There is a lot of competition in the modern market, so manufacturers resort to various methods in order to sell their goods and services. So, some are trying to dump. This means artificially lowering the cost of products in order to displace competitors and occupy their niche. In a number of countries, dumping is perceived negatively, so laws are created against it and various measures are taken.
According to financiers, dumping in the economy is an ambiguous concept. On the one hand, this phenomenon helps the state or companies to penetrate a new market and gain a strong foothold there. On the other hand, similar products from other manufacturers depreciate, which leads to losses.
In a general sense, dumping is understood as the sale of goods and services at prices that are artificially low. Such prices are often lower than market prices, and sometimes even lower than the cost of production.
What is the goal of those who resort to dumping? The most important goal is to get rid of competitors and strengthen your position in the market. At the same time, thoughtful company managers understand that dumping also means hoping for compensation for current losses in the future.
But losses may vary, since some companies constantly dump prices, while others only one-time at the initial stage of trading. The latter are simply trying to quickly sell illiquid goods or monetize stocks in the warehouse. Moreover, this is done if there is a risk of incurring more serious losses than losses due to price dumping.
According to modern laws in force in the territories of developed countries, there are the following types dumping:
In the commercial area, there are several types of dumping, including:
The consequences of dumping are very disastrous, primarily for the country that is the importer. In this state, producers suffer due to imported cheap products. That is, they suffer serious material damage. 
In addition, dumping negatively affects the level of growth of economic indicators on a local scale. In particular, this can be seen in the services market, where suppliers deliberately lower prices in order to take their “place in the sun.” If such a phenomenon becomes systemic, then not only one industry suffers, but also the entire regional market where similar services are provided.
Today, many countries are faced with the question: how to combat dumping? After all, the attitude towards it on the part of manufacturers is often negative. It is believed that dumping destroys all rules of fair competition and leads to local companies suffering losses.
Modern economic practice has already come to the conclusion that dumping can be resisted with the help of legislation. There are already special anti-dumping laws, and an anti-dumping duty is established on the import of goods at reduced prices. 
If dumping brings serious problems associated with damage to material point view, then experts recommend that the affected companies conduct an investigation and contact the relevant authorities to clarify the circumstances.
The concept of dumping
Dumping (from English dumping- reset) - in economic theory, the sale of goods at artificially low prices.
Dumping prices are significantly lower than market prices, are not economically justified, and sometimes even lower than the cost of goods or services.
Dumping in government procurement pursues the goal of including the supplier in the procurement market for government needs and ousting competitors and is expressed in the conclusion by the supplier of a contract with the customer through a significant reduction in price when participating in tenders.
The problem of dumping has spread during the process of holding open auctions in electronic form within the framework of Law No. 94-FZ. Any suppliers from all regions of Russia could participate in the auction and submit proposals at prices below market prices. There were cases when participants reduced the NMC to zero, and then tenders were held to increase the price.
The reform of legislation in the field of state and municipal procurement was intended, among other things, to solve the problem of dumping. In this regard, 44-FZ introduced a rule providing for anti-dumping measures when conducting competition And auction. The norm is enshrined in Article 37 of the Law on the Contract System. The use of anti-dumping measures when purchasing by other means is a violation of Law No. 44-FZ and suppliers have the right to appeal such actions of the customer.
1. If the NMC of the contract is 15 million rubles or less, and the procurement participant offered a price lower by 25% or more, then he is obliged to provide:
2. If the NMC of the contract is more than 15 million rubles, and the procurement participant offered a price lower by 25% or more, then he is obliged to provide only
Ensuring the execution of the contract, 1.5 times the amount specified in the documentation
It is often difficult for procurement participants to provide security in an amount exceeding 1.5 times that specified in the documentation, because it can be quite large amounts. Therefore, the legislator has provided for the possibility of confirming the good faith of the participant. Information confirming the integrity of the procurement participant includes information contained in the register of contracts concluded by customers , and confirming the fulfillment by such participant of obligations under contracts:
In these cases price of one of the contractsmust be at least twenty percent of the price, for which the procurement participant proposed to conclude a contract. For example, if the contract price is 100 million rubles, then the procurement participant must provide information on the execution of contracts for the previous period, the price of one of which was at least 20 million rubles.
However, if the NMC is more than 15 million rubles, and the procurement participant offered prices lower by 25% or more, then he no longer has an alternative in the form of the possibility of documenting his good faith, but is obliged to provide increased security for the execution of the contract, one and a half times the amount specified in the documentation.
The procurement commission rejects the application if this information is recognized unreliable . The decision to reject such an application is recorded in the protocol for determining the supplier (contractor, performer), indicating the reasons for the rejection of the application, and is brought to the attention of the procurement participant who sent the application no later than the working day following the day of signing the specified protocol.
If the participant is part of the competitive application no information provided , confirming his good faith, a contract with him is concluded after he provides contract security in an amount one and a half times greater than the amount of contract security specified in the tender documentation, but not less than the amount of the advance (if the contract provides for the payment of an advance).
Contest
In case of participation in the competition, information is provided by the participant as part of the application for participation in the competition. In practice, this means that the supplier, having read the tender documentation and calculated that he can offer a price lower than the initial one, for example, by 30%, provides documents confirming his good faith as part of the tender application, in accordance with the gradation established in Art. 37 of the Law on the Contract System. The customer, having received such an application, checks the accuracy of the information about the good faith of the participant in the register of contracts by the register entry number: the fact of the existence of such a contract; correspondence of the price to the specified size; absence of penalties, fines, penalties associated with improper fulfillment of obligations under this contract.
Auction
If such participant, recognized as the winner of the auction, fails to comply with this requirement or the procurement commission recognizes the information provided as unreliable, the contract with such participant is not concluded, and he recognized.
In this case, the decision of the procurement commission is documented in a protocol, which is posted in a unified information system and brought to the attention of all auction participants no later than the business day following the day of signing the specified protocol.
With participation in auction the participant provides information confirming his good faith when sending the signed draft contract to the customer.
Enforcing the contract provided by the procurement participant with whom the contract is concluded, before his imprisonment . A procurement participant who fails to comply with this requirement shall be deemed evaders from concluding a contract. In this case, the procurement participant’s evasion from concluding a contract is documented in a protocol, which is posted in a unified information system and brought to the attention of all procurement participants no later than the working day following the day of signing the specified protocol.
1. Inclusion in the RNP of information about the participant who took second place is legal
Example 1.
The winner avoided concluding a contract and the customer offered to conclude it to the auction participant whose application was assigned the second number, with which the participant agreed. However, the contract price he offered was 25% lower than the initial (maximum) contract price. Consequently, anti-dumping measures should be applied to this participant: the provision of increased security for the performance of the contract or information confirming good faith.
The arbitration court upheld the decision of the antimonopoly authority. If the participant whose application is assigned the second number agrees to enter into a contract, he is considered the winner. In the case where the requirements of Art. 37 of the Law are not fulfilled, such a winner is recognized evaders from concluding a contract.
