The Sale of a Man Over the Sale of His Brother is Not Allowed
Question

                It is haram for a man to sell over the sale of his brother, but is the transaction valid if it happens?
Praise be to Allah.
    It is not 
    permissible for a Muslim to undersell his brother, because it is proven in
    al-Saheehayn that the Prophet (peace and blessings of Allah be upon 
    him) said: “No man should sell over his brother.” 

    The wisdom behind 
    this prohibition is that it provokes enmity and hatred among Muslims, and 
    everything that leads to enmity and hatred among Muslims is haram, because 
    of the general meaning of the verse in which Allah says (interpretation of 
    the meaning): 

    “Shaytan (Satan) 
    wants only to excite enmity and hatred between you with intoxicants 
    (alcoholic drinks) and gambling”

    [al-Maidah 5:91]

    Allah has stated 
    that the reason for the prohibition on alcohol and gambling is that it leads 
    to enmity and hatred for those who do those things. 

    Secondly: 

    If a Muslim 
    undersells his brother, is the transaction valid or not? There are two 
    scholarly points of view. Some of them said that it is not valid, which is 
    the view of the Hanbalis, and some said that the transaction is valid but 
    sinful, which is the view of al-Shafi’i (may Allah have mercy on him). 

    Ibn Qudamah (may 
    Allah have mercy on him) said in al-Mughni (4/149): If he goes 
    against that and does the transaction, then the transaction is invalid, 
    because it is forbidden, and the prohibition implies that it is invalid. And 
    it is possible that it may be valid, because what is forbidden is offering 
    his product to the buyer or saying something for which he cancels the 
    transaction before the transaction has been completed, and because if the 
    annulment of the transaction which causes harm is valid, then going ahead 
    with the (second) transaction should also be valid, and because the 
    prohibition has to do with protecting the rights of another person, so it is 
    similar to artificial inflation of prices. This is the view of al-Shafi’i. 

    Al-Mardawi said in
    al-Insaf (4/331): it is not permissible for a man to undersell his 
    brother, which means saying to one who has bought a product for ten: I will 
    give you something similar for nine.  And it is not permissible for a man to 
    falsely tempt (outbid) his brother, which is when he says to someone who has 
    bought a product for nine: I will give ten for it, in order to cancel the 
    sale and make a deal with him. There is no difference of scholarly opinion 
    concerning this. This may occur in two cases: before the two parties 
    conclude the deal and part, or when the deal is conditional. … In answer to 
    the question “If he does that, is it valid?” there are two views, both of 
    which are narrated in al-Furoo’ and elsewhere. 

    1 – It – i.e., the 
    second transaction – is not valid. This is our point of view, and it was 
    classed as sound in al-Tasheeh. It says in al-Madhhab wa Masbook 
    al-Dhahab: the transaction is invalid according to the apparent view. It 
    says in al-Furoo’: It is not valid according to the more correct 
    opinion. It says in al-Ri’ayah al-Kubra: The better known view is 
    that it is invalid. This view was favoured by Abu Bakr and others, and it 
    was confirmed in al-Khalasah, al-Wajeez, and Tadhkirat Ibn 
    ‘Abdoos. It was also given precedence in al-Sharh and al-Kafi. 

    2 – It is valid. 
    This was the view favoured by al-Qadi and Abu’l-Khattaab. Shaykh Taqiy 
    al-Deen said: It is haram to outbid one’s brother, and if he does that the 
    first purchaser has the right to demand the product from the seller and take 
    the extra amount or compensation. End quote. 

    See: 
    al-Mawsoo’ah al-Fiqhiyyah (9/214) 

    Al-Shaykh ibn 
    ‘Uthaymeen (may Allah have mercy on him) said: The words “the transaction is 
    invalid” clearly show that the transaction is not valid, but some of the 
    scholars say that the transaction is valid, because the prohibition here 
    does not refer to the trade goods, rather it refers to something else, 
    namely the transgression against the rights of another Muslim, so the 
    transaction is haram, but it is still valid. This may be proven by the fact 
    that if the one who undersold his brother gets permission from the one whom 
    he undersold, then the transaction is valid and there would be nothing wrong 
    with it. Therefore, the transaction is valid but sinful. 

    But to adopt the 
    view of the madhhab is better because it prevents people from transgressing 
    against the rights of others. End quote from al-Sharh al-Mumti’ 
    (8/206). 

    And Allah knows 
    best.