Dumping: What to Do When a Competitor Artificially Lowers Prices
How dumping works and why it’s used
The main sign of dumping is when the price drops significantly below market level. For example, if the average price for a coffee in your city is $4, but one place offers it for $1 — that’s clear dumping. Unlike regular discounts, such pricing doesn’t even cover costs.
This can be done for various reasons: to attract customers, eliminate competitors, or simply clear out unsellable stock. It’s an aggressive strategy that can be profitable short-term but often leads to losses or market issues in the long run.
Common reasons for using dumping:
Real-world dumping examples
Is dumping legal?
What does U.S. law say?
In the U.S., anti-dumping and unfair pricing practices are governed by several key laws and regulations:
- The Sherman Antitrust Act prohibits anti-competitive practices, including price-fixing and predatory pricing. If a company lowers prices below cost with the intent to eliminate competitors and later raise prices, it could face legal consequences under this law.
- The Clayton Act strengthens antitrust protections by addressing practices like price discrimination, exclusive dealing, and mergers that may substantially lessen competition.
- The Federal Trade Commission Act prohibits "unfair or deceptive acts or practices" in commerce. If price dumping misleads consumers or harms competition, the FTC may intervene.
- Anti-Dumping Laws under the Tariff Act of 1930 specifically target foreign companies selling products in the U.S. at unfairly low prices. If dumping harms domestic industries, the U.S. can impose anti-dumping duties — special tariffs that raise the import price to a fair level.
While competitive pricing is legal and expected in a free market, manipulating prices to destroy competition is not. Businesses should ensure their pricing strategies comply with U.S. antitrust and trade laws to avoid investigations, fines, or lawsuits.
How prices are dumped on marketplaces
Dumping is common on marketplaces. Shoppers go there for low prices and fast delivery, while sellers drop prices to beat competition or gain visibility. This is especially visible in high-demand categories (daily goods, clothing, shoes, food).
Undercutting others might seem logical, since buyers often choose the cheapest item. But compromising on quality drops ratings quickly, and bad reviews scare off new customers. Sellers focused only on low prices rarely succeed long term. It’s better to aim for fair pricing — and if a product isn’t profitable, reconsider your product mix.
Instead of lowering prices, it's more effective to attract buyers differently: offer something unique, invest in promotion, include bonuses, and maintain quality.
A well-designed product listing can boost sales dramatically. High-quality photos, clear descriptions, and infographics help show what the customer is paying for. If competition is too intense on one platform, consider other sales channels instead of competing only on price.
It’s important to present your product in a way that explains why it’s worth the cost. Look at how big brands do it — they sell not just a product, but value, through packaging, design, and service. Of course, a small store can’t replicate Apple, but you can apply their principles — highlight your product’s unique features, advantages over competitors, and customer convenience.
What to do if a competitor is dumping prices
You can respond to dumping in different ways depending on how much it affects your business.
Types of dumping
Price reductions that hurt profit margins can be split into two types:
In short: the first is mostly used domestically, and may involve selling at a loss. The second is common in exports, but still allows for profit.
Conclusion
Dumping is a way to compete by cutting prices, but it doesn’t always pay off. It may quickly grow your customer base, but over time it often leads to losses.
Constant discounts reduce profit and weaken your business. Instead of racing to the bottom, focus on quality, customer experience, and strong marketing. In the end, those who offer real value — not just low prices — are the ones who win.