Decision of the Arbitration Court of the Khanty-Mansiysk Autonomous Okrug - Ugra dated 04/02/2015 in case No. A75-2002/2015
Example 2.
The winner avoided concluding a contract and the customer offered to conclude it to the auction participant whose application was assigned the second number, with which the participant agreed. However, the contract price he offered was 25% lower than the initial (maximum) contract price. Consequently, anti-dumping measures should be applied to this participant: the provision of increased security for the performance of the contract or information confirming good faith.
The specified requirements were not fulfilled by the participant. On this basis, the antimonopoly authority included information about him in the register of unscrupulous suppliers (RNP).
The arbitration court upheld the decision of the antimonopoly authority. If the participant whose application is assigned the second number agrees to enter into a contract, he is considered the winner. In the case where the requirements of Art. 37 of the Law are not fulfilled, such a winner is recognized as having evaded concluding a contract.
(Decision of the Arbitration Court of the Khanty-Mansiysk Autonomous Okrug - Ugra dated 04/02/2015 in case No. A75-2002/2015)
2. The good faith of the participant is confirmed not only by information from the register of contracts
Example 3.
The auction winner, who reduced the contract price by more than 25%, provided the customer with information from the register of contracts confirming good faith when concluding the contract. The customer, considering that the participant had not properly confirmed his good faith, refused to conclude the contract and sent information about the winner to the antimonopoly authority. This information was included in the register of unscrupulous suppliers.
The courts of first and appellate instances declared the decision of the antimonopoly authority invalid.
As it was established by the courts, the winner, to confirm his good faith, presented, among other things, certificates of work performed under several contracts. However, according to the antimonopoly authority, in relation to the auction winner in the register of contracts, the number of entries with the status “execution completed” does not meet the requirements of Art. 37 of Law 44-FZ.
This argument was not accepted, since the discrepancy between the register data and the information provided by the winner on the number of executed contracts may have arisen due to incomplete or untimely entry of information into the register by customers.
(Resolution of the Seventeenth Arbitration Court of Appeal dated March 13, 2015 No. 17AP-980/2015-AK in case No. A60-39881/2014).
Law No. 44-FZ provides for the right of a supplier, when participating in an auction, to provide information confirming good faith, or to ensure the execution of a contract using protocols of disagreements (in order to increase the time for signing a contract and providing information). It must be remembered that in accordance with part 13 of Art. 70 of Law No. 44-FZ, if the winner of an electronic auction does not send the signed draft contract or a protocol of disagreements to the customer after thirteen days from the date of posting the protocol for summing up the results of the auction in the Unified Information System, then he is recognized as having evaded concluding the contract.
1. Law 44-FZ provides for the application of a special procedure for anti-dumping measures when conducting special purchases. For example, such procurements include holding competitions for research, development or technological work, as well as for the provision of advisory services.
In such procurements, the customer has the right to establish in the tender documentation different values of the significance of the application evaluation criteria for cases where a tender participant submits an application containing a proposal for a contract price that is up to 25% lower than the minimum contract price.
If the proposal for the contract price for these purchases is 25% or more below the minimum contract price, the value of the significance of such a criterion as the contract price is set equal to 10% of the sum of the significance values of all criteria for evaluating applications, which is carried out in accordance with the Rules approved by the Decree of the Government of the Russian Federation of November 28 .2013 N 1085 for the specified types of work (services) are established in the range from 20 to 80%.
2. If the subject of the contract for the conclusion of which a tender or auction is held is the supply of goods, necessary for normal life support(food, means for providing ambulance, including specialized emergency medical care in an emergency or urgent form, medicines, fuel), a procurement participant who proposed a contract price that is twenty-five percent or more lower than the initial (maximum) contract price, is obliged to provide the customer with a justification for the proposed contract price . This may include:
a letter of guarantee from the manufacturer indicating the price and quantity of the goods supplied,
documents confirming the availability of goods from the procurement participant (agreement, delivery note, etc.),
other documents and calculations confirming the ability of the procurement participant to supply the goods at the proposed price.
With participation in competition The participant provides justification as part of the application for participation in the competition.
If the procurement commission, when evaluating an application, recognizes that this document should be provided, but has not been provided, then the commission has the right to reject such an application. Such a decision of the commission is recorded in the protocol of consideration and evaluation of applications for participation in the competition or consideration of a single application for participation in the competition.
If carried out auction, then the letter of guarantee or documents confirming the availability of the goods are presented by the participant to the customer when sending the signed draft contract.
If the participant does not fulfill this requirement and does not send the necessary documents, he is recognized as having evaded concluding the contract.
A draft amendment to 44-FZ has been submitted to the State Duma for consideration, proposing to exclude from the law provisions on anti-dumping measures that are applied when supplying goods necessary for normal life support.
In June 2014 in Art. 37 of Law 44-FZ included part 12, which provides for the possibility non-use anti-dumping measures subject to two conditions:
Answer: The supplier is assigned such an obligation by virtue of 44-FZ, and if the customer has not indicated the corresponding requirement in the documentation, he still has the right to demand justification and calculation of such a price, as well as the necessary documents, or to reject the application for failure to provide them. However, to avoid disputes, it is better to provide in the documentation the condition and cases of providing justification.
The word dumping in English letters (transliterated) - dumping
The word dumping consists of 7 letters: g d e and m n p
DUMPING Selling goods in a foreign country at prices that local producers consider unreasonably low. Dumping means: selling goods at lower prices...
Raizberg B.A. Modern economic dictionary. — 1999
Dumping - 1. A situation when firms sell goods abroad at prices below costs or at a price lower than in the domestic market (interpretation from the position of the exporting country); 2.
slovar-lopatnikov.ru
Dumping is the sale of goods on foreign and domestic markets at artificially low prices, lower than average retail prices, and sometimes lower than cost (production and distribution costs).
Raizberg B., Lozovsky L., Starodubtseva E. Modern economic dictionary
Dumping syndrome
DUMPING SYNDROME occurs in patients who have undergone extensive gastrectomy, especially in the Billroth-II modification. There are early and late dumping syndrome.
Dumping syndrome (from the English dumping - dumping), dumping syndrome, agastric asthenia, a painful condition that occurs in some patients after partial or complete removal of the stomach...
TSB. - 1969-1978
DUMPING SYNDROME (dumping syndrome) is a series of symptoms that occur after gastric surgery, especially after gastrectomy. After eating a meal (especially one rich in carbohydrates), the patient experiences weakness and dizziness, turns pale...
COMMODITY DUMPING
COMMODITY DUMPING - export of goods at reduced prices, i.e. below domestic market prices. One of the means of fighting for markets. According to the GATT rules, COMMODITY DUMPING occurs in cases where goods of one country are sold on the market of another at a price lower...
Financial Dictionary. — 1999
Currency dumping
CURRENCY DUMPING (English currency dumping) - massive export of goods at prices below the world average, associated with the lag of the inflation rate from the depreciation of the exchange rate, mainly in order to oust competitors in foreign markets.
Financial and credit encyclopedic Dictionary/ Under general ed. A.G. Gryaznova.
