Ruling on Price Fixing and Regulation

Authored by Dr. Muhammad Zia-ur-Rahman Azmi (رحمه الله)

Types of Price Fixing:​

Price regulation or fixing can be classified into two categories based on its circumstances:

1. Price Fixing Due to Injustice or Hoarding:​

If authorities intervene to set prices due to unfair practices, such as hoarding or exploiting market conditions, this type of price regulation is permissible.

• Reason for Permissibility:
  
  • It ensures fairness in the market and protects consumers from harm caused by unethical behavior.
  • The Prophet (ﷺ) said:
    "Only a sinner hoards goods."
    (Sunan Abi Dawood, Hadith No. 3447)
  • When someone deliberately engages in hoarding or price manipulation, it becomes necessary for authorities to intervene and set a fair price.
• Guideline for Authorities:
  
  • The intervention should allow the seller a reasonable profit without exploiting buyers.

2. Price Fixing Without Injustice:​

If price increases are due to natural causes, such as scarcity of goods or other market dynamics beyond human control, price regulation is not permissible.

• Example from the Prophetic Era:
  • When prices rose during the Prophet’s (ﷺ) time, people requested him to fix prices. He responded:
    "Indeed, Allah is the one who sets prices, grants provision, and constrains provision. I hope to meet Allah without anyone having any claim against me for an injustice in matters of wealth or blood."
    (Sunan Abi Dawood, Hadith No. 3451; Sunan al-Tirmidhi, Hadith No. 1314; Sunan Ibn Majah, Hadith No. 2200)
  • The Prophet (ﷺ) refrained from fixing prices because the increase was not due to human wrongdoing but rather natural economic factors.

Summary of Rulings:​

1. Permissible Price Fixing:
   
   • If price regulation aims to eliminate injustice, such as hoarding or price manipulation, it is allowed.
2. Impermissible Price Fixing:
   
   • If prices have risen due to natural causes and not due to human injustice, fixing prices would itself be an injustice and is therefore prohibited.

—Referenced from Ibn Uthaymeen: Noor ‘Ala al-Darb, Vol. 10, Pg. 254.

Conclusion:​

Price fixing is context-dependent in Islam:

• Allowed: To address market injustice.
• Prohibited: When caused by natural market dynamics without human interference.