2011 International Conference on Electrical Engineering and Informatics 17-19 July 2011, Bandung, Indonesia A Syariah Compliant e-Auction Framework Suriati Jamalludin #1 , Norleyza Jailani *2 , Shofian Ahmad #3, Salha Abdullah *4 , Muriati Mukhtar *5 , Marini Abu Bakar *6 , Mariani Abdul Majid *7 , Mohd Rosmadi Mokhtar *8 , Zuraidah Abdullah *9 Faculty Computer Media & Technology. TATi University College, 24000 Kemaman Terengganu Malaysia Faculty of Information Science and Technology, Universiti Kebangsaan Malaysia, 43600 Bangi Selangor Malaysia Faculty of Economics and Management Universiti Kebangsaan Malaysia 43600 UKM Bangi Selangor, Malaysia 1 suriati@tatiuc.edu.my, 2 njailani@gmail.com , 3 Shofian_69@yahoo.com, 4 {sa, mm,marini,mariani,za}@ukm.my, 5 mrosmadi@gmail.com Abstract— 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 Keywords— e-auction, conceptual framework I. INTRODUCTION The growth of E-Commerce in the past few years has generated considerable diversity and complexity in its structure and applications. E-Commerce referred to the use of information and communication technologies network economic activities and processes, in order to reduce information related to transaction costs to gain a strategic information advantage [28]. On the other hand e-commerce also produces multiple types of business models including e- auction. As in [12] Mollenberg define it as a virtual market that depends on the internet protocol and internet line services to carry out the auction.E-auction is conducted through online internet facilities [11]. While three familiar examples are the publicly-traded web giants Amazon, eBay and Yahoo!, which are known for their remarkable ability to attract large numbers of buyers and sellers to one common marketplace in which a vast array of unique objects is sold [6]. As in [7] have reported that in 2001 eBay, the largest online auction house, had 423 million items listed for sale in 18, 000 unique categories. Moreover Yahoo!’s total revenue in 2004 was equal to $3.574 billion. It is believed that over 50% of Yahoo!’s revenue is derived from auctions [7]. Online retailing and auction has become, and will continue to become, a full and complete business model for some companies. Internet firms, such as Amazon.com, eBay, Yahoo! and Netscape, have proven that this type of business model can be very successful. There are several of Malaysia auction systems such as Lelong.com.my, Mybid, Superbid, Censtation and Pennyauction [8][1][10][19][14] Traditional auction transaction is permitted towards Islamic principle [29]. Traditional Auction also can be called as al- muzayadah. However, the transformation of the traditional auction into the e-auction leads to the changing in rules, features and thus becoming an issue from Islamic point of view. Therefore this paper will investigates the issue on e- auction from Syariah perspective and the related issues on the Syariah e-auction legality. Thus a discussion with the head of Syariah department, Islamic Faculty, Universiti Kebangsaan Malaysia, Ustaz Shofian also lead the view of Syariah perspective on e-auction. Auction is one of trading method, so the rules are considered towards on Syariah trading principle. H6 - 2 978-1-4577-0752-0/11/$26.00 ©2011 IEEE