Currency dumping is the export of goods at bargain prices (below market prices) due to a decrease in the exchange rate of the exporting country's currency. For D. v. There is a characteristic difference between high domestic and low export prices.
Librarian's terminological dictionary on socio-economic topics. - St. Petersburg: RNB, 2011
Dumping Currency - English. currency dumping - an increase in the export of goods at reduced prices due to the depreciation of the national currency, with a slight decrease in purchasing power within the country.
Dictionary of business terms. — 2001
DUMPING
DUMPING, DUMPING - carried out to oust competitors and capture foreign markets for goods exported from the country at lower prices than prices within the country or on the world market (an artificial reduction in prices even below cost is possible) ...
Currency dumping
CURRENCY DUMPING CURRENCY DUMPING is the export of goods at bargain prices (below market prices) by reducing the exchange rate of the exporting country’s currency. The exporter compensates for losses on prices by exchanging the proceeds of a more stable foreign currency for his own...
Dictionary of financial terms
Dictionary of financial terms
Currency dumping is the export of goods at prices below market prices due to a decrease in the exchange rate of the exporting country’s currency. Exporters, purchasing goods at low domestic prices, sell them at dumping prices on the foreign market for hard currency...
Anti-dumping duty
ANTI-DUMPING DUTIES - duties imposed on goods imported into the country using dumping, i.e. lowering the price of a product compared to its normal value.
Foreign economic explanatory dictionary
Anti-dumping duty - an additional customs duty levied on imported goods in respect of which it is established that they are sold for export at prices below the “normal value” of these goods. The Code establishes that an anti-dumping duty can be imposed only after the fact has been established dumping and determining that dumping is detrimental to national production in...
ANTI-DUMPING DUTY ANTI-DUMPING duty is an additional import duty imposed on goods exported at prices below normal world market prices or domestic prices of the importing country. In English: Antidumping duty See also: Customs duties Dumping Financial Dictionary Finam.
Dictionary of financial terms
Dumping, sale at bargain prices
Dumping, selling at bargain prices International finance, selling goods abroad at a price below cost in order to get rid of surplus goods or in order to combat foreign competitors.
Financial and investment dictionary. — 2002
CURRENCY DUMPING
CURRENCY DUMPING, CURRENCY DUMPING - expansion of exports at reduced prices; is possible provided that the degree of depreciation of the national currency exceeds the corresponding indicator of its purchasing power within the country.
Explanatory dictionary of economic terms
Material damage from dumping
Material damage from dumping (Dumping damage) - (usually assessed in an industry context) - a deterioration in the situation of an economic sector that occurred as a result of dumped imports (see Dumping) or subsidized imports and is expressed, in particular...
slovar-lopatnikov.ru
Russian language
Dumping/.
Morphemic-spelling dictionary. - 2002
But dumping is quite possible, since the competition between tour operators is enormous.
Without explaining why society should consider privatization dumping in the style of Chubais an achievement.
Dumping must be established and defined.
But this dumping will not last very long.
In the absence of the possibility of detailed analysis, average indicators can be used as a guide. All such calculations are usually carried out by customs or antimonopoly services.
In accordance with the recommendations proposed by the anti-dumping committee, its presence simultaneously confirms the presence of these two facts. If they are identified, there are grounds for initiating an investigation, which occurs in strict compliance with the conditions. Investigation procedure An application is submitted to the Antimonopoly Committee listing the actual facts of the damage caused or the creation of obstacles to business activities. At the same time, calculations of an adequate price and comments on the percentage of dumped products on the market are provided.
Given the spread of trade relations, there are measures to prevent dumping and its consequences developed and approved at the international level. The first precedent for dialogue on an international scale occurred in 1947, during the Tariff and Trade Agreement.
Attention Subsequent approvals led to tougher control measures and all of them were included in the International Dumping Agreement, signed after the creation of the WTO. As a result of all the activities, a universal classification was adopted and a number of signs and consequences of dumping were identified:
At the same time, it is important to take into account the components of the price, such as taxes, expenses, cost, and average profit level.
Actually, it is on the transfer from the EXW to CIP basis that a company that is accused of dumping can inflate costs and itself provide its own evidence to defend its interests in its competent authority. But based on materials on the procedural component, the competent (state) body can decide:
The resolution of the dispute will already be a substantive component.
As for retaliatory measures, they can be introduced even before proceedings in the WTO dispute settlement body (taking from a year to several years).
This is especially evident in the services market, whose suppliers, by lowering prices below the real level, try to increase their market share. This phenomenon, becoming systemic in nature, hinders the development of both one industry and the entire market of homogeneous services as a whole.
Within the framework of Article VI of the GATT and the Agreement on the Application of Article VI of the GATT 1994 (anti-dumping), both the definition of dumping and methods of combating it (through the introduction of anti-dumping duties) are given. Thus, within the framework of Article VI of the GATT, dumping in international trade is understood as the sale of goods at a price below their normal value.
In this case, the normal value of a product is understood to be such a value of a product that will not be lower than the price of a similar product on the domestic market.
Dumping is required solely to compete for the market. By lowering prices, you can quickly increase turnover and generate revenue.
As a rule, a company reduces the price of a product only when it enters the market and wants to attract a buyer. Such newcomers are even ready to work at a loss today in order to get a good income tomorrow.
Some companies cut prices in order to force out a competitor. The thing is that not everyone can withstand price races and simply leave the market so as not to lose profits.
If you look at it from the consumer’s point of view, then for him market dumping is an opportunity to save his own money and buy a product at an attractive price. As for the manufacturer, artificial price reductions are prohibited at the state level.
The only thing companies should do is keep strict records and do everything to make a profit. Reduced price to participate in the auction. This form of dumping must be highlighted separately.
It is no secret that many suppliers, in order to win, sometimes lower the price below cost. After winning, the work turns out to be unfulfilled or of poor quality.
To prevent this from happening, Federal Law 44 was adopted at the state level, which defines ways to combat dumping and establishes punishment for a manufacturer who violated the law and deliberately reduced the price of its products. All manufacturers who take part in the auction undergo strict verification.
How to fight dumping It is worth noting once again that dumping of competitors is necessary measure, which companies use exclusively in emergency situations.
Grab piece B difficult times Small business owners have to dodge to ensure that their checking account has cash inflows. Analyzing for Last year procurement under 44-FZ, there is a noticeable tendency for prices to decrease by 50-70% for the SMP organization. As a rule, small young organizations with a turnover of up to 30 million per year dump. Feed buyers In a saturated market, the promise that it can be even cheaper than now attracts retail buyers. A couple of years ago, a well-known online store of goods from China, entering the Russian market, collapsed prices for non-food products. Cheap souvenirs, clothes, shoes, toys, equipment and much more were delivered to Russian residents almost free of charge.
Gradually prices increased, but buyers who came from European and American colleagues remained. The decline in consumer activity primarily affects the service sector.
