I liked the FFXI AH better. People will always undercut because:
- there are only a few items way overpriced (eg. Harlequin gear for 10 M because it's the only one up)
- there are too many of them and the only way to make sure yours sells fast (key word) is to undercut. Most people like to have the gil right away instead of waiting for 1 week only to realize someone is selling 5 k cheaper. (eg. materia gear such as belts or wristlets)
- last reason: people stumble over something they only planned on using temporarily, therefore not looking to make a profit, so they don't mind undercutting to get some gil back

You can't solve undercutting because everyone is doing it.