Dumping - what is the phenomenon of unfair competition?

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In the modern economy, one can encounter the phenomenon of dumping, which is one of the manifestations of unfair competition on the market. What exactly is dumping and how should it be prevented? We answer in the article!

What is dumping?

The definition of dumping has not been directly clarified in any Polish legal act. However, it is possible to refer to the concept of dumping in the PWN dictionary - "(...) selling goods abroad at prices below domestic prices in order to gain or maintain a foreign outlet. "

The concept of unfair competition has a similar definition, which, pursuant to Art. 15 of the Act on Combating Unfair Competition means the sale of goods and services below the cost of their production or provision, or their resale below the cost of purchase in order to eliminate other entrepreneurs. In other words, the phenomenon of dumping is defined as the placing on the market of products at a price lower than the average price on the domestic market - it means lowering the export price in relation to the price of this good in the normal turnover on the domestic market.

It is also worth noting that the phenomenon of dumping in Poland is a prohibited act. Pursuant to Art. 18 above of the Act, in the event of an act of unfair competition, an entrepreneur whose interest has been threatened or infringed may demand:

  • refraining from unlawful activities;
  • removing the effects of prohibited activities;
  • compensation for the damage caused;
  • issuing unjustified benefits;
  • adjudication of an appropriate amount of money for a specific social purpose related to supporting Polish culture or protection of national heritage.

Dumping - what forms can be distinguished?

In practice, there are three forms of dumping:

  • occasional dumping - distinguished by sporadic selling of products abroad at prices lower than the cost of production. Occasional dumping results from exceptional situations, when a producer achieves an unexpected surplus of goods and starts selling them abroad at prices lower than those currently in force in the country, in order to avoid, for example, losses related to the storage of goods;
  • constant dumping - distinguished by a constant tendency to sell products abroad at prices lower than domestic. Constant dumping results from a situation where the demand for a given good on the domestic market is less flexible than on the foreign market - then the producer sells the goods at a high price on the domestic market, while reducing the price of the good on the foreign market in order to increase the demand;
  • predatory dumping (also known as predatory dumping) - consisting in dumping activities aimed at specific enterprises that are to weaken their position on the market and, consequently, fight and eliminate competition. In the event that a company using predatory dumping becomes a monopolist on a given market, then it can raise prices to continue to realize monopolistic profit. In international trade, such practices are the reason for the imposition of penal duties by the importer's state (the so-called anti-dumping duty) or for establishing quantitative restrictions on the import of a given product.

Dumping and trade defense instruments in the European Union

The European Union uses a number of trade defense instruments - anti-dumping procedures and measures to combat unfair trade practices. The legal basis for anti-dumping proceedings in the European Union countries are the provisions of the Council Regulation on protection against dumped imports of products from countries not members of the European Community.

One of the forms of counteracting dumping is the imposition of the so-called anti-dumping duties (countervailing duty) on products sold at artificially low prices. In a situation where the European Commission initiates the anti-dumping procedure on the basis of a written complaint from an entity acting on behalf of the European Union, then - in the case of finding dumped imports - it may impose a provisional anti-dumping duty on the importer usually for a period of 6-9 months.
Then, at the request of the European Commission, the Council of the European Union may impose definitive anti-dumping duties pursuant to a regulation. In such a case, the anti-dumping duty is imposed for a period of 5 years, with the possibility of a later extension or the imposition of an additional countervailing duty.

The second form of counteracting unfair competition is the use of a price obligation. Then, if, as a result of the proceedings conducted by the European Commission, dumping and the related injury are found, the accused exporter may agree with the European Commission on a price undertaking, which consists in increasing the price level of the exported goods so that it does not harm EU producers.

The price undertaking is therefore an alternative to the definitive anti-dumping duties. The solution may be beneficial for both the defendant and the European Commission, as the Commission does not have to prove dumping and the injury associated with it in the course of a long proceeding, and the exporter, instead of paying a higher anti-dumping duty, can achieve a higher profit on each product sold.

To sum up, dumping is one of the possible manifestations of unfair competition, which may significantly weaken the modern economy, as well as individual European entrepreneurs. It is worth knowing that the EU industry is constantly struggling with dumped imports, which results in the imposition of penalties on an increasing number of entrepreneurs, as well as the development of further anti-dumping measures.