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Monopoly and Monopolistic Markets

From: Encyclopaedia of Islamic Economics, Vol. II ( Volume II editor. Monzer Kahf) ,
pp. 97-105, (Chief eds. Abdelhamid Brahimi, and Khurshid Ahmad). Encyclopaedia of
Islamic Economics,London, 1430 AH/ 2009 AD

Muhammad Anas Al-Zarqa

Monopoly is a subject addressed by both classical Islamic Fiqh and modern
economics, with a historical hiatus of 700 to 1000 years. The "classical"
juristic views I refer to had been spelled out by 350H/961G, by the founders
of the four schools of fiqh and their major pupils. The most significant later
views are those of Ibn Taymiyyah (d. 728H/ 1328G) and his disciple and
advocate: Ibn al-Qayyim (d. 751H/ 1350 G).
This article approaches the subject not historically but analytically.
Section-I briefs non-economists on modern economic concepts on
monopoly; Section-II introduces concepts of monopoly in classical Islamic
fiqh; followed in Section-III by comparisons and integration of the diverse
views. Section-IV reviews five modern monopolistic situations from
economic-juristic perspective; finally Section-V presents general
conclusions
A question arises about the methodological soundness of comparing the
ideas of jurists and economists. For, jurists focus mainly on the normative,
what ought to be, i.e. is monopoly halaal (permissible) or haraam
(prohibited). In contrast, economists focus mainly on the positive, what is:
e.g. what are the causes and effects of monopoly. Nonetheless, we shall see
significant common ground between the two groups, validating a
comparison of some of their ideas.

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I- Main economic concepts on monopoly

Economists distinguish among different market types by major distinctive
characteristics, known as the market structure. Such structures differ in (1)
the concentration of providers/sellers; (2) their relative shares of the market;
(3) product characteristics (such as homogeneity or differentiation), and (4)
barriers to entry in the market. Special attention has been paid to two polar
cases:
- Pure competition, and
- Pure monopoly.
In addition, there is a wide range of markets which stand at various distances
from either pole. The most common are:
- Monopolistic competition (competition of the many), and
- Oligopoly (competition of the few).
Pure competition
Pure competition is a market structure assumed by economists to meet the
following requirements:
Condition 1: There must be so many sellers that each seller's share of the
market is so small that any change in one sellers sales or prices cannot
influence the market share or performance of competitors.
Condition 2: The products (services) offered by the different providers must
be so uniform that the buyer does not prefer one supplier to another. This is
the condition of product homogeneity.
Condition 3: Ease of entry and exit to the industry. The market must be fully
open to new entrants and provide for suppliers to withdraw at will.
Condition 4: Freely accessible information to potential buyers and sellers
about products, including supply (quantities), prices, and characteristics.
The prevalence of these conditions inevitably rules out any diversity of
prices and leads to a single market price at any given time. Moreover each
supplier is by necessity a price taker: has to accept the market price and in
no way can influence it. Any attempt by an individual seller to increase his
selling price will decrease in his sales to zero. This is expressed graphically
by drawing the demand curve facing any single seller as a horizontal line (of
infinite elasticity) cutting the price axis at the point of market price.

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Economists concede that pure competition is rare in the real world, because
its conditions are hard to prevail. They nonetheless have analyzed it
intensively because of its potential role, if realized, in boosting economic
efficiency and benefiting the consumer.
Competitive structure has also been adopted as the standard against which
the freedom and openness of markets are measured, and as an ideal to be
approached as far as possible in restructuring of non-competitive markets.
Actual markets that are somewhat close to pure competition are the
international markets of some commodities such as wheat, cotton and
cement. I say somewhat because there are some large buyers and sellers
whose decisions affect the market.
Pure monopoly
For a market to be labeled as pure monopolistic, it has to meet the two
following conditions:
- Condition 1: There must be a single supplier, and
- Condition 2: The product (service) provided has no close substitutes.
The first Condition implies the existence of barriers to entry. For, the
absence of such barriers leads to a multiplicity of suppliers.
Pure monopoly is quite rare without state protection.1 The most common
examples nowadays are in the fields of public utilities and municipal
services such as water, electricity, transportation and communications.
Technically speaking, as the supplier and the industry are one and the same
under pure monopoly, the demand curve facing the monopolist slopes
downward to the right. Unlike competitors in pure competition, a monopolist
can set the price of his product. He/she, however, has to accept the quantity
buyers are willing take at that price. Conversely, she can fix the quantity she
wants to produce (or supply) but has then to accept the price at which this
can quantity will sell.
Monopolistic competition
Both pure competition and monopoly are rare in the real world. Most
existing markets are median structures containing elements of both
1

