Prophetic prohibition against economic monopolies

Monopoly, orIhtikaarin Arabic, is a prohibited practice in Islam
because it leads to injustice. The Prophet Muhammadhas made explicit
and specific statements about it. For example, he said:"Whoever
withholds food )in order to raise its price(, has certainly
erred!"]Muslim[ Also:"Whoever strives to increase the cost )of
products( for Muslims, Allaah, the Exalted, will seat him in the
center of the Fire on the Day of Resurrection."]Ahmad and al-Haakim[
Mu'aathsaid that he heard the Messenger of Allaahsaying:"What an evil
person is the one who withholds! If Allaah causes the prices to drop,
he would be saddened, and if He causes them to climb, he would be
excited."]Al-Bayhaqi[ There are also Hadeeths that prohibit buying
goods from trade caravans before reaching the city,and traditions that
prohibit selling goods to persons unfamiliar with the market. These
are types of monopolistic practices that have known negative effects
upon the economic infrastructure.
As to buying goods from trade caravan merchants )who are unaware of
current prices in the market(, this is most analogous to what is known
today as a "special monopolistic pact," under which consumers,
typically, are harmed most.
As for selling goods to persons unfamiliar with the market, this works
to create special markets in which the seller or supplier utilizes the
consumer's lack of knowledge of the market and prices to his own end.
Ibn Hajar al-Haythamisaid:"It is said the reason this type of
transaction is prohibited )i.e., buying goods from trade caravans( is
the concern that the buyer will withhold the goods he purchases from
others, and thereafter treat them unfairly and make it difficult for
them."
The jurists are at variance as to what a monopoly includes. Is it
specific to foods, or does it include everything?
The majority opinion, which is also most in line with the aims
)maqaasid( of the Sharee'ah, is that the prohibited monopoly is one
that inflicts harm on people and makes it difficult for them with the
monopolist's intention to sell when prices soar, and at the highest
possible price. Whoever does this would be considered a monopolist,
and his deed is unlawful.
Imam Maaliksaid:"Monopolyoccurs in everything, including food
products, jute, woolen or safflower products and the like; whatever,
if withheld, would harm people, the withholder should be prevented
from so doing, but if he is not harming )consumers( or their commerce,
there is nothing wrong with it.
Imaam Yahya an-Nawawisaid:"The wisdom behind prohibiting monopolistic
practices is to prevent the harm that would befall people as a result.
Scholars are in agreement that if a person possesses items that people
are in dire need of, and they can not find anyone elseto supply it, he
is to be forced to sell it in order to lessen the harm and remove
difficulty from people."
Dr. Robi has clarified the conditions of the prohibited monopoly. He
said:"After readingthrough judicial economic writings, we can conclude
that the conditions of the prohibited monopoly according to the
jurists' are as follows:
Increasing the price
Many traditions underline that the aim of the one who withholds is to
increase the price.This can be understood from an economic
perspective, since it is not feasible for withholder to undergo loss
in order to purchase and store the product while part of it perishes
besides the fact that he used his capital to purchase the products to
later on sell it at the same price! This individual increases the
price when people are in need of the product.
As for one who stores some products, to make them availableat a time
of need, and makes a small profit by increasing the prices, without
harming the people; this person would indeedhave brought about a good
service to others.
This is, therefore, a form of permitted monopoly. Thus increasing
prices of goods is not harmful in itself. In fact, prices of a product
usually fluctuate during normal times, and may change from day to day,
and can increase to meet normal inflationthat is typical for the
particular community the trading takes place in.
Monopolistic practice, on the other hand, manipulates a situation to
intentionally increaseprices suddenly and drastically.
Decreasing supply sufficiently
A known method, by which prices are increased, is increasingdemand for
a product so that this demand exceeds its supply, or, conversely,
decreasing supply at a rate greater than the decreasing demand.
Naturally, in this case, it is not feasible for the one who withholds
the product to increase the supply, unless he decreases its cost, and
he defeatshis purpose in so doing. In such acase, he would not be able
to make a profit unless he reduces its supply partially or totally for
a period of time. The jurists differentiated various cases:
A. Controlling the supply of a product should not be confused with
decreasing the supply. Controlling supply, which is lawful and occurs
under normal circumstances, usually when products are readily
available, is beneficial to both consumer and supplier, as is the case
with agricultural goods.
