SRAMs dumping complaint against Shimano goes mainstream

Entitled Antidumping: A Cautionary Tale and written by Richard Miniter, editor of the Business Europe column in The Wall Street Journal, the articles starts by saying: Welcome to the strangest, smallest antidumping case that you’ve never heard of.

Last year SRAM initiated a dumping complaint against Shimano, arguing that Shimano was dumping internal hub gears at predatory prices.

Miniter accuses SRAM of using the dumping complaint as a stick to hit Shimano with. He wonders why a non-European company filed a complaint to the EU against another non-European company.

There are no European-owned outfits involved. The last independent European bicycle-parts company was liquidated recently and the American complainer bought the German market leader. Only the buyers (bike makers) and the regulators are European and the case doesn’t seem to stir much passion in them, wrote Miniter.

Nor is there a David and Goliath angle here. Both companies…are big global players, with factories scattered across time zones. Each corporation has a roughly equal number of European factories, offices, employees and customers. And, since both sell almost entirely to bike manufacturers who are subject to market competition, consumers are not likely victims.

There are two different ways to run a business. One can focus on nuts-and-bolts, like making a good product and pricing it smartly…The second approach: use every weapon in the arsenal, including lawsuits and antidumping charges.

Shimano is definitely in the first category. When Shimano’s managing director, Satoshi Yuasa, was asked why he doesn’t counter-charge his competitor, he seemed confused. Waving away his own cigarette smoke, he said: "That is not the way we do business."

Sram is definitely in the second camp. Its Web site includes the boast, "We don’t make fishing gear!" a clear dig at Shimano, which does. And judging by the case it’s brought to the EU, it is willing to resort to legal maneuvering to beat the competition.

Be suspicious of complaints from rivals. Almost all dumping complaints come from competing firms. EU trade officials insist that they can sift bias from facts. But costs are hard to measure, markets are constantly moving and human motivations are complex…Launching dumping cases is easy, maybe too easy.

The euro complicates trade disputes. In January 1999, European bike makers began clamoring for Shimano to price its products in the new currency. (For years, Shimano maintained a single world-wide price list, in yen.)…Shimano reluctantly agreed to price products shipped from its German warehouse in euros.

[But]…the euro fell some 30% against the yen. Soon European customers began canceling their usual orders with Japan and reordering the same products from the German warehouse. Shimano tried, unsuccessfully, to raise prices in October 1999. But traditionally a price is good for an entire model year, so that the bike makers can charge uniform prices and earn stable margins. Bike makers threatened to sue Shimano if it raised prices during a model year–even to make up for the euro’s decline. (Shimano eventually succeeded, in Jan. 2000, in the midst of model year.) Nonetheless, the currency difference made it appear that Shimano was charging different prices for the same product.

Injury is an elastic concept. To prevail, the complainer must shown that his business has been harmed in some way. Sram holds some 60% of the market and charges lower prices than Shimano. So where’s the harm? Sram claims that Shimano’s "dumping" has artificially lowered the price level to gain market share…

[Anyone] who assumes that filing an anti-dumping case might be a shrewd way to spike a competitor probably wouldn’t be far wrong.

The full article is available at wsj.com.