Among the rare examples of pure monopoly are De Beers in South Africa ( in diamonds) and for
sometime Canadas International Nickel Company,(in nickel) .

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competition and monopoly. Two of the most prevalent in the real world are :
monopolistic competition and oligopoly.
In monopolistic competition:
- There are many suppliers each holding a small share of the market;
- Entry in the industry is easy,( because the minimum viable
investment is not large, etc.) , and
- There is product heterogeneity, i.e. real or perceived differences
among the products of different suppliers; so customers deem them
close but not full substitutes.
Difference among substitute products include quality differences ,both true
or perceived, brand name, packaging, sale terms and conditions, the time and
place where the product is supplied, and the suppliers conduct with the
customers.
Monopolistic competition is common in the retail industries, clothing,
food, furniture, fresh foods and home appliances. Medical, educational and
private services (e.g. haircutting) also fit under this market structure.
As product heterogeneity is a distinctive feature of this market type, its
meaning should be made more clear.
First: whether two products (or services) are similar or different is NOT in
the present context an objective fact that experts decide. Rather, it is
subjective, depending on customers' perception. For instance, two brands of
aspirin may in fact be medically identical (perfect substitutes), but if
consumers think they are different we count them economically as
heterogeneous
Second: What about a product - say a can of juice of a specific brand supplied by two sellers in two different places? Does it make any difference
if I buy it at a nearby modern supermarket, or at the old vegetable market ,
to which I may have to drive and forfeit a good deal of time. In addition, I
may miss the fragrances and soul-stirring melodies to which supermarkets
treat their customers! Thus circumstances surrounding the transactions lead
economists to treat the two identical cans as two close substitute but not
identical products, and may command different market price.

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It comes as no surprise then, that monopolistic competition is among the

most common market types throughout history.
Oligopoly
Oligopoly, also known as competition of the few, is closer to pure monopoly
than pure competition. It is characterized by:
- The relatively small number of producers/suppliers (each with a
substantial share of the market). Hence, each suppliers performance is
highly sensitive to the actions of his competitors. If, for instance, one
firm runs an aggressive promotion campaign, the others will immediately
feel it through the decline of their sales.
- The existence of barriers to entry, such as very large minimum capital,
special technical know-how or patents.
- Products/services in this market may either completely identical
(homogeneous) or slightly different but are still regarded as substitutes,
(e.g. car models).
- Differences in market shares of suppliers may be quite large.
Hence this market structure is the least uniform and most varied in terms of
possible outcomes.
Moreover in oligopolistic markets, "economies of scale" often obtain;
whereby average unit costs can be significantly reduced by increasing the
scale of output. If, however, demand is not large enough to absorb the
additional output, small scale producers will be driven out of the market and
only few large producers can survive.
Obviously, if markets as large as the United States or Germany can sustain
only a small number of car makers, steel producers or airlines, smaller
markets such as in Turkey, Egypt or Malaysia can sustain even fewer
players, sometimes only a single supplier, in the absence of significant
export opportunities. Economies of scale are a major factor that has led to
the rise of oligopoly in the big industrial countries, and is expected to
prompt a similar pattern in smaller countries, with a higher tendency towards
pure monopoly.
II- monopoly in classical Islamic fiqh

The legal texts:

The substantive source for this section is the Kuwaiti Juristic Encyclopedia (article
:Monopoly), Vol.1, pp. 90-95. Other sources have been acknowledged at appropriate
places.
2

