Answered by Shaykh Amjad Rasheed
Are auctions permitted? When are they disliked?
Definition of Auction
An auction is when the seller offers his merchandise to a group of people, beginning with a certain price on the agreement that whoever pays more than this price and bids higher than the others will become the owner of the merchandise. This purpose of this form [of trade] is to make people desirous of buying [the merchandise].
Transfer of Ownership
One should note, however, that ownership of the merchandise is not transferred by the mere settling of the price. Rather, a spoken offer and acceptance must take place [between the buyer and the seller]. It is also permissible to follow the [weaker] position in our school that [ownership is transferred] when the buyer gives the known price to the seller without a verbal offer or acceptance.
When the price settles, the sale is not binding on either [the buyer or the seller]. Rather, each has the option of conducting the sale or abandoning it.
What is forbidden in auctions is for an attendee to bid up the price not because he wants to buy the merchandise but to make someone else pay a higher price. This is what is forbidden.
[Translated by Sidi Hamza Karamali]