There are definite restrictions on that—however, they're after a few days in jail, not after 10 minutes in cuffs.
Police can detain with reasonable suspicion alone, and it is entirely likely they had reasonable suspicion in this case.
And I'm still not really convinced that there was reasonable suspicion that a crime is being committed. Wouldn't that mean that any private party sale negotiated in public is inherently suspicious? I know law enforcement has a lot of leeway here but that would be kind of alarming.
Interestingly, there was a recent This American Life with almost this exact same setup, but it was approached cautiously and executed correctly. http://www.thisamericanlife.org/radio-archives/episode/549/a...