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Numerous Prophetic traditions (adth) proscribe monopoly. One of them

was authenticated by Muslim (r.a.) in two versions: He who monopolizes is
a wrongdoer and only a wrongdoer monopolizes. No legal text however
defines outlawed monopoly, leaving the matter to juristic efforts of the
Companions and later scholars.
Two juristic tendencies
A survey of jurists views unveils two main tendencies with regard to
monopoly. The first, endorsed by the majority of jurists, restricts the scope
of outlawed monopoly ( henceforth I refer to it as : the restrictive, or the
majority or mainstream view). The second, a minority view, advocates a
wider scope for actions and situations that fall under outlawed monopoly.
All classical jurists seem intensely aware of the fact that both "legitimate
trade and productive activity" , and "outlawed monopoly" , involve a
similar buy-keep-sell cycle. Understandably, they went to great pains to
distinguish what they deem "outlawed monopoly", lest they prohibit
legitimate trading activities that Shariah not only permits but clearly
encourages.
Mainstream jurists restrict the scope of "outlawed monopoly"
These jurists include the three schools of Hanafis, Shafi'is and
Hanbalis. Their posture is well expressed in the Hanbalis definition of
monopoly as the buying of victuals and withholding them (from the market)
in anticipation of selling at higher prices. In explicating this definition,
jurists emphasize that: (A) the term victuals ( ) is more specific than
food (), and is confined to basic essential items which can sustain
humans for extended periods. Fruits and non-essential foods are not
victuals.
(B) Buying victuals for own consumption is not monopolistic, unlike
buying for trade when prices are high. (C) The definition also stipulates
buying as a requisite for monopolistic behavior. Thus saving the crops of
ones own farm is not monopolistic. (D) Importing victuals from outside
and withholding them for selling at higher prices is not monopolistic. This
stands to reason; for a sinful monopolist buys from the local market thus
putting town people in a straitened situation, while an importer increases
local supply if he sells, and doesn't reduce it if he withholds.
A Minority of jurists expands the scope of "outlawed monopoly"

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The Mlikis generally, Abu Yusuf from among the Hanafis, and Ibn
Taymiyyah from among the anbalis are a vocal minority who define
unlawful monopoly as: withholding commodities in a way that harms the
public. As such, their definition includes not only withholding the products
bought from the local market, but also those imported or saved from ones
own produce beyond ones familys needs. Besides, the scope of unlawful
monopoly is not restricted to victuals or even food products, but extends to
any product whose withholding is assessed as harmful to the general public.
Ibn Taymiyyah and his disciple Ibn Al-Qayyim, both late anbali jurists,
adopted this expansionist view. They also drew attention to another type of
unlawful monopoly they termed labour monopoly (itikr al-amal);
whereby a group of artisans supplying a commodity/service (e.g. bakers or
carpenters) collude at a time of high demand to force higher wages. Abu
anifa also, though otherwise sharing the majority restrictive view,
disallows real estate surveyors ( ) to form a cartel, as they would
then force people to pay them more.
Characteristics of unlawful monopoly
Restrictionists and expansionists agree that for monopoly to be unlawful,
the purchase and withholding of products must put the general public in a
straitened situation. This happens when the monopolist buys at a time of
high prices for reselling when prices become still higher. Conversely, buying
products when they are plentiful and cheap, to sell them later when dear at
higher prices, is not unlawful monopoly, but a commendable act.3
The major difference between the majority restrictive and the minority
expansive views focuses on the commodities that may be subject to
monopoly ( victuals vs. any commodity ) not on actions deemed
monopolistic. Thus Imam Mlik, and Ab Ysuf in some reports, both
among the minority, do not regard withholding ones harvest or imported
products as monopolistic.4 However, Ibn Rushd, a prominent Mliki jurist,
deems the withholding of ones harvest in times of dearth an unlawful
monopoly.
Famine situations
Ibn Hazm , question No.1568; also Al-Nawawi, pp. 130-31; and imam Malik as in
footnote 8 below.
4
Al-Duri, p.290n.
3