They took and opened the production of televisions in the United States and stopped making deliveries from Japan. In the states they began to produce new models, the cost of which was, of course, higher. In such a situation, the authorities could not do anything, since the company did everything right, without breaking the law. It turns out that Sony, thanks to a simple dumping policy, was able to win and strengthen its position in the American market. To this day, the company occupies a good position and poses serious competition to other manufacturers.
Everyone famous company, which produces cars, was also found dumping several years ago. It all started when the manufacturer simply decided to move vehicle production to European countries. Thanks to this, costs were reduced, and the company decided to offer cars at reduced prices.
You can figure out how to dump in commercial practice using the following examples:
Competition is the engine of trade. Let's talk about an effective market technique in which financial losses help make profits in the future. So what is dumping?
The concept of dumping (from English “to dump” to dump, dump, rubbish) means setting prices for goods obviously lower than the market price. This concept came into practice at the beginning of the last century. Dumping as a technique is used primarily in a competitive environment.
Please note that what is being “discarded” is not an outdated or low-quality product. Dumping is a popular tool for companies and entire countries, when selling goods and services at a price below cost becomes profitable.
There are cases when losses are covered from state budgets in favor of the interests of certain groups. The existence of export subsidies is actually a type of dumping.
International law views dumping as an illegal tool of competition.
Valid on the territory of the Russian Federation anti-dumping duty on imported goods. This customs tariff is introduced only if dumping is detected. The investigation can last for 6-12 months.
Please note that price reductions as marketing promotions in your supermarket are not dumping.
In the listed cases, prices are in any case higher than production costs, and companies do not lose anything when, in the course of marketing moves reduce prices.
Dumping- sale of goods and services on the foreign and domestic markets at a specially reduced cost.
When the desired market position is achieved, the state or company stops the dumping policy. But often companies resort to one-time dumping: the sale of illiquid assets, monetization of warehouses and an urgent need for funds with the threat of losses.
Some countries do not apply dumping policy, considering it a negative phenomenon, and use anti-dumping measures. Although with dumping, the consumer wins by paying a low price for the product.
The basis of the dumping process is three options.
Types of dumping:
Different countries and their legislation distinguish between types of dumping.
Monopoly- the company occupies the entire market or a certain segment of it in the production of products and sells goods abroad at a lower price than it sells on the domestic market.
To achieve this, the national bank must be protected so that products sold domestically must not be displaced by low-cost imported competitors.
Monopoly dumping must be carried out with the support of the state: sanctions in the creation of activities and provision of protection for foreign goods.
Technological dumping- sales of products at low prices as a result of high labor productivity through the use of modern advanced technology.
Social- determination of price benefits. The exporting country benefits from low production costs and low social development and living standards.
Sporadic appearance- import of products in large volumes to the domestic market within a short period of time. The goal is to reduce the stock of goods. The company faces a dilemma: not to produce the product or to continue producing it, but sell it to the foreign market at a price lower than in the domestic segment.
Deliberate dumping- special reduction in the cost of goods for export. The goal is to oust competitors and establish a monopoly.
Permanent view- sale of products for a long time. Export of goods and services at a price slightly higher than cost.
Reverse dumping is rare. Occurs as a result of sharp fluctuations in the exchange rate. The price of goods for export is inflated compared to the cost of products sold on the domestic market.
Mutual dumping- counter sales of one product by two countries.
Dumping policy is applied by large companies and the state for certain purposes:
In international practice, dumping is illegal. The WTO (World Trade Organization) opposes it.
In the domestic market of the Russian Federation, the antimonopoly service is fighting the dumping policy, proposing to regulate tariffs. But the idea was not supported by the state.
Moscow Institute of Economics, Management and Law
ESSAY
on “World Economy”
Topic: “Dumping in international trade is the sale of goods at prices lower than domestic and world prices. Why do global trade entities resort to dumping?”
Completed by: Student of the EZVDc+v1.2/0-11 group.
Kleimenova E.A.
Specialty “Accounting, analysis and audit”
Moscow
Dumping in international trade is the sale of goods at prices lower than domestic and world prices. Why do global trade entities resort to dumping?”
Dumping (from the English dumping - dumping) - sale of goods at artificially low prices.
Dumping prices are significantly lower than market prices, and sometimes even lower than the cost of goods or services.
Dumping is carried out for various purposes: penetration or strengthening in a new market, ousting competitors. Dumping is carried out by the state and companies with the expectation of compensation in the future for current losses, when the desired position in the market is achieved through dumping. However, quite often both companies and the state resort to dumping as a one-time event: they monetize warehouse stocks, sell illiquid products; in case of an acute and urgent need for funds, when there is a threat of greater losses than losses due to dumping. In some countries, dumping is considered a negative phenomenon and is combated by applying anti-dumping laws, although in the case of dumping, the consumer may benefit by paying a lower price.
Modern legislation in developed countries distinguishes between two main types of dumping:
price dumping - or selling a product on the export market at a price that is lower than its price on the national market;
Cost dumping is the sale of a product on the export market at a price that is lower than its value.
In commercial practice, dumping can take one of the following forms:
Sporadic dumping - occasional sale of excess stocks of goods to the foreign market at reduced prices. Occurs when the internal volumes of production of a product exceed the capacity of the domestic market and the company faces a dilemma - either not to use part of the production capabilities at all and not produce the product, or to produce the product and sell it at a lower price than the domestic price on the external market.
Deliberate dumping - temporary deliberate reduction of export prices in order to oust competitors from the market and subsequently establish monopoly prices. In practice, this may mean exporting goods at prices below their home market prices or even below production costs.
Constant dumping - constant export of goods at a price below their cost.
Reverse dumping - inflated prices for exports compared to sales prices for the same goods on the domestic market (for example, exports of gas and other energy resources from the Russian Federation). Occurs rarely, usually as a result of unexpected sharp fluctuations in exchange rates.
Mutual dumping - countertrade between two countries with the same goods at reduced prices. It is also rare in conditions of high monopolization of the domestic market for a certain product in each country.
Interestingly, any dumping is by definition illegal. But, as practice shows, it is almost impossible to catch a manufacturer or seller of illegal actions, because there is almost always a more or less reasonable explanation for a sharp drop in prices. Therefore, the history of dumping is replenished with new examples every year, and there are no more people punished.
Many years ago, when international trade was not yet sufficiently developed, one could only talk about dumping on the textile or spice market, when foreign traders sought to sell as many products as possible for the maximum possible price. short term. Now price wars have spread to all areas.
Dumping is quite common in tourism. Here, companies are trying to gain market share by organizing their own charter flights, and thereby reducing the cost of the tour by almost one and a half times. The situation with island Greece is widely known, when in 2008 several operators fought for the right to provide holidays there. As a result, this dumping in the tourism field led to companies losing up to 500 euros on each tour, but there was no excitement: this market turned out to be too small and most tour operators went bankrupt.
Price dumping in insurance is also developing. It would seem that the services are the same, but large companies nevertheless strive to maintain their market share and win a new one, which leads to some sacrifices on the part of insurers in order to maintain their positions.
