Types of Dumping
1. Predatory Dumping: Predatory dumping aims to eliminate competition by selling products at a loss for a specific time. This strategy allows the dumping company to drive competitors out of the market. Once competitors are gone, the company can raise prices, recover losses, and possibly establish a monopoly. Companies engaging in predatory dumping might use tactics like pricing below production costs, utilizing subsidies from their government, or employing aggressive marketing strategies to undercut competitors. The primary goal is to gain control over the market. By eliminating rivals through low prices, the dumping company seeks to become the dominant player. Once it achieves dominance, it can raise prices and potentially reap significant profits.
2. Persistent Dumping: Persistent dumping involves consistently selling goods or services at prices below what’s considered fair market value for an extended period. Unlike predatory dumping, the goal here isn’t just to eliminate competition but to maintain dominance over time. Companies practicing persistent dumping aim to secure a strong position in the market. By continuously offering lower prices, they discourage new competitors from entering and ensure they maintain a significant share of the market. This type of dumping can have long-lasting effects on the market dynamics. It creates barriers for new entrants and makes it difficult for existing competitors to compete effectively, potentially leading to market stagnation or reduced consumer choice.
3. Intermittent Dumping: Intermittent dumping involves sporadic instances of selling products below their actual cost. Unlike persistent dumping, this strategy isn’t about maintaining consistently low prices but rather about disrupting the market periodically. Companies may resort to intermittent dumping to create instability in the market. By periodically undercutting prices, they make it challenging for competitors to predict pricing trends or plan their strategies effectively. Intermittent dumping can lead to uncertainty and volatility in the market. Competitors may struggle to adjust their pricing strategies or invest in long-term planning, potentially weakening their position over time.