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It is important to note that throughout this article, the discussion and all
juristic opinions are meant for normal situations. In case of famine or
impending starvation, all jurists agree explicitly that withholding food in
excess of one's family needs is prohibited. Public authority can then force
holders of excess food to sell it at normal prices, or to extend it as loan-inkind to be repaid later.
Monopoly of a class- of-goods (IHTIKAR al-sinf)
According to Ibn Al-Qayyim, this happens when the general public are
prevented from selling a certain class of goods, with trading exclusively
restricted to some people. Importers of such goods have to sell to the
exclusive buyers, who then set the prices at which they sell to the public.
Ibn Al-Qayyim condemns such behavior as mischief on earth and raininhibiting injustice.5 Abu Ishaq Al-Shatibi also prohibits restricting to
specific people the exclusive right to provide a particular job or service
(such as slaughtering animals).6 This type of monopoly has been condemned
and disallowed by expansionists and restrictionists alike.
Ibn Al-Qayyims strong condemnation of a-class-of-goods monopoly
reflects his perception that it is a grand sin. In modern economic terms, such
monopoly creates an unjustified barrier to entry into a particular
market/industry. Depriving people of freedom of entry to any market without
legitimate reason is thus a grand economic sin.
Ibn Al-Qayyim seems to be aware that occasionally such monopoly
may be inevitable. If so, he suggests state intervention, to fix prices
at normal levels", adding that ".. jurists are unanimous that suppliers
must then be restrained from buying and selling except at such
normal prices. A modern instance will be seen in the forthcoming
discussion about public utilities.
III- Comparisons and integration of views
The common denominator: Monopoly is outlawed for harm
Having highlighted the differences above, it is time to bring up the common
denominator not only among jurists but economists as well.

5
6

Ibn Al-Qayyim, Al-uruq al-akmah (p. 207), adopted from Ibn Taymiyyahs Al-isbah (pp. 24-25).
Al-Shib, Al-fatw: (p. 137). See also Al-Lounshirsis, 11/126-127.

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All jurists agree that for monopoly to be outlawed, it must lead to

tangible or potential harm to the general public. But what is meant by
that harm? And how significant should it be to lead to outlawing monopoly ?
The dual criteria for "outlawed monopoly" agreed by all jurists
Recall first the tripartite fiqh classification of products into necessities,
conveniences and supplements. For monopoly to be outlawed, two
conditions must obtain jointly:
(A) the product ( goods or services ) affected must be a necessity ( victuals,
in the majority view) ,or a major convenience ( in the minority view).
No classical jurist applied "outlawed monopoly" to supplements.7
(B) the monopolistic action must put the general public in a straitened
situation, by which jurists mean a significant increase in price. Or in
modern jargon, an increase in cost of living for the common people, in
whose budget the share of food and major conveniences is high. A
straitened situation may also include dearth of the products in question.
Jurists spelled out factors usually leading to a straitened situation, and
designated them as "conditions" for outlawing monopoly :8
Location: to take place in a town where a straitened situation can easily
arise. Many jurists noted that this is the case in Makkah, Al-Madinah and in
the remote towns at the boundaries of the state, where transportation is
irregular and local production may not be commensurate with the
population size. They noted further that this is not the case in Baghdad
and Al-Basrah, which are easily reached by ships.9
Timing: to buy and withhold at times of high prices and dearth, not at times
of plenty.10
Source: to obtain the products by buying from the local market, thus
reducing supply, not by own production or importation from outside.
Purpose: the products in question are bought for later trading, not for own
consumption or use.
An economist's view of the dual criteria
This may be gleaned from many juristic quotations. See for instance Qahtan Al-Doori ,
"Monopoly".
8
I skipped over minor differences among jurists in these conditions. See direct
explanatory quotation from Imam Malik in Al-Baaji explication of Muwatta Malik ,Jami
Al-Fqh Al-Islami ,bab al-Ihtikaar.
9
Direct quotation from Imam Ahmad Bin Hanbal is given in Sharh Sunan Abi Dawud by
al Azeem Abadi, Bab al-Ihtikaar.
10
Al-Nawawi, pp.130-31.
7

