The Snicker Company, the largest manufacturer of Snickerdoodles in State F, deci

Question

The Snicker Company, the largest manufacturer of Snickerdoodles in State F, decided about two years ago to enter the cookie market in State G. Several small companies in State G manufacture Snickerdoodles, but the market has traditionally been very small. When Snicker entered State G’s market, it undertook a widespread advertising campaign to promote Snickerdoodle consumption and to encourage consumers to try its product by publishing coupons in newspapers that allowed purchasers to buy Snicker’s Snickerdoodles below their actual cost. As a consequence of this campaign, the sales of Snickerdoodles in State G have skyrocketed. In addition, the sales of Snickerdoodles manufactured by State G firms have more than tripled. State G’s Snickerdoodle manufacturers are, nonetheless, displeased because their market share has gone from 100 percent to 30 percent in two years. Concerned with this loss, they have asked State G to impose anti-dumping duties on Snicker, since its snickerdoodles are being sold below cost. Both State F and State G are members of the WTO. Should State G impose anti-dumping duties on Snicker? Explain.

Explanation / Answer

If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product.

The WTO agreement allows governments to act against dumping where there is genuine (“material”) injury to the competing domestic industry.

Anti-dumping measures can only be applied if the dumping is hurting the industry in the importing country.

In the case mentioned above, The Snicker Company is selling the Snickerdoodles below their actual cost in State G. This shows that it is a case of Dumping.

However, according to the WTO agreements, there should be material hurt to the domestic industry in order for the government to take action against Snicker Company. In this scenario, the extensive promotional efforts of the said company have actually tripled the sale of Snickerdoodles in State G. This shows that even though the proportionate share of the domestic producers has reduced, their sales have actually increased and that would automatically show higher profitability for them.

Thus, we can conclude that even though it is a case of dumping, the government of State G should not take any action against The Snicker Company as it is actually helping in increasing the sales and profitability of the product's industry.

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