Friday, 6 May 2011

Swiss book price-fixing: can it work?

Where old business models prove inadequate on account of new technologies and old IP laws, the usual answer these days is to call for new business models (whatever, and however effective they may or may not be).  There is however another solution, though admittedly one which may be of limited and diminishing applicability, depending on the technology -- state control of the market.

In March of this year the Swiss Parliament adopted new legislation to fix book prices. This law, which also applies to online book sales, requires the publisher or importer to set the final retail price of books that it publishes in, or imports into, Switzerland, compelling retailers to resell the books at the fixed price.

Following the passage of this law the Swiss Competition Commission decided to suspend its investigation of whether distributors and marketers of French-language books in Switzerland held a dominant position and, if so, whether they had set their prices at an excessively high level (Secretariat of the Competition Commission opened a preliminary investigation in 2007 into the French-language book market in Switzerland to see whether the retail price differences observed between books sold in Switzerland and those sold in France (between 25% and 35% at that time) were caused by anticompetitive activity).

On March 13 2008 the commission decided to open an investigation into distributors of French-language books operating in Switzerland. Distributors obtain exclusive rights to publishers' books and therefore any given book can be purchased only from its respective distributor or marketer in Switzerland. In view of this exclusivity, the commission considered that there were indications that the distributors of French-language books might hold, on an individual basis, a dominant position on the Swiss market, and that the level of prices charged for distribution services might be regarded as abusive pursuant to Article 7(2) of the cartel act. Subsequently, the commission widened its investigation to include Swiss recommended public prices set by distributors, in order to examine whether such practices (as well as the juxtaposition of vertical agreements between distributors and booksellers) could be regarded as illegal within the meaning of Article 5 of the cartel act.

The purpose of the new law is to promote the variety and quality of books, which are considered as cultural assets. Accordingly the publisher or importer has the right to determine the final retail price of the books that it publishes or imports. While booksellers are compelled to sell books at the final retail price they can still offer a general discount of up to 5% on the final retail price, as well as dropping prices for sales to public libraries, bulk sales and sales by book clubs. The law applies to the sale of books on the Internet (but not to digital books).

It will be curious to see how the controlled market for books fares in the era of e-books, downward-spiralling copyright protection and the accelerated closure of traditional book shops. If it works and keeps prices up, I suspect that this will make it more profitable for people to seek to circumvent it.  If it doesn't work and prices fall anyway, it may as well not have been implemented in the first place. Another interesting issue is the impact of this law on current and future contracts struck by authors with their Swiss publishers. But let's wait and see ...

Source: "New legislation introduced to allow publishers to fix book prices" by Silvio Venturi or Pascal Favre (Tavernier Tschanz), International Law Office, 5 May 2011

2 comments:

Japser said...

In the Netherlands, prices are set by distributors as well and retailers have to abide by those prices. They are not even allowed to have short-term promotional prices for books.

Which system is mandated by law and approved by the European Commission. Because this allows publishers to make big money on best sellers and use that win to compansate for losses less well selling books. In this way, the offer of books is kept as varied as possible.

Well, according to publishers and the government, that is.

Fortunately, in Flanders, book prices are not fixed :-)

Rob Harrison said...

Germany has known fixed prices for over 100 years and it is currently the only exception ankered in the "Gesetz gegen Wettbewerbsbeschränkungen" which states that the general prohibition against price fixing does not apply to products from publishing house (para 16). This was put under sevre test when Austria joined the European Union. The Commission investigated - I cannot remember the exact results - and resulted in Austria introducing a law similar to that in Germany instead of the previous contractual arrangements.

Intriguingly the restriction cannot apply to the principle of movement of free trade between EU states. So you can fix the prices sold in Germany (or Austria) but not those sold from Germany or Austria to the other country. There have been some attempts to exploit this - but at the end of the day the costs of distributing the products (books are heavy!) means that any potential savings are small.

Books from the UK or US can be sold without price restriction in Germany.

The prohibition on price restriction might or might not apply to eBooks. The publishers seem to think so and the law could be interpreted in such a manner. However, some legal authors adopt a different view.