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Criterion (A) relates to market demand, and implies that it is price inelastic,
as is usual in necessities and major conveniences.
Criterion (B) relates to supply. The location condition implies that supply
has low or zero price elasticity in the short run. Under each of the other three
conditions, local supply is reduced (the supply curve shifts the left) by the
amount withheld by the monopolist.
The dual criteria thus obtain in a market with low price elasticity in both
demand and supply. Analytically, a given reduction in supply leads to higher
price increase the more inelastic the demand or the supply curves. Thus
when both are inelastic, price increases even more, putting the public in a
straitened situation.
Clearly, the jurists' logic is economically impeccable.
A comparison between jurists and economists concepts of monopoly
Classical jurists observed more than ten centuries ago a world where
productive units were small, numerous and generally competitive. Monopoly
then was largely the result of local commercial behavior, within regular
commercial activity.
The industrial revolution in the 18th Century brought economies of scale,
mass production, and persistent innovation, all connected with production,
giving rise to the non-competitive market structures analyzed by modern
economists.
Whereas classical jurists focused on commercial monopolistic actions
directed at socially important products, modern economists focus on market
structures that motivate and facilitate monopolistic producer behavior in
many kinds of products.
From an economists perspective, monopolistic decisions as regards
quantity, quality and selling price are mostly taken by the producers rather
than the vendors. The monopolistic policies espoused these days by many
pharmaceutical and computer software companies exemplify this.
What is a monopolistic institution?
To economists, a monopolistic institution is simply an institution
producing /selling any product in a market which is not purely competitive.
An institution that can select the price at which to sell, or whose actions can
influence the market price, is not purely competitive, but monopolistic to
some degree. This applies in different degrees to all market structures except
pure competition.

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To jurists, "outlawed monopoly" signified a particular behavior, in

circumstances likely to cause significant price increase of socially important
products.
Two modern legal approaches to restrain monopoly
Two legal approaches emerged in Western countries to maintain competition
and curtail unlawful monopoly: The "rule of reason" and the " per se" rule.
The rule of reason here refers to an appraisal of the positive and negative
economic ramifications of a particular monopolistic situation. It is then
permitted or disallowed based on the predominant outcome.
The per-se rule, postulates that certain market regulations must be accepted
for their own sake; i.e. without attempt on part of the court to weigh up their
economic benefits and costs. This is reminiscent of the famous juristic
principle of preventive restraint (sadd al-dhari): outlawing lawful
deeds when quite likely to lead to unlawful consequences.
The dual juristic criteria for outlawed monopoly seem closer to the "rule of
reason" approach. However Muslim jurists clearly took a "per se" approach
in emphatically disallowing:
(a) collusion among buyers or sellers in any market ( not elaborated on in
this article).
(b) formation of a cartel by real estate surveyors, and
(c) monopoly of a class- of-goods in any product.
It is fair to conclude that any realistic policy must use both approaches. A
good example can be seen in Articles 85 and 86 of the European Common
Markets regulations (The Treaty of Rome) 11:
Article 85 prohibits as unlawful competition,
[] all agreements between undertakings, decision by
associations of undertakings and concerted practices which may
affect trade between Member States and which have as their
11

Pass and Sparkes, p. 133.

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object or effect the prevention, restriction or distortion of

competition within the common market.
In other words, such practices are prohibited per se, without weighing
up their advantages and disadvantages.
Article 86 stipulates that, any abuse by one or more undertakings of a
dominant position within the common market, or in a substantial part
of it, shall be prohibited as incompatible with the common market in
so far as it may affect trade between Member States
Note that it is not the "dominant position" (i.e. the control of a
substantial share of the market) that is outlawed, but its abuse, which
definitely requires applying a rule of reason.12

