Is there a specific limit on a merchant's profit? And when is it permissible for the state to set prices for goods?
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The questioner : ... .
The Shaykh : If you mean by this question something other than the first question.
The questioner : Yes...
The Shaykh : This is it, so I say: There is nothing in the Shari'ah that orders a merchant to earn a fixed, limited profit. Therefore, any merchant may earn as much as he wishes, within the limits of not being unjust to the people who need to buy goods from him. I said earlier that price-setting by the state is not permissible except under certain circumstances. One of these circumstances is when greed takes hold of merchants and it becomes apparent that they are monopolizing the raising of prices. In this case, the state may intervene and impose a limited, reasonable price. However, under normal circumstances, no one may set prices, and there is no fixed profit, because it is inconceivable to impose a fixed profit. It is not reasonable to set a fixed percentage of profit for the goods that are sold. There are things sold by the ton every day, and there are things that are not sold except once or twice a month, such as food and drink items like vegetables and fruits, and so on. These are sold every day by the qinatis (large baskets). But for example... and the like, these are not sold in such quantities. Therefore, it is inconceivable to establish a principle of price fixing, for Allah the Exalted is the One who sets prices. However, the Muslim must fear Allah the Exalted and be merciful to the believers, and not exaggerate in prices. For this reason, the Wise Lawgiver has forbidden hoarding, because hoarding goods helps the hoarder to exaggerate in their price. And... hoarding is forbidden. But when there is no hoarding, and the goods are, so to speak, common among all people who buy and sell them, then there is no fixed price for profit. This means... other than that.
The Shaykh : If you mean by this question something other than the first question.
The questioner : Yes...
The Shaykh : This is it, so I say: There is nothing in the Shari'ah that orders a merchant to earn a fixed, limited profit. Therefore, any merchant may earn as much as he wishes, within the limits of not being unjust to the people who need to buy goods from him. I said earlier that price-setting by the state is not permissible except under certain circumstances. One of these circumstances is when greed takes hold of merchants and it becomes apparent that they are monopolizing the raising of prices. In this case, the state may intervene and impose a limited, reasonable price. However, under normal circumstances, no one may set prices, and there is no fixed profit, because it is inconceivable to impose a fixed profit. It is not reasonable to set a fixed percentage of profit for the goods that are sold. There are things sold by the ton every day, and there are things that are not sold except once or twice a month, such as food and drink items like vegetables and fruits, and so on. These are sold every day by the qinatis (large baskets). But for example... and the like, these are not sold in such quantities. Therefore, it is inconceivable to establish a principle of price fixing, for Allah the Exalted is the One who sets prices. However, the Muslim must fear Allah the Exalted and be merciful to the believers, and not exaggerate in prices. For this reason, the Wise Lawgiver has forbidden hoarding, because hoarding goods helps the hoarder to exaggerate in their price. And... hoarding is forbidden. But when there is no hoarding, and the goods are, so to speak, common among all people who buy and sell them, then there is no fixed price for profit. This means... other than that.