The number of fines issued to international supermarket chains for selling products under the procurement price is growing, as suppliers and manufacturers more often exercise their rights given to them by laws on agriculture order, writes napi.hu.
During the first six months of the year, the Agricultural Office (Mezőgazdasági Szakigazgatási Hivatal; MgSZH) issued Ft 168.75 million (€620,000) in fines, compared to a total of Ft 183 million last year. All businesses with the exception of Tesco have paid the fines. Among other chains which were issued a fine are Auchan and Penny Market.
…I dont see the issue with selling things cheaper – anyone care to
explain?
@mike: Actually, throughout Europe countries have laws against selling stuff below cost, which is considered anti-competitive behavior. Meanwhile, in France (and maybe Germany, too) retailers are tightly restricted on when they can hold “sales” – not exactly sure how, but I think the number of sale days and when they are held is codified by law. I don’t think there are any regulations in Hungary like the latter, but for sure there are rules against selling below cost, as hard as they are to enforce, and as strange as they may seem to people from countries without such regulations.
The term for such commodities is ‘loss leader’, often used to entice shoppers in by offering a basket of the most commonly demanded goods at low prices.
I note that local shops here (Budapest) also do something similar with milk, bread etc… to compete with custom from larger supermarkets (though it normally works the other way around).
Loss leaders are normally hidden away somewhere in a shop to make sure shoppers have to scan their eyes past or walk around the shop to find them. This inevitably leads to unplanned, spur of the moment purchases whose price offset the losses of the target item.
There is also a science to shelf stacking and software that can help you optimise this to increase profits.
The UK often has price wars as a result of these practices. I remember there being competition to sell tins of baked beans for virtually nothing. Tesco, Sainsbury’s etc… offering them at 1p, such that the shops then had to introduce limits on the number of such items shoppers could purchase as students gleefully invaded the stores.
Kindly re-read the article and what Erik had said on it, Vándorló. As you are rather wrong and misleading in stating that the practice described in the article and by Erik above is known in retail commerce as a “loss leader.” That is something else entirely, and you had in fact described it accurarly for what it is.
However, selling on the retail level below acquisition cost in order to gain market share and market domination is simply known as “DUMPING.” Therefore, “loss leaders” are something else entirely.
@TVV47: The behaviour is as described. Dumping is related and use of loss leaders an important part of dumping activity. As the original article does not distinguish the form and aim of such activity from the sellers’ perspective (“…beszerzési ár alatti értékesítéssel kapcsolatos szabály megsértése miatt…”) your assertion that this is blatant dumping is unfounded, though may be true. In any case, loss leaders are used in dumping marketing and predatory pricing campaigns. More than this, there was no connotation of an international, cross-border dumping of goods in Hungary as dumping often suggests or entails. To be pedantic, the technical definition of dumping does require an international perspective.
The articles I have read do not refer to dumping (‘dömping’ as it would be referred to in Hungarian). Though it is clear that Auchan’s fine for underselling Jägermeister *could* be. Predatory pricing (k.b. ‘ragadozó árképzés’) for the underselling of bread and milk may not be. Just for the record the best (short) translation of loss leader I have come across is ‘invitáló termék’ (azért, mert pontos fordítása csak körülírással legetséges).
I’ve had a look for more detailed info, including on the government agency website responsible for the fines (www.mgszh.gov.hu) and there is little more than the napi.hu story to it.
So, TVV47man, what makes you sure the behaviour in question was dömping and not simply the use of invitáló termék?
Vándorló, you goofed, and instead of admitting that you goofed, you are trying to muddy the waters for everyone. In fact, you are trying to prove that dumping is really a “loss leader,” and that a “loss leader” is actually dumping. Doesn’t even sound right, does it now?
When in fact, the truth is simpler than that: dumping is dumping, and a loss leader approach to get customers is, well… you’ve guessed it: something else entirely. One is an illegal practice. The other one is not an illegal practice. Big difference, therefore, hmm?
BTW, no matter how hard you twist and turn the facts, the article cited above did NOT talk anything about any “loss ldader.” However, it did talk about getting fined for practicing dumping, i.e. selling retail for below acquisition cost.
Just so we are straight on all of this, you know.
@TVV47man: No, I was clarifying the differences as I clearly stated that dumping requires, by definition, for the trade to be international and cross-border (“A standard technical definition of dumping is the act of charging a lower price for a good in a *foreign market* than one charges for the same good in a *domestic market*.”)
It is also clear that I do not believe dumping and loss leaders are the same from the set of examples I give. It is that case that dumping often involves the use of loss leaders, though not visa versa (if the trade is conducted within ones own local economy/market).
Hope this helps you to understand these concepts. I understand it can be difficult for economic neophytes such as yourself, but persevere you’ll get there with (a lot of) effort.
If you can provide more data on the case and on the exact basis for the fines then we would be able to state unequivocally which was which. As I have stated, no such data appears to exist. The goods listed suggest the mere use of loss leaders not dumping in most, if not all, cases.
I’d say the “loss” in the term “loss-leader” makes it pretty clear that it is supposed to mean selling stuff for less than it costs, in order to drive demand for other products. At least in US English, this is how it is understood; a good example is the 10 cents per pound (or whatever) Thanksgiving turkeys supermarkets advertise – and sell at a loss – in order to get people to come in and buy lots of cranberry dressing and so on at a normal (or higher-than-normal) markup. In other words, it’s all the same.
Well, I suppose “some people” will never give up. Right, Erik=Vándorló?
The term “loss elader” does not signify anything by itself, unless you happen to know what the term means, you probably cannot figure it out just by looking at the meaning of the two words indvidually that comprise this term. Still with me on this, guys?
