Malik related to me from Abu'z-Zinad from al-Araj from AbuHurayra that the Messenger of Allah, may Allah bless him and grant himpeace, said, "Do not go out to meet the caravans for trade, do not bidagainst each other, outbidding in order to raise the price, and atownsman must not buy on behalf of a man of the desert, and do not tieup the udders of camels and sheep so that they appear to have a lot ofmilk, for a person who buys them after that has two recourses open tohim after he milks them. If he is pleased with them, he keeps them andif he is displeased with them, he can return them along with a sa ofdates."Malik said, "The explanation of the words of theMessenger of Allah, may Allah bless him and grant him peace, accordingto what we think - and Allah knows best - 'do not bid against eachother,' is that it is forbidden for a man to offer a price over theprice of his brother when the seller has inclined to the bargainer andmade conditions about the weight of the gold and he has declaredhimself not liable for faults and such things by which it isrecognised that the seller wants to make a transaction with thebargainer. This is what he forbade, and Allah knows best."Malik said, "There is no harm, however, in more than one personbidding against each other over goods put up for sale."Hesaid, "Were people to leave off haggling when the first person startedhaggling, an unreal price might be taken and the disapproved wouldenter into the sale of the goods. This is still the way of doingthings among us."
USC-MSA web (English) reference: Book 31, Hadith 97
Arabic reference: Book 31, Hadith 1383