A Syariah compliant e-auction framework

Currently, the Internet which provides a set of interconnected networks has made it possible for individuals and businesses to conduct business transactions electronically. Various internet-based business models have been realized including e-auction, e-shops, e-procurement, e-mall, virtual enterprises, and e-marketplaces, just to name a few. Instead of using the traditional medium, more consumers now prefer to use the Internet as it provides numerous advantages for the consumers such as elimination of the extra cost caused by middlemen. Specifically, e-auction or electronic auction has received tremendous attention from both buyers and sellers. Although the concept of auction or al-muzayadah in general is allowed in Islam, however the conversion of traditional auction to internet-enabled setting has change the way it is conducted, especially in e-auction environment that uses proxies and software agents to bargain on behalf of human users. Studies indicated that some electronic auctions are not Syariah compliant hence Muslim users are exposed to prohibited features like riba (interest), maisir (gambling) or gharar (uncertainty). Thus in this paper we propose a Syariah compliant electronic auction conceptual framework. The study found eight characteristics that do not comply with Syariah principles, which are identification verification, product description, payment method, bidding fee, closing period, starting price, auction fee and payment by third party. Based on the findings, a conceptual framework and system architecture for e-auction is developed to address the issues of non-compliancy with the Syariah rules. The framework is validated by a panel of Syariah experts using Delphi technique. The conceptual framework can become the basis for a Syariah compliant electronic auction model for commercial use. However the model for commercial use needs to be evaluated and verified by appropriate Syariah bodies such as Majlis Fatwa Malaysia.