IV- Some contemporary monopolistic situations

I review briefly now five contemporary market situations that have
monopolistic aspects.
The first two (patents, public utilities) are legal monopolies granted and
protected by a public authority and usually justified by the public interest.
The next two (monopolistic competition and oligopoly), enjoy no legal
protection but can arise from free market operations.
The fifth is a pernicious contemporary mutation of a-class-of-goods
monopoly.
1. Patents:
Patents give innovators temporary legal monopoly (often for 15 years)
on the use of their invention. This is usually justified by
socioeconomic importance of innovation, and the need to encourage

12

Pass and Sparkes, p. 133

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it by giving the innovator time to recover costs and make a profit

before competition catches up.13
Do patents meet the dual criteria for outlawed monopoly? One
can see that if the product patented is not socially important (i.e., not
a necessity or a major convenience), then the first criterion is missing,
and that particular patent monopoly is not objectionable.
If the product patented is socially important, it becomes an open
question. My conclusion is that a patent does not put the public in "a
straitened situation", nor does it close any prior advantages open to
society. Rather a patent usually opens new opportunities in
processes or products, hence does not meet the second criterion of
outlawed monopoly.14
Exceptional cases however may justify from Shariah point of view a
different approach. For instance, a new patented drug may protect
from or cure a dreadful disease. This may justify the state buying the
patent for a just price (high enough to encourage future innovators) ,
then availing it to the public at reasonable price. 15
2. Public Utilities:
In many cities around the world an exclusive license is given to only one
operator to provide certain municipal services (e.g. electricity, water, or

13

See more details in Vickers, pp. 4-5.

The International Fiqh Academy approved patents without addressing their monopolistic aspect
(Resolution no.43(5/5) ,on 15-12-1988).
14

15

An important partial alternative to patents, which where applicable is both more just
and more efficient, has been suggested by J.E. Stiglitz..

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sewage disposal). This is definitely a-class-of-goods monopoly which is

strongly prohibited unless justified.
The compelling justification is that this is a natural monopoly where the
total cost of one provider is much less than that of several providers
supplying the same market.16 This is due to the high initial investments
required for setting up a network and connecting to users. With
competition, there will be much socially wasteful duplication of
investments, which from Shariah point of view is a case of big israaf
(extravagance, or severe loss of efficiency). Thus we have here two
competing rules: Avoiding israaf or avoiding a-class-of-goods monopoly.
The lesser evil is to grant a legal monopoly to one provider and then
socially control the selling price and service terms. This is in line with the
earlier Ibn al-Qayyim suggestion regarding unavoidable monopoly of a
class- of-goods.
Important new developments in public utility economics and policy
uncovered novel ways to open competition in production, and to give all
producers the right to use the same monopolized network for a just
fee.17
3. Monopolistic Competition:
Is monopolistic competition objectionable according to classical
juristic criteria?
Such market structure is very common now, and must have been so
throughout history in large human settlements. This must have been
true in all large cities of the Muslim world such as Cairo, Baghdad
and Damascus, where tens or hundreds of artisans and traders
16
17

Sharkey, p. 603.
See Baumol for a lucid exposition of the case of electricity and telephone networks.
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provided goods and services which where close substitutes. No

classical jurist deemed such markets objectionable per se. For if a firm
in such market raised its price or withheld its supplies, close
substitutes are readily available, and the public faces no straitened
situation .
4. Oligopoly (Competition of the few)18
One can reach here the correct fiqh conclusion by posing a series of
questions about a given oligopoly,
(A) Is it legally protected, with no justification based on the
public interest?
(B) Is there collusion among the oligopolists?
If the answer to either question is affirmative, then it is an "outlawed
monopoly" per se regardless of the product or the effect on prices.
If however the answer to both questions is negative, then only we
pose a third question:
(C) Is the product or service socially important (a necessity or

high convenience)? If not, then the oligopoly as such is not

objectionable from fiqh point of view.
Even if the product is socially important, there is still no fiqh basis for
objection. But the public authority must keep a close watch lest the
oligopolists collude, or otherwise abuse their power.
Two useful analytical results are worth remembering here:
(1) The fewer the number of oligopolists the easier it is to collude,
and
For a different view, generally rejecting patents, oligopoly and monopolistic
competition, see: I.Y. Yusuf. For a well argued view that an Islamic market is a
"contestable market" ,see Mahboob. For a thorough discussion from Shariah point of
view of a draft law in Egypt to promote competition and prevent monopoly ,see
Muhammad Abdul Haleem Umar.
18

