[Extract from Preface of Islam and Business Ethics by Dr S M Hasanuzzaman,
published by the Institute of Islamic Banking and Insurance, London, UK 2003]

‘When we say that prices must be just, or fair, does this justice or fairness involve a moral value? Wholesale prices for all the dealers are almost the same. Can we then justify price variations at different centres? In Islamic law, if anybody charges an extraordinarily high price, it is termed as grave deception and is unacceptable. The Ottoman Code of Civil Law defines grave deception as higher than 5% (profit) on goods, 10% on animals and 20% on immovable property. The concept lays down the rate of profit but not the sale price. As a matter of fact, the wholesale price alone does not determine the sale price. It is determined by locality, standard of intramural decoration, packing, service, environment and other overhead costs. A trader has to add all the incurred and accrued expenses to the wholesale price, in addition to a profit for himself/herself. What rate of profit he should charge is determined largely by market forces and the nature of the competition, given a normal or prevailing price. All this proves that the concept of a just price is not a moral concept except where monopolies or oligopolies arbitrarily fix an unrealistically high price quite out of proportion with costs.


Source : islamic-banking.com