Dumping

What is dumping?

Dumping is the practice of selling goods and services at artificially low prices, used to suppress competition, expand the customer base, and increase financial flows. This term comes from the English word "dumping," which translates to "throwing away." In the context of trade, it implies flooding the market with large volumes of goods at prices significantly lower than market rates, sometimes even below cost. For example, when large taxi services capture regional markets, they may set low prices for passengers and subsidize drivers from their budget to quickly dominate the market.

Goals of dumping

Dumping is used for various purposes, including:

• Eliminating competitors: In predatory dumping, a company sets low prices to drive smaller businesses out of the market.
• Expanding the customer base: Newcomers in business can attract customers by offering lower prices, after which they set standard rates.
• Saving the business: During crises, companies may lower prices to quickly sell goods and close financial gaps.
• Disposing of outdated products: Sporadic dumping allows for the disposal of goods nearing their expiration.

Main methods of dumping

Companies resorting to dumping use various cost-saving methods that can negatively impact the quality of goods or services. For example, consider a small entrepreneur producing pastries. As production volume increases, she may reduce costs; however, faced with competition, she might resort to dumping. Here are several methods that may be utilized:

• Reducing quality: The entrepreneur may start using low-quality ingredients to lower the price.
• Financial cushion: Selling assets to ensure temporary price reductions to survive in the market.
• Wage dumping: Lowering employee salaries or employing unskilled labor.
• Environmental dumping: Ignoring environmental standards to reduce costs.

What is pseudo-dumping?

Pseudo-dumping is a method where the seller claims to reduce prices, but this does not actually happen. It is a marketing trick that can negatively affect reputation. For example, an online store may offer a product at a low price but without the necessary components, forcing the customer to spend more on additional items. Other examples include reducing packaging volumes or product weight without changing the price.

How to fight dumping?

There are several strategies to combat dumping:

• Wait: Dumping may deplete the competitor's resources, leading to their exit from the market.
• Negotiate: Initiate negotiations for cooperation.
• Create a comprehensive offer: Combine products with related services to enhance value.
• Change the customer niche: Shift focus to higher-quality goods or services.
• Take legal action: If a competitor's actions violate laws, legal steps can be taken.

Legislative framework against dumping

In Russia, prices for goods are not subject to state regulation, except for regulated tariffs. However, there are laws to protect against dumping, including:

• Federal Law "On special protective, anti-dumping, and compensatory measures during the import of goods."
• Federal Law "On competition protection."
• Federal Law "On the contract system in the procurement of goods, works, and services to meet state and municipal needs."
• Law "On consumer rights protection."

These legislative measures are aimed at protecting small enterprises and preventing unfair competition, making the market fairer for all participants.