Dumping
If you’ve just launched an aggressive discount by email and you’re wondering whether that’s dumping, the short answer is no. Dumping is something else. It’s a much more specific practice, with legal implications that a simple price cut doesn’t have. But it’s worth understanding exactly where the line is, especially if your pricing strategy relies heavily on promotions.
What is dumping?
Dumping means offering products or services below their real price. Almost always, below the actual cost of production. The goal isn’t just to sell more. It’s to gain market share and weaken the competition, sometimes even to eliminate it altogether.
The term comes from the English verb to dump, which means to pour out or throw away. In Spanish it’s also known as precios predatorios (predatory pricing). A label that already makes clear the negative connotation that usually comes with it.
It’s also worth telling it apart from a simple one-off price cut. Selling at a reduced margin during a campaign is not dumping. Selling systematically below cost to choke off the rest of the industry, on the other hand, is.
Types of dumping
There are several forms of dumping, depending on the motive behind it and the context in which it occurs:
- Predatory: it aims to drive all competitors out of the market. Once that’s achieved, it raises prices and more than recovers what was lost. It’s the least ethical version of all.
- Cyclical: it appears in times of recession, when unemployment rises and sales fall. Lowering prices helps minimize losses, even if the margin almost completely disappears.
- Seasonal: it’s used to clear a seasonal surplus. The coats or swimsuits left over when their season ends are the most commonly cited example.
- Persistent: it’s the most dangerous, because it lasts over time. The company charges more in its home market and much less abroad, to gain international competitiveness at the expense of its own local customers.
Not all of these variants stem from the same intention. Even though the end result looks quite similar from one to another.
Is it legal? The role of anti-dumping
It depends.
Occasional dumping is not illegal in itself. The problem arises when there is an intention to eliminate competition, or when it unfairly affects international trade.
In Spain, the Unfair Competition Law regulates these practices when they seriously harm the market. At the international level, the World Trade Organization allows anti-dumping measures to be applied. These are additional tariffs on imported products that are sold below their normal value in the country of origin.
These measures are not automatic. They require a prior investigation. That investigation must demonstrate the damage caused and calculate the so-called dumping margin. However, once approved, they make the imported product more expensive until its price is more realistic compared with that of the local manufacturer.
Dumping vs. a flash sale: they’re not the same
This is where many marketing managers ask themselves the question that opened this article. A flash sale reduces the price for a very short time to create urgency. But it keeps a reasonable margin, and it doesn’t aim to destroy anyone.
Dumping, in contrast, involves selling below cost on a sustained basis. With a much more aggressive competitive intention. And that’s the key difference: the duration, the real margin and the intention behind the price.
Sending a newsletter with a 30% Black Friday discount doesn’t make you an offender. It would only be dumping if that discount were designed, month after month, to push the price below your own cost. With the sole aim of cornering the competition.
How to protect your pricing strategy without falling into a discount war
At Mailrelay we believe that competing on an ever-lower price is, almost always, a dead end. Our platform lets you segment your list and send personalized offers. Instead of resorting to blanket discounts that erode your margin.
You can also automate customer loyalty campaigns, rewarding those who already trust your brand instead of fighting on price alone. Sometimes it’s worth more to win back an inactive customer with relevant content.
If you want to build a sustainable pricing strategy, you can check our plans and pricing and create your Mailrelay account to try segmentation and automations with your own list. At no cost on your free plan of up to 80,000 emails per month.
Frequently asked questions about dumping
Does an offer with a big discount count as dumping? Not necessarily. Only if the price falls below your real cost on a sustained basis, and with the intention of eliminating competition.
Who can report a case? Usually companies in the same sector, to bodies such as the WTO at the international level or the competition authority in each country.
Is it always illegal? Not always. It can be legal if it’s occasional and doesn’t aim to destroy the competition. It becomes punishable when it meets the conditions set by each country’s legislation.
In conclusion
Dumping is a pricing practice that is much more specific than it seems at first glance. Selling cheap is not enough for something to be considered dumping.
For any business that competes with discounts, the key is to keep a reasonable margin and a transparent intention. That’s enough to leave dumping where it belongs: outside your email marketing strategy.
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