Have you heard this one? Well, three merchants in prison meet and the first of them says: “There was such interest in my goods that I was able to set prices well above the cost of production. But I was imprisoned for abusing my monopoly position. ”The other just chuckles ironically and says,“ Well, that was an opportunity! I set prices well below cost to gain more customers. They locked me up at dumped prices and destroying competition. ”The third leans against the wall, smiles, and just remarks,“ The rest of us didn't want to end up like you, so we all kept the same prices. They locked us up for price agreements. "
V the first part In our mini-series, which deals with regulations and supposed "market protection", we looked at the topics freedom of choice, consumer protection, importance open markets and how it works competition. I also recommend reading a kind of "nipple", which deals with the topic of "What is a monopoly?"
In this second part we will look at dumping and the effects of anti-dumping policy. Ok lets go!
What is it all about? dumping? Many times we may encounter someone complaining about unfair competitionwhen someone in the market applies predatory or predatory dumping. What is it all about and should we be afraid of any dumping at all?
Dumping means that the manufacturer sells at a lower price than its costs. Some say that dumping aims to eliminate competitors and gain a kind of dominant or even monopoly position on the market. A company with a large amount of capital, ie the "predator", is trying to do this strategy push competition out of the market.
Because a large company has an abundance of capital, many think that the company will withstand the loss and that it relies on other competitors not to last because they will not be able to sell at such low prices for so long. As a consequence, the departure of competition from the markets is alleged, thus clearing the predator's space in the market, which the predator will use to greatly increase the price, which will "compensate" him for previous losses.
And now let's be honest - the thesis is mentioned above logical?
Imagine a hypothetical mobile retailer phones. This seller decides to sell "his" mobile phones at a lower price than he bought them, so he sets the price below his cost. This is to eliminate the competition and everyone started to buy mobile phones only and only to him.
Other mobile phone dealers have resisted this price battle for a while, but in the end they go bankrupt one by one. Our predatory dealer is happy. But why?
Our predator has gained the majority in the mobile phone market, but at what price? He has exhausted his savings, therefore, must increase the price of their phones. That probably won't seem like a problem to you, after all dominates the market. The problem, however, is that our predator does not control the market, but the market controls him - our predator, even though he has a majority in the market, has to watch his prices. If he increased the prices of his phones, he would make a profit. And profit that second one is the biggest attraction for entering the market for us, or not?
I'm not saying that there were no cases of predatory dumping, but I'm not sure if the "predators" they earned. But what I'm sure of is that competitors often accuse a company of dumping just because the company is cheaper and more successful than themselves.
How can we even be sure that the company is selling below cost? What if the company just gets rid of excess inventory? What if some "costs" are already sunk costs?
We all know each other sales. It's actually about the most widespread form of dumping - Why are you on her? no one complains? Or maybe very popular introductory prices - After all, this is too dumping, so why don't different authorities and courts solve this problem as well?
The fact is, some imaginary "Predatory" dumping is often just a scarecrow used by one group of producers to harm another group of producers. Most often it is about domestic manufacturer, fighting for the introduction of various tariffs, who use one of their arguments dumping by foreign producers, which, according to them, “threatens domestic market and competition ’.
Anti - dumping policy has essentially no meaningful criteria for assessing it price below cost. Nevertheless, under pressure from the domestic lobby, governments are engaged in various "anti-dumping proceedings", which are sometimes really ridiculous, in which reason sometimes remains common ground.
As a beautiful example, there was a problem golf carts from Poland, when the US Department of Commerce initiated an anti-dumping proceeding against their imports. However, the Ministry could not compare the prices of those carts with the price on the Polish market because the defendant the manufacturer did not sell any carts on the Polish market. The Authority therefore decided to use the price for comparison purposes Canadian carts in the Canadian market. Of course - the price of Canadian trucks in Canada was higher than the price of Polish trucks. This was enough for the Ministry to prove that "beyond a doubt" it was demonstrated that the Polish truck manufacturer performed on the US market. dumping.