One of the most interesting forms of dumping is the so-called currency dumping. Its essence is as follows. For example, a consignment of goods arrives on the Japanese market, paid for in dollars. And due to the temporary depreciation of the yen relative to the dollar, it turns out that prices for this product below the market average. The benefit of the seller is that he was able to correctly predict the possibility of this situation.
Chiptrip dumping means that the manufacturer reduces the costs of transporting products and thereby achieves significant opportunities to reduce prices. Constant chip trip dumping often leads to the fact that local manufacturers are simply unable to resist external aggression and are forced to leave their own market or take some serious measures such as reorganizing production or attempting to enter foreign markets.
Positional dumping aims to create an oligopoly in a certain market sector. There is a reduction in prices below cost, as a result of which large producers suffer only partially, and small ones die, unable to withstand such pressure. During the dumping period there is no question of service or high quality products. There is only a systematic reduction in prices. After the market has been rehabilitated, the few remaining players bring prices back to normal and are already winning over buyers with their product characteristics and service.
Examples of dumping
It is clear that dumping can lead to both positive and negative results. We already know an example of dumping by tour operators in Greece. Several years ago, Vnukovo Airlines became other victims of their stupidity in this area. By the end of 1997, this company was one of the leaders in Russian market. But already in the summer of 1998 the company decided to win back the positions of Siberia and Krasair on southern routes. As a result, after just a few months, the air carrier did not even have the funds to refuel its planes. And a few years later the company went bankrupt, and its property went to the same Sibir. That is, we can say that the dumping factor here clearly did not play in favor of the initiator.
In the 70s, Sony entered the American market with its televisions, selling them 40 percent cheaper than in its own Japanese market. The government did not like such dumping methods, and the company was called to account. But here the manufacturers did something truly brilliant: they opened production in the United States and stopped importing from Japan.
In the states, completely new models were produced, which did not give the American authorities the opportunity to compare prices. Thus, as a result of this dumping, the initiator company won, because it strengthened its position in the American market and maintains it to this day.
There is a case of dumping in the auto market several years ago. At that time, Nissan actively located its production facilities in European countries. This led to the fact that the prices for their products became significantly lower and the company was able to sell cars at lower prices compared to importers from other countries. Such dumping of Nissan caused a wave of aggression and a number of lawsuits. But as a result, all charges against them were dropped.
As for examples of dumping in Russia, several years ago the following situation arose in one of the regions. A fairly large manufacturer of office supplies had two clients who purchased products in stable quantities for the purpose of selling them. A new client appeared and was ready to purchase twice as large volumes of products, but with significant discounts. The manufacturer, having calculated the possible profits from expanding production, agreed. The result of this was obvious dumping in stores, since the new client had the opportunity to significantly reduce prices and thus displace old sellers. They, in turn, went bankrupt, stopped purchasing goods, and the manufacturing plant also suffered. The market crashed for several years.
Dumping is prohibited under the rules of the World Trade Organization (WTO). Dumping violates the rules of fair competition and causes losses for local producers. In world economic practice, in a number of countries it is customary to resist dumping by applying anti-dumping laws and establishing special anti-dumping duties. Because as a result of dumping, not only national producers and sellers suffer, but also the government. After all, due to lower prices, tax revenues to the budget also decrease. The state has the legal right to impose anti-dumping duties on goods that are sold at prices below fair prices and cause material harm to the industry of the importing state.
Dumping syndrome continues to cover all market areas. After all, as mentioned above, it is almost impossible to prove dumping. Therefore, the question of how to combat dumping will remain open for a long time. And the negative and positive consequences of dumping in world trade will be assessed by the most outstanding economists with only one goal: to minimize its impact on the country’s economy.
Bibliography
The free encyclopedia - Wikipedia.
“Fundamentals of Marketing” - Philip Kotler
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Currently, many companies prefer to improve the consumer properties of their products while maintaining or even slightly increasing selling prices. With appropriate advertising such<< скрытая >> a discount on the price of a product usually causes a positive reaction among the modern consumer, who so often associates a low price with the unsatisfactory quality of the product.
Capturing a market by penetrating it through the development of a new branded product or displacing competitors offering similar products also occurs with non-price competition. But it is still small on the domestic Russian market, so it is used mainly when organizing exports. In the world, the success of non-price competition is determined (especially in Europe, North America, Southeast Asia) technical level, quality and reliability of the product, confirmed by certification in generally accepted centers, level of service and after-sales service, and not low prices.
One of the complex problems of modern theory and practice of organizing the competitive activity of participants in the market process is to establish the causes of the emergence and diagnosis of qualitative and quantitative conditions for the transition of price competition to non-price competition. Pioneering works in this direction include the works of J. Bulow, J. Ginakoplos and P. Klemperer, as well as J. Tirol and D. Fudenberg.
Non-price competition gives rise to a whole range of major market problems.
Among them is the interindustry profit mechanism in the form of the input-output problem, excess capacity, the influence of non-price factors on sales volume, preference and choice, competitiveness, and consumption costs.
One of the weaknesses of the prevailing theories of competition is the exclusion of the consumer from them. Indicative in this regard are the conclusions of J. Tirole (1988) on methods of competition. Thus, he believes that in order to compete in the market, a company can use many tools. He categorizes these tools according to how quickly they can be reconfigured.
In the short term, the main instrument is often price. It is complemented by advertising and sales promotion measures. At the same time, the cost structure and product characteristics remain unchanged. Under monopolistic competition, a firm can make economic profits if prices are higher than average costs; or face losses if prices are below average costs. Over a longer period, cost structure and product characteristics can be changed both together and separately. Production methods can be revised and improved, and production capacity can be increased or decreased depending on the competitive challenge. Product characteristics include quality, design, delivery times, location of outlets, etc. In the long run, product characteristics and cost structures can be changed not only by simple improvements in product mix and possible costs, but also by changes in that mix.
The likelihood that easy entry into industries with monopolistic competition will promote product variety and product improvement is perhaps the redeeming feature of monopolistic competition, which can offset all or part of the “costs” associated with this market structure. There are indeed two fairly clear circumstances here:
1) product differentiation at any given point in time;
2) improving the product over time.
Product differentiation means that at any time the consumer will be offered wide range types, styles, brands and degrees of quality of any given product. Compared to the situation with pure competition, this definitely means tangible benefits for the consumer. The range of free choice is expanding, and the variety and shades of consumer tastes are being more fully satisfied by manufacturers. But skeptics warn that product differentiation is not a net good. The rapid increase in the variety of certain types of products can reach a point where the consumer becomes confused, making smart choices difficult and making purchases time consuming. Diversity of choice can add spice to a consumer's life, but only up to a point. Woman who goes shopping to buy lipstick, may be confused by the huge mass of similar products from which she can choose what she needs. Only Revlon offers 157 lipstick tones, of which 41 are “pink”! Some observers also fear that consumers, faced with a myriad of similar products, may begin to judge their quality based on price alone—that is, consumers may irrationally assume that price is necessarily an indicator of a product's quality. 7
Product competition is an important means of achieving technical innovation and product improvement over time. This product improvement can be incremental in two different senses. First, a successful improvement in one firm's product obliges competitors to imitate or, if they can do so, to surpass that firm's temporary market advantage, otherwise they will suffer losses. Secondly, profits from successful product improvements can be used to finance further improvements. However, again there are significant criticisms of the product changes that can occur under monopolistic competition. Critics point out that many product changes are more apparent than actual. They are minor, temporary changes to the product that do not increase its durability, effectiveness or usefulness. More exotic packaging, brighter packaging or “sparkling” are often the main directions of product changes. It is also argued that, especially in the case of durable and limited-life consumer goods, change can occur through the principle of “planned obsolescence,” where firms improve their product just enough to make the average consumer feel dissatisfied with last year. models.8
In oligopoly and monopolistic competition, sellers in the same market often provide a variety of similar products. The question arises whether these markets provide adequate variety of products or whether the desire of firms to somehow differentiate their products from those of competitors is excessive, leading to waste.
