy on a person who is lenient when he sells, lenient when he buys, and lenient when he asks for payment. “ [19]

Badr al-Din al-‘Aini in his commentary said: In this hadith, it calls us to be lenient in our muamalah and to have good character as well as avoid stinginess in trade. The reason is there are blessings in trade. The Prophet PBUH didn’t invite his ummah except in matters that are beneficial for his ummah in the affairs of the hereafter and this world. While, for the benefits in the hereafter, the Prophet PBUH supplicated blessings and forgiveness for those who do good in trade. Thus, whoever wishes to attain the supplication of the Prophet PBUH, then he should follow the instructions of the Prophet PBUH and practise them. [20]

Wallahu a’lam.

[1] See al-Fiqh al-Manhaji (6/42)

[2] Narrated by Muslim (1519)

[3] Narrated by Muslim (1605)

[4] Narrated by al-Tirmidzi (no.1235). He said this hadith is hasan sahih.

[5] See al-Mu`tamad fi al-Fiqh al-Syafie, 3/65-66

[6] Just like the rulers aren’t originally allowed to set the price for goods, sellers are also not allowed to conspire and sell the goods at a certain price. This is only when it doesn’t harm others.

[7] See Fiqh al-Buyu`, 2/1002

[8] See al-Halal wa al-Haram fi al-Islam, pg. 254

[9] See al-Muntaqa Syarh al-Muwataa’, 3/424

[10] See Majmu’ al-Fatawa, 28/76

[11] See Turuq al-Hukmiyyah, pg. 331 & 358

[12] See al-Muhazzab, 2/57

[13] Narrated by Muslim (1587)

[14] See Ihya al-Ulum al-Din, 2/79

[15] See Sahih al-Bukhari, hadith no. 3642

[16] See Sahih al-Bukhari, hadith no. 3129

[17] Narrated by al-Tirmidzi (1208). Imam al-Tirmidzi evaluated this hadith with a hasan sahih sanad.

[18] See Aun al-Ma’bud Syarh Sunan Abi Dawud, 9/125

[19] Narrated by al-Bukhari (2076), al-Tirmidzi (1320), Ibn Majah (2203) dan Ahmad (14699)

[20] See ‘Umdah al-Qari Syarh Sahih al-Bukhari, 11/189

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