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(2) The larger that number, the closer that market approaches the
competitive ideal in price and quantity. Public policy can help
approach such ideal in several ways including:
(a) Encouraging an increase in the number of firms, if no
significant loss of efficiency is expected.
(b) Facilitating imports.
(c) Facilitating exports so more firms can survive.
5. Monopoly of a class- of-goods in developing countries
A modern mutation of this type of monopoly is now a common form of
corruption in developing countries. It is easy to see why.
For if the public authority wants to grant financial favor to someone, it can
get him paid from the public treasury. But this is a direct cost to the treasury,
and more importantly, faces legal and publicity hurdles. By granting that
someone a monopoly of some class-of-goods, the burden is stealthily
shifted to the general public by increasing their cost of living, in amount
equal to the above-average profits of the monopoly.
Granting such monopoly is often done in exchange for illegal favors,
outright bribe, or sharing in the fruits of that monopoly. To cover things up,
this type of corruption can infect the public licensing process, which is now
required to start any business. Many apply, only a few favorites get a
license, with the remaining applications still under consideration.
In another mutation, certain economic activities are publicly disallowed , but
a blind eye is turned to the lucky few who engage undisturbed in the
disallowed activities, while the prohibition is strictly enforced on others.
The socio-economic costs of this type of monopoly-cum-corruption go far
beyond increases in the cost of living to the public. Other high dynamic
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costs result from the corruption of economic incentives, diverting them

from productive pursuits that generate social value added, towards rent
seeking pursuits that are negative-sum games.
Ibn Taymiyyah and Ibn Al Qayyim, in their clear appreciation of the serious
impact of this type of monopoly have scored a pioneering insight both in
fiqh and economics.
V- General Conclusions
1. Islamic Shariah and modern economic theory both deem monopoly
undesirable and competition desirable. Shariah prohibited monopoly, and
supported that prohibition by other measures including protection of
freedom of entry to any market, and explicit prohibition of collusion
among sellers or buyers.
2. Trading, including the buying and withholding of goods for later sale, is
generally permissible. It becomes "outlawed monopoly" only if it meets
the two monopoly criteria, spelled out by jurists:
i. occurs in a good or service which is socially
important.
ii. Leads to significant harm to the general public.
What is deemed socially important is subject to ijtihaad (juristic
reasoning), and to changes in living conditions.
3. Freedom of entry into any market is a major Sharia requirement, and may
be curtailed only for clear public interest.
4. The concept of monopoly among economists is much wider than
outlawed monopoly" among classical jurists. Careful substantive case
by case consideration is required before declaring some modern market
structure or practice to be objectionable from fiqh point of view .
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5. Policies to implement Shariah rules relating to monopoly and markets

require deep knowledge of Shariah, economic analysis, and actual market
conditions. Such policies must also be informed by the accumulated
human experience of different countries in curbing monopoly and
promoting competition.

References - Arabic
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Ibn Qayyim Al-Jawziyyah (1955), Ilm al-mawqiayn (Ed.
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- Al-Shib, Al-fatw: Dr. Mohammed Abu al-Ajfn, (Ed). Tunis,

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References English
Baumol, William (1996), Rules for Beneficial Privatization, Islamic
Economic Studies, Vol. 3 No. 2, Muharram 1417 (June 1996), pp.1-34.
Pass C. and J. Sparkes (1980), Monopoly, 2nd edition, London,
Heinmann.
Sharkey W.W. (1987) Natural Monopoly in The New Palgrave
Dictionary of Modern Economics, Macmillan Press Limited, London.
Stiglitz, Joseph E. (March 2007): "Prizes, Not Patents, published by
Project Syndicate, online,
Vickers, J. (1994), Concepts of Competition, Oxford: Clarendon Press.

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