Since diversity tends to be expensive, society must choose to produce only a few of the vast number of conceivable goods and services. It would be better to limit the number of types of goods produced in most markets, compensating for this by using economies of scale to produce more of each type of good at lower unit costs. If more output were produced by fewer firms and they set the price, equal to the value average costs, then prices and unit costs would be lower. But this would be less variety than in a monopolistic competitive equilibrium, and consumers want both variety and low prices.
Looking around the store shelves, we often feel that the variety generated by industrialists wasting resources to produce many almost identical brands of products is too great.
The larger the aggregate market, the less expensive it is to provide any given level of diversity within it. As economies develop and people become more wealthy, increasing diversity becomes more effective as the demand for all goods increases. In a very poor country, only one firm's products may be sufficient to satisfy demand in many markets. As the economy grows and consumer demand expands, opportunities for a large influx of firms open up and market structures evolve toward monopolistic competition, providing consumers with the benefits of diversity.
The same kind of gain can be obtained from taking advantage of international trade between countries. Most trade between industrialized countries occurs within the same industry. For example, Germany and France sell cars to each other. This trade in differentiated products provides the people of both countries with access to a wider range of products, all of which are produced for the world market and therefore can be produced on a reasonably large scale.
Non-price competition with a wide range of products is the most promising type of competition. The company competes with unique quality, and not low price of products. This means that only this enterprise can produce certain products and, without reducing prices, competes with quality. An example would be global shipbuilding. Thus, Japan is the only country that builds large-capacity tankers with a displacement of more than 100 thousand tons with a unique degree of automation. This type of competition is only suitable for large firms with great scientific and technical potential.
According to foreign scientists, products travel from manufacturer to consumer along a path that can be represented in the form of the following formula:
Product + distribution + R&D +
Advertising of any product plays a leading role in the formation of consumer demand.
Advertising in various forms, especially on product packaging, helps achieve the main goal by persuading consumers to continue using the product and trying out the product in new applications, as well as encouraging those who do not use the product to buy it.9
When a company has produced a new product, an additional or modified old one, advertising helps the company in finding and attracting new consumers. At the same time, she tries to influence existing customers so that they continue to buy the company's products. Advertising should also be aimed at attracting buyers in order to replace those whom the company has lost as a result of competition.
Advertising causes customer activity in three ways: it can motivate them to take direct action (the buyer is asked to immediately come and buy, send an order, etc.); indirect action (by constantly reminding the brand and encouraging you to buy only this product); a combination of the two, asking the buyer to take a step towards a purchase, but not requiring it to be done immediately.
Several main media are used in advertising: television, radio, newspapers, magazines, as well as outdoor advertising media: signs, stands, shop windows, neon advertising. Advertising in the form of packaging plays a special role, so the main advertising burden is, of course, carried by the packaging.
The purpose of advertising for a firm operating under conditions of monopolistic competition is that the firm hopes to increase its market share and strengthen consumer loyalty towards its differentiated product. In technical terms, this means that the firm hopes that advertising will shift its demand curve to the right and at the same time reduce its price elasticity.10
5. Pricing strategies. Dumping pricing.
The practice of enterprises in a market economy has developed certain strategies in the field of price setting. The most common, typical ones are:
Dumping pricing is one of the strategies prohibited by law or market ethics.
6. Dumping prices and wars.
Dumping wars reflect the use of dumping prices by one of the competitors, which means the use of prices significantly lower than market prices, often even below the industry average cost of production.
Initially, dumping prices were used in foreign trade, when exporting goods to world markets and with the aim of conquering them. Currently, the practice of dumping wars is also used in domestic markets, which is associated with the intensification of both interstate and domestic competition in many industries and sectors of the economy. During periods of seasonal sales of products, price wars occur, which buyers are often unable to recognize, since the discounts provided by participating companies can be perceived by end consumers as a form of seasonal sales.
The main reason for waging price wars is the desire to capture a larger market share. Waging a dumping war may mean the desire of its organizer to completely oust competitors from the market.
Price wars are initiated by competing companies quite often. In this regard, there is a need to find an answer to the question of their consequences for the organizers and participants, which cannot be unambiguous, since it must be considered from different angles.
On the consumer side, we can talk about his gains resulting from lower prices, which is confirmed by various examples from foreign and partly domestic practice. For this reason, we can conclude that price wars are not so dangerous in conditions of developed market relations and in those markets where the shares and niches of competing companies have already been determined. Although the same result may not happen in Russian conditions, since for Russian specifics, ousting a competitor in conditions of weak antimonopoly legislation may mean monopolization of one or another market. And then, in the long run, the consumer may lose, since the monopolist will set the prices that he wants to set.
The consequences of price wars can be:
market destabilization;
redistribution of shares of competing market participants;
ousting weak competitors, primarily small and medium-sized companies, their possible bankruptcy and ruin;
reduction in sales volumes, income and profits of its participants, consequently, a decrease in funds for development, innovation and a possible decrease in the capitalization of companies;
reduction in volumes and deterioration in the quality of services provided;
reduction in the number of workers and rising unemployment.
The main sign of a price war is a sharp decrease in price. The price war can continue until the price for the product reaches the industry average production costs, which means an inevitable loss in the profits of competing companies.
An example of holding dumping.
Suppose there is a market in which there are 5 players. Of these, 4 trade at a certain average (“market”) price, and the 5th dumps so that its price is somewhere around the cost price. In the long term, such a situation seems to be impossible. Actually this is not true. Let us assume that, unlike the other four market players, the dumping entity is actually an integral part of a large diversified holding company, the other divisions of which provide it with such a profit that allows it to dump without much difficulty. In this way, the dumping entity successfully ruins its competitors.
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Hello! In this article we will talk about what dumping is and why it is necessary.
Today you will learn:
Price dumping, translated from English, means to dump or dump.
In simple words, dumping concept - This is a simple sale of goods at a specially reduced price, below the market value.
Sometimes companies lower prices so much that they operate at a loss. Dumping is required exclusively for the market. By lowering prices, you can quickly increase turnover and generate revenue.
As a rule, a company reduces the price of a product only when it enters the market and wants to attract a buyer. Such newcomers are even ready to work at a loss today in order to get a good income tomorrow.
