Diablo 3's Auction Hall has been controversial its entire existence. No one can deny it has totally reshaped the game but there are real questions as to what exactly those effects were. Blizzard recently talked about it, saying that they feel like they screwed up when making the AH. They claim that their goals were good (reduce fraud and account theft by getting rid of third parties, for example) but that the AH was used far more than they anticipated and had more sweeping effects than anyone thought possible.
Some of what is said against the AH is entirely true of course. By far the best way to progress in D3 is to play the AH buying and selling. Beating up monsters is a terrible way to get better because it takes so long to accumulate wealth. Additionally there is the problem that items are so incredibly variable that finding the item with the perfect stat spread for a build is completely impossible while going solo but it can be bought instantly on the AH. Simply put you can beat the game solo but you will progress at double to ten times the speed by using the AH.
You can't just look at this in a vacuum though. Imagine the AH was gone. Instead people would wander into games and yell at each other in an attempt to trade items directly. This would take forever and be incredibly irritating but would still allow the trading pros to accumulate immense wealth while new players would get scammed out of their stuff in record time. No difference there except that it is more annoying. It would feel more reasonable to simply play solo because the trading interface was such a pain in the ass but that wouldn't change the fact that traders would be obscenely wealthy and players would be broke. We saw this in D2 so this isn't even remotely speculative - that is exactly what happened. Just like in D2 there would be tons of third party sites selling stuff, stealing accounts, and scamming people. I know those exist in D3 but they would be ten times as large if the Real Money Auction Hall didn't exist. People would buy gear from these sites and people would complain about the noobs who buy gear just like always. The difference is that the money would be going to DiabloLegitGear.com instead of Blizzard and a bunch of people would get scammed.
So how would we get away from this? We could remove trading completely which would certainly get rid of the possibility of buying your way to the top and would make playing the game the best way to advance. Although this would definitely piss some people off I think it would end up being a far better game in the long run. The second thing that could be done is to normalize gear. The fact that the best weapon I found ever in D3 was 33% worse than a weapon I bought on the AH for a trivial sum is insane. Weapons in particular are incredibly variable and if the stat spreads on gear were really tightened up trading would be less important because you could depend on having an item that is 80% as good as the Best In Slot item just on your own. Right now your guarantee is more like 40% and that makes the AH required. If both of these ideas were implemented the game would still be fun to play with friends but you could play alone quite reasonably. They aren't possible to put into the game without a total overhaul though so I don't think they will happen.
When you make a game about trading you have to accept that the traders will be the rich ones. Just like in real life where the bankers make insane money the traders in D3 make insane money. If you don't want that then you either have to make trading impossible or pointless. No other solution will suffice.