Saturday, September 29, 2012

Q&A: On Price Fixing by Sheikh Ata' Abu Rashta

The following is the translation of an Arabic Q&A from the website of Sheikh Ata' Abu Rashta.  

Question: We know that it is forbidden for the ruler to fix the price of commodities for the people because the Prophet (saw) said: "Indeed Allah is the Creator, the Restrainer, the Reliever, the Provider and the One Who fixes the prices, I wish to meet Allah in such a state that nobody claims that I have done any wrong to him either in his blood or his money" as narrated by Ahmad. He (saw) also said: "Whoever strives to increase the cost (of products) for Muslims, Allah, the Exalted, will seat him in the center of the Fire on the Day of Resurrection." narrated by Ahmad.

Hence the question is: if some traders in any region fix the price of any commodity, for instance the rice traders assembled and agreed among themselves upon selling the rice to the people (other) traders on a fixed price; so in such a case, fixing the price of this commodity with the traders' mutual consensus shall be considered Haram (forbidden), or the forbidden is to fix the price by the State only and not the mutual agreement of traders to fix the price of a commodity?

Answer: The reason is clear from the second hadith and if the reason exists, the rule will be applied… So, if the traders' agreement is aimed at increasing the price, they will be included in the prohibition. However, if their agreement is for the sake of preventing speculations, and organizing the system of trade in such a way that no vendor is able to conceal his goods, for example, to sell it on a higher price and leave the rest of the traders to sell, without exhibiting his own products i.e. he monopolizes it and then sells it at the time of deficiency. So, in such a state, the traders are not prohibited to organize the system of trade. However, the meeting and mutual agreement of merchants on a certain price is most likely to increase the price, particularly if they are wholesale dealers of such products, which are not sold by other than them. Therefore, their agreement in this case, even if it does not result in increasing the price of the commodity but there is all probability that it may happen, comes under "means to Haram is Haram". Hence, their participation in fixing the price of commodity leading to its increment, even if it does not happen categorically but it is most likely to do so. And the high possibility is enough here and therefore I believe that the traders' agreement on fixing the price of a commodity is not permissible. Rather, this matter should be left to the market rate, leading to fixation of the prices by every trader according to his conditions. In such a scenario, the things will be easy for the people and market will be away from the high price.

In this matter, I admire what was mentioned in the book of Legal System by Ibn Qayyim Al-Jauziyah under the chapter "chapter concerning the dealers who deal in the real estate etc on rent" as it was stated:

"And for this reason: many scholars such as Abu Hanifa and his companions forbid the dealers who deal in the real estate etc on rent: from entering into partnership with each other, for the reason that if they enter into partnership – and people are in need of them – they increase the charges on them.

I said: the price control administrative official should also forbid those who wash the deceased and carry them from participation for the reason of increasing the charges on them besides forbidding the partaking of any group whose benefit may be needed by the people…" (Concluded)

28th Dhu'l-Hijjah, 1432 AH. 
24th November, 2011 CE. 

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