Some companies cut prices in order to force out a competitor. The thing is that not everyone can withstand price races and simply leave the market so as not to lose profits.
If you look at it from the consumer’s point of view, then for him market dumping is an opportunity to save his own money and buy a product at an attractive price.
As for the manufacturer, artificial price reductions are prohibited at the state level. The World Trade Organization maintains strict control over the activities of all manufacturers, since it can cause great damage to the country's economy, leaving many citizens without work.
A dumping price is a forced measure, thanks to which a company can either win part of the market or get out of the crisis. In the second case, this is the only option for making a profit in order to stay afloat.
Let us note the main goals of dumping, which are achieved by reducing prices for goods:
In the sales field, it is customary to distinguish between two types of dumping:
By reducing costs, companies are trying to achieve various goals. However, it is necessary to take into account that reducing the cost of a product is a necessary measure and if you use it constantly, it will go into the negative.
In addition to the listed types, we can distinguish:
However, there are companies that are constantly reducing the cost of their products and. But how do they get their income? In fact, everything is simple and they save on the quality of the product.
Each company has its own reasons for dumping. The only thing companies should do is keep strict records and do everything to make a profit.
Reduced price to participate in the auction.
This form of dumping must be highlighted separately. As a rule, a government agency organizes electronic auctions with only one purpose - to obtain the most advantageous offer. In practice, the winner is the manufacturer who offers the minimum price for his product.
It is no secret that many suppliers, in order to win, sometimes lower the price below cost. After winning, the work turns out to be unfulfilled or of poor quality.
To prevent this from happening, Federal Law 44 was adopted at the state level, which defines ways to combat dumping and establishes punishment for a manufacturer who violated the law and deliberately reduced the price of its products. All manufacturers who take part in the auction undergo strict verification.
It is worth taking into account that the problems of dumping are extremely deplorable. This especially applies to a country that acts as an importer. This is where manufacturers begin to suffer the most due to the cheap products that enter the market. As a result, local producers suffer colossal material losses.
And also do not forget that price dumping has a negative impact on the level of growth of economic indicators. As a rule, this can be found in the market where suppliers deliberately reduce their pricing policy in order to capture the market.
If this becomes a habit, then not only one industry may suffer, but also the entire regional market, which produces similar products.
Let's consider the advantages and disadvantages of reducing the cost of goods in order to conquer the market.
Pros:
Minuses:
It is worth noting once again that dumping of competitors is a forced measure that companies use exclusively in an emergency situation. But what to do when you are on the other side of the barricade? A completely logical question arises: how to combat the decline in the cost of commercial products and protect against dumping?
Anti-dumping strategies:
Of course, you may not believe it, but the simplest thing you can do is just wait. It is worth understanding that if a new manufacturer has entered the market and has not properly established the production process, then by reducing the price, he is simply slowly digging a hole for himself.
So just watch him on the sidelines and wait for him to go broke. At this point, you will not only return to the market and be able to make your profit, but also buy the premises and its equipment cheaply.
Thanks to new equipment, purchased for pennies, you can increase your production volumes. However, before purchasing equipment and space from a former competitor, it is worth carefully calculating your financial capabilities.
You don't actually need to be your competitor's best friend. This strategy is necessary in order to maintain an equal pricing policy in the market. Thanks to this, companies will be able to make their profit and stay afloat.
Of course, all contractual relations are discussed only verbally and are not confirmed by any documents. But, nevertheless, this scheme works well.
Some manufacturers are terrified of raising prices. In this case, there is a big risk of losing a regular customer.
But you can look at it from the other side. Thanks to the increase in price, it is possible to move into a new segment, from “beginner” to “professional” and increase your average bill.
Of course, you will need to change the packaging, introduce a new product, advertise the new product well, and possibly improve the quality of the product.
Of course, this is more suitable for the service sector, where you can quickly persuade a client to purchase additional services at an attractive price. As for products, you can offer free delivery, interest-free installments or payment for goods by card.
It is worth noting that interest-free installments are an excellent move that allows you to increase sales volumes and achieve the desired profitability.
This is the last and most unusual option, which is suitable if competitors have appeared on the market who offer similar products at the lowest price. In order not to work at a loss and not to wage a long war with your competitors, it is easier to go to another business.
It is extremely difficult to take this step, but sometimes it is the only way out, otherwise there is a risk of losing everything that has been accumulated over the years.
If you carefully study the history of the country, you can see several examples of dumping, when companies entered the market only due to a decrease in cost.
Among such companies it is worth highlighting:
As for the well-known company Sony, it appeared on the market in 1970. The first profit appeared solely due to the fact that the company produced televisions for export at 40 percent more expensive than they cost on the Japanese market.
But the country's government quickly noticed this and forced the company to answer for its actions and correct violations.
But in such a situation, the company acted simply brilliantly. They took and opened the production of televisions in the United States and stopped making deliveries from Japan. In the states they began to produce new models, the cost of which was, of course, higher.
In such a situation, the authorities could not do anything, since the company did everything right, without breaking the law. It turns out that Sony, thanks to a simple dumping policy, was able to win and strengthen its position in the American market.
To this day, the company occupies a good position and poses serious competition to other manufacturers.
A well-known company that produces cars was also found dumping several years ago. It all started when the manufacturer simply decided to move vehicle production to European countries.
Thanks to this, costs were reduced, and the company decided to offer cars at reduced prices. But such a reduction in prices was quickly noticed by the state. However, lengthy legal proceedings led to the fact that all charges against the company were dropped.
A tender participant sooner or later faces dumping in government orders. The phenomenon of dumping itself has existed in the field of tenders for a very long time, almost since the emergence of the institution of public procurement in Russia. The concept of “anti-dumping measures” in government orders appeared not so long ago, namely after the adoption of 44-FZ. In Law No. 94-FZ, which was in force before 44-FZ, there was no such concept. At the same time, in practice, of course, there was dumping in government orders, but the state made no attempt to combat this phenomenon legislatively. What is “dumping” in government orders today and what methods are used to combat this phenomenon? Let's try to figure it all out!
The word dumping is borrowed from the English dumping, which means dumping (selling at artificially low prices). Most often, dumping prices are lower than market prices and even lower than production costs. To understand the nature of this phenomenon, let’s look at the reasons for using dumping in tenders:
1. Entry of a supplier into a market that has already been divided and there is no other way to get into it.
2. Receiving an order from a specific customer in order to begin cooperation with this customer for the purpose of upselling related services, works, as well as entering into larger contracts.
3. Obtaining new contracts and obtaining the necessary qualifications to participate in major competitions and requests for proposals.
4. Playing according to the rules established by the state, where the price indicator is the most important and in most cases decisive in government procurement.
What all these reasons have in common is that the supplier, working at a loss or zero, plans to make a profit or some kind of preferences in the future. In addition, we should not forget about Russian reality. At the moment, the government has created a public procurement system in which the supplier who offers the lowest price has a greater chance of winning. This is true both for auctions and for competitions and other procurement methods. In the vast majority of purchases, the significance coefficient is higher for the “Price” criterion than for other evaluation criteria.
