I hate AH, because sometimes it is just impossible to sell anything, thanks to the players who play AH for living..
Though AH undercutting can be solved with at least two ways.

AH requests
Player A wants to buy 200 Goldthorns for 5g each.
Player A puts a request on AH => WTB 200 Goldthorn 5g each.
Player A completes the request by transferring 1000 gold to AH.
Player A begins to wait miracle if someone really sells these herbs for this cheap!

Player B with Goldthorns browses AH requests and sees Goldthorn needs.
Player B fulfills Player A's requests; Player A gets 200 Goldthorn, Player B gets the 1000g from AH system.
Everyone is happy, yay!

AH personal item lock
Player A sees he has been undercutted on Runecloth.
Player A removes one or more his Runecloth auction, causing Runecloth being locked for him to prevent auctioning that item again for 60 minutes.
Everyone is happy, yay!