Erik, you claim that “loss leader” happens in order to drive demand up for other products. That may be. It also may be that the pracrtice is aimed at enhancing market share and market penetration, like for instance when a new dept store opens up, and they price stuff less expensively then their nearby competitor.
For instance, I am pretty sure that every time Auchan underprices Tesco for a particular identical product they both sell, the “news” will not end up here on RealDeal.hu, nor will there be a HUF 169,000,000 fine assessed against Auchan for doing so.
“Dumping requires, by definition, for the trade to be international and cross-border.”
MY TAKE: Not really. Maybe in the Eurolexicon. In the USA, for instance, you can be fined for dumping even if both the mfr and the retail outlet are US-based.
Also, are you saying, Vándorló, that some benevolent WESTERN MULTI company is “dumping” the same identical quality and freshness date food product in Hungary for LESS MONEY than what they could get for it back home? Why?
“Dumping often involves the use of loss leaders, though not visa versa.
MY TAKE: But only if YOU insist, Mr. Vándorló.
@TVV47man: You are way out of your depth on this as with everything else.
There is no difference in meaning in the US and EU use of the term dumping, which entered US law in various acts from 1916-21. Other country dates are Canada 1904, New Zealand 1905, Australia 1906, Japan 1910, South Africa 1914 and Great Britain 1921.
The first specific US anti-dumping law was part of the Revenue Act 1916. Your assertion that dumping is used to describe intra-national, as apposed to inter-national, is without any basis whatsoever and simply wrong.
The rest of what you write is a scrambled attempt to repeat what I have already written in the comment from September 9, 2009 1:04 PM.
Vándorló, it looks like you are pretty handy in looking up stuff on Wikipedia. Just how do you do it so quickly and efficiently, pray tell!?
Okay, so let’s see if we can come up with a workable compromise here as the solution? How about this slightly revised sentence based upon your very own mind-strecthing original version:
“Various anti-dumping laws against Hungarians indiscriminately dumping on them were enacted by the United States in 1916-21, Canada in 1904, New Zealand in 1905, Australia in 1906, Japan in 1910, South Africa in 1914, and Great Britain in 1921.”
Now, is everybody happy? Can we all go home and get on with our busy lives, or will you be stuck in first gear from now until the year 2525, Our Beloved Vándorló?
BTW, who exactly is this “TVV47man,” Meddling Horsie? Your long lost brother from Bangladesh? You don’t say, do you now!?
@TVV47man: The information was gleaned from “Anti-dumping and anti-trust issues in free-trade areas”
By Gabrielle Marceau, not from Wikipedia. You can get it from Oxford University Press, USA (February 16, 1995) ISBN-10: 0198259204 or ISBN-13: 978-0198259206.
Though it is a little pricey at $240.
Vándor, the Ló, Hell-ló!!!
“The information was gleaned from “Anti-dumping and anti-trust issues in free-trade areas”
by Gabrielle Marceau.”
MY TAKE: Oh, I know Gabi. She gives real good he… he-hummm. Sounds most impressive indeed, doesn’t it now? It works well with the chicks too, I suppose? Oxford University — they teach BUSINESS over there? Didn’t even know that, phew….
“Not from Wikipedia. You can get it from Oxford University Press, USA (February 16, 1995).”
MY BEMUSEMENT: Okay, okay, so this thing from the Oxford University, which is in the USA? Not that one in the UK? But which USA Oxford University are we talking about then — USA East Coast or USA West Coast?
“Though it is a little pricey at $240.”
MY TAKE: Yeap, it definitely costs more than if you had looked up the same exact information on Wikipedia, as I had imagine that you really did.
http://en.wikipedia.org/wiki/Dumping_(pricing_policy)
But hey, if you were able to “liberate” this paperback from your local Szabo Ervin konyvtar library, then it wasn’t all that bad as that for the price. Right, My Esteemed Vándor, the Ló — Pestiside’s Own Resident Scholarly Type…?
BTW, who exactly is this “TVV47man,” Meddling Horsie? Your long lost brother from Bangladesh? You don’t say, do you now!? Wow!!
Yours truly,
Frankoferko
@TVV47man: “…it definitely costs more than if you had looked up the same exact information…” The information I provided is not given on the page you reference and I did use a digital copy of the book I referenced (printed in the US under license).
Also, to help you in future events a fuller translation in Hungarian of loss leader (often shortened to simply ‘leader’) would be “veszteséggel értékesített forgalomépítő, invitáló termék” (as given by the EU online dictionary http://iate.europa.eu/iatediff/ ). This pretty much fully describes what it is in plain Hungarian.
ATTENTION: Wild Horse on Unabated Nomenclature Rampage!!!!
Good Horsie, now you claim to us that “the information I provided is not given on the page you reference and I did use a digital copy of the book I referenced (printed in the US under license).”
MY TAKE ON THE LATEST NONSENSE: U R really confused, My Dear Wandering Four-Legged Animal. If it is a DIGITAL BOOK or E-BOOK, then it is NOT printed on paper. The ones that are printed on paper are called “regular books” or “paper books,” dig?
Also, did you really go all the way to the United States to print out this book, so you can tell me something that I already knew beforehand? You really shouldn’t have, you know….
“Also, to help you in future events a fuller translation in Hungarian of loss leader (often shortened to simply ‘leader’) would be “veszteséggel értékesített forgalomépítő, invitáló termék” (as given by the EU online dictionary http://iate.europa.eu/iatediff/ ).”
MY NOD IN COMPLETE AGREEMENT: In fact, a “loss leader” or “leader” is oftentimes described by more sophisticated Hungarians as a “Szalasy.” Since he was also called a “leader,” correct?
BTW, does you digital-cum-paper magic book of high exclusivity also tell you why the 169 million forint fine was assessed against the Hungarian supermarkets? The multitalented Gabi surely must have known this in advance. Right, Our Beloved Leader!?