B. Keeping stock for use should not be confused with stock kept for
retail. Considering the jurists' definition of monopoly, we find that
they restricted its meaning to buying products which are later
withheld, with the intentionof retailing them. Therefore, stocking
products for personal use is lawful, for it does not disrupt the
supply of the product or lead to price increases.
C. Large markets should not be confused with less important markets.
The reason monopolies are prohibited is due to the harmand dangers
that arise from them. Therefore, if withholding a product in a large
market would cause harm, it would be considered a prohibited monopoly.
D. Importing goods should not be confused with withdrawing goods from
the market. The majority of jurists agree that the importer of goods
from distant markets is not a monopolist, as long as he does not cause
harm. It is clear from the conditions of prohibited monopoly and
textual proofs in the Sharee'ah that monopolies of all sorts would
fallunder the same ruling, for the following reasons:
1.The traditions that mention prohibition of monopoly are general, and
no distinction is made therein between food products and animals.
2.The prohibition of the Messenger of Allaahregarding monopolies
relating tofoods is a ruling given to a common item which is
monopolized. It does not mean that it is the only item that a monopoly
is prohibited in, nor are the general traditions concerning this
restricted by those traditions mentioning the prohibition of the
Messengerin foods.
3.The reason monopolies are prohibited is the harm that arisesfrom
them; whenever this reasonis present in food monopolies or other
monopolies they are to be prevented.
4.Restricting monopolies to foods alone allows monopolies initems that
aid in their produce, such as fertilizers, agricultural machinery, and
animals. By right, monopolies in these items should also be disallowed
because they lead to monopolies in foods. In addition, present day
economic conditions are more complex, specializations have broadened,
work details have been divided, people are dependant upon others to
fulfill many of their needs, and new products have been invented,
which if not readily available cause disorder, and if monopolized
cause harm.
For this reason, Abu Yousef, the great Hanafi juristwas of theopinion
that monopolies of all sorts are prohibited, as long as they harm
people. In the language of present day economics it can be said that
it isnot lawful to play with supply of a necessary product which has
nosubstitute.
Examples of monopoly
Monopoly cannot be restrictively and exhaustively defined due to its
many types, but it is possible to cite some of the examples the
jurists mentioned when they talked about monopoly.
1.Monopolizing the production ofa product, whether individually or by
a group, so as to control pricing, supply, and competitive production.
2.Monopolizing certain services and trades, such that a certain group
has the arrogation of a monopole. Thus they can preventothers from
providing that service or trade, or they will not provide their
services, while the Ummah is in a dire need of them.
Ibn Taymiyyahsaid: "If people are in need of farmers, tailors, or
construction services, this work is compulsory upon them if the ruler
forces them to do so, after they refuse to accept reasonable charges
in lieu of their services. It is not lawful for them to ask for more
than that sum for their services."
He said: "Moreover, if people are accustomed ]or, have restricted
access[ to foods and other products being sold only by certain people,
in such a case it isa must that pricing be controlled,such that they
can only sell at reasonable cost."
Ibnul Qayyimsaid: "A horrid form of oppression is the renting out of
shops on the sides of roads, or in villages, for a certain price and
with the condition that no one sells a certain product except the one
who rents out theshops. This oppression is prohibited upon the one who
rents the shop out and upon the one who rents it....So too ]is
theirprohibition[ when people are habituated to foods or other
products being sold only by certain people, and wholesalers sell only
to them, and these wholesalers then sell the products in retail at
their own prices, while anyone besides them who sells these products
are punished and prevented fromdoing so. This indeed is oppression and
corruption whichhas spread in the lands."
Some researchers have commented on this passage saying: "The matter
which Ibn al-Qayyim is considering here is exclusive commercial or
business representation, which is commonin Islamic countries."
3.Agreed monopoly, wherein buyers or sellers agree to monopolize an
industry. Ibnul Qayyimsaid:"Many scholars, such as Abu Haneefah and
his companions, have disallowed those who divide real estate and other
things for a fee, to unite under a coalition ]or cartel[, for if they
do so, and people are in need of their services, they will increase
their rate."Ibn Taymiyyahsaid:"'Also, buyers should be prevented from
agreeing to purchase what one of them purchases until nothing is left
in the market."Ad-Dusooqi,the Maliki juristdescribes another form of
price-fixing that occurs in auctions:"It is not lawful for a buyer to
secretly agree with others not to raise the price of a product for him
in an auction."

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