Despite the fact that the state has created conditions for the development of dumping in government orders, it has also created anti-dumping measures to combat this phenomenon. Let's take a closer look at this tool.
In 44-FZ, dumping is understood as a reduction in a participant’s price offer by 25% or more from the initial (maximum) contract price. That is, if the purchase limit is 1,000,000 rubles and the participant’s price offer is 750,000 rubles or more, then such an offer is recognized as dumping; if the supplier offers 750,001 rubles, then by law this is not dumping. Did you catch the fine line? One ruble or even one kopeck can influence whether the proposed price is recognized as dumping or not. Of course, this approach is formal and has an indirect relation to the market. The government procurement market has its own rules and these rules are 44-FZ. Let's look at anti-dumping measures under Federal Law 44 in more detail.
Two situations are possible:
Option No. 1 Price (NMC) of purchase is more than 15 million rubles.
In this case, according to Part 1 of Art. 37 44-FZ, if the price of the winner of the purchase is dumped and reduced by 25% or more, then the customer enters into a contract with such a participant only after the winner provides contract security with a coefficient of 1.5. But in this case, the amount must be no less than the amount of the advance (if the advance is provided for in the procurement documentation and in the draft contract). That is, the procurement participant, offering a price of 25% or lower than the price from the NMC, must be ready, in case of victory, to provide contract security of 1.5 higher. The participant can choose to provide security for the contract, either in the form of a bank guarantee or by transferring funds to the customer’s account. Of course, most often the supplier chooses security in the form of a bank guarantee.
Option No. 2 Purchase price (NMC) less than 15 million rubles.
In this case, the procurement participant has a choice:
- provide contract security with a coefficient of 1.5 (as in the option above)
- provide as part of the application documents confirming the integrity of the supplier as of the date of application.
IMPORTANT: documents on good faith must be submitted as part of the application for the competition, that is, before the winner is determined. If you participate in an auction, such documents are provided along with the signed contract.
Let's consider what is meant by the “good faith” of the supplier” and supporting information.
The integrity of the supplier is understood as the confirmed fact of successful execution of contracts with government customers. That is, such contracts must be completed and information about such contracts must be contained in the register of contracts.
In addition, the conditions for the statute of limitations of such contracts, the number and the presence or absence of penalties must be met:
Option #1: 3 or more contracts within 1 year before the date of application, without penalties.
Option #2: 4 or more contracts within 2 years before the date of application, 75% of contracts without penalties.
Option #3: 3 or more contracts within 3 years before the date of application, without penalties.
At the same time, the price of one executed contract must be at least 20% of the participant’s price offer in the procurement procedure.
IMPORTANT: Please note that contracts confirming good faith must be included in the register of contracts. The fact that such a contract has been entered into the register must be verified independently. Contracts that are not included in the register of contracts cannot be used by participants as information confirming good faith. If the concluded contract is not in the register, contact the customer to clarify the reasons. Entering contracts into the register is the responsibility of the customer, who also bears administrative responsibility.
In practice, information confirming good faith can be presented by the supplier in the form of a certificate with a list of contracts that meet the requirements of Options No. 1, 2 or No. 3, which we discussed above. In such a certificate, the procurement participant can also indicate a link to entries in the register of contracts. To confirm the information, the supplier can attach printouts from the register of contracts, as well as copies of executed contracts and acts (the participant must provide a certificate, the rest is at his discretion).
In some cases, the customer may recognize information confirming good faith as unreliable if:
- the participant provided information on good faith on unfinished contracts
- the information provided on contracts confirming good faith is not in the register of contracts
- the requirements for the number of confirming contracts, terms, and absence of penalties have not been met (in accordance with options 1,2,3 discussed above)
This situation can have far-reaching consequences for the supplier, with the participant being included in the register of unscrupulous suppliers in the event of participation in an electronic competition. If the customer reveals false information in an open competition, the participant will get off with rejection of the application.
Option #1: If the Customer holds a competition to carry out research, development or technological work, then the competition documentation may provide for various criteria for evaluating applications with a price reduction of 25% or more from the NMC and less than 25% from the NMC. For example, a participant in such a competition reduces the price by 25% or more, in this case the Customer lowers the significance coefficient for the price proposal and sets it equal not to 60%, but to 30%; for assessing qualifications, the coefficient will become, for example, not 40%, but 70% . Thus, the application of the “dumping” participant will be evaluated in such a way that it becomes unprofitable to offer a lower price, since the participant in this case is guaranteed to score fewer points. These figures are given as an example and it is natural that the customer must specify in the procurement documentation the significance factors and the conditions under which they will be applied.
Option #2: If the customer is purchasing life support goods (food, first aid, fuel, etc.), then the participant, in addition to 1.5 times the contract security (or information confirming good faith), must justify the reduction in the price offer by submitting:
- letter of guarantee from the manufacturer (with price and quantity of goods)
- documents that confirm the fact that the participant of the procedure has the goods
- other documents
Option #3. Anti-dumping measures in some cases cannot be applied at all, for example, in the case of the purchase of drugs that are included in the list of necessary and essential drugs (such a list is approved by the Government of the Russian Federation). But the price of medicines should be reduced by no more than 25% relative to the maximum selling price registered in accordance with the legislation of the Russian Federation.
Option #4: Anti-dumping measures are also not applied if the customer does not establish a requirement to ensure the execution of the contract. Establishing contract security requirements is the responsibility of the customer, and in some cases the customer has the right not to establish contract security. In this case, the supplier does not need to provide contract security, provide information confirming good faith as part of the application, or provide contract security with a coefficient of 1.5.
We have examined in detail the anti-dumping measures under Federal Law 44, examined in all nuances the integrity of the supplier, and ways to confirm integrity. Now let's ask ourselves how effective are these measures proposed by the authors of 44-FZ? The point is that the starting point when determining dumping price or non-dumping proposed initial maximum contract price (IMC). But, as NMC practice shows, the customer can formulate and justify absolutely any, that is, it is not market price. If the NMC is 1,000,000, this does not mean at all that the real cost of goods, works, services is the same, that is, 1,000,000 rubles. Naturally, the customer is interested in ensuring that the procurement procedure takes place. Therefore, it is beneficial for the customer to form an NMC above the actual cost. This situation with the formation of the NMC is also beneficial for the supplier, who, by participating in the procurement, has the opportunity to “reduce” the price and compete for the order. Thus, we can conclude that the supplier’s price reduced by 25% or more from the NMC may not always be truly dumping. The mechanism that is laid down in 44-FZ to combat dumping cannot be called effective and thoughtful.
But it should also be noted that the customer himself can create conditions for combating dumping, for example, by choosing a procurement procedure in which it is possible to set a significance coefficient at a price of 30%. As practice shows, the customer himself is not always interested in fighting dumping, since in today’s unstable realities the lowest contract price is the most important factor when choosing a supplier.
It should also be understood that too low a price may cause poor quality of the goods, works and services supplied. Customers and suppliers should try to look for and find a middle ground in this difficult issue.
