Battle Over Price Maintenance
Roils The European Book Trade
In case there was any doubt about it, German culture minister Michael Naumann will not go gently into his country’s cultural good night. Portraying himself to the media as a lonely lookout on the prow of the Titanic, scanning for the iceberg that will plunge German literature to the depths of commercialism, Naumann has in effect declared war on the free market. And that means cut-price bestsellers are still verboten in Germany, where publishers have staunchly defended the century-old practice of maintaining fixed retail prices for books. Their stance was affirmed last month when the deeply discounted future came knocking in the form of 14 European Commission minions, who raided several German publishers — among them Bertelsmann — seeking evidence that they colluded to cut off distribution to savvy Austrian Internet bookseller Libro, which on July 1 began selling more than 100 German-language bestsellers into Germany at a 20% discount.
July 1 was the fateful date that Germany and Austria agreed to abandon their commitment to one another’s retail book prices after bowing to EU competition commissioner Mario Monti, who has crusaded against cross-border price fixing on the grounds that it presents an illegal restraint of trade. This skirmish on the Danube over what is known as resale price maintenance has highlighted the vulnerability of European book markets to vanishing trade barriers. But the battle over fixed prices transcends economics to pierce the very heart of what it means to sustain a literary culture amid a one-world zeitgeist.
“For smaller language zones like Germany, book price maintenance is very necessary,” says Eugen Emmerling, a spokesman for the Börsenverein, the German publishers and booksellers alliance. “We must ensure a future for a variety of independent bookshops and publishing houses. In Germany we value freedom of speech.” Those are fighting words in a country where more books are sold per capita than in any nation save for Britain. Emmerling and others argue that fixed prices ensure “literary productivity” and “diversity,” because deep discounting by chains and Internet booksellers threatens the existence of small, literary booksellers and publishing houses. They warn that the abolition of price-fixing would put two-thirds of Germany’s 6,000 bookshops out of business. It would also cut back on the 900,000 books in print in Germany, where the new title output reached an all-time high last year of 80,779. “We have more new titles in Germany than in other countries,” explains Emmerling, “and we think that the system of the fixed book price can help retain this variety and stop conglomeration in the book trade.”
Yet critics note that the German book biz has been under siege from imports for some time now. The Weekly Standard examined a leading bestseller list and found that only a quarter of the top hundred titles in Germany last year were written by German-speaking writers. Within the top ten, in fact, there was only one German speaker. By contrast, more than 40 of the top hundred titles were British or American works. In other bad news, the German book market just turned in its second flat year in a row, with sales up a slim 1.5% to $8.3 billion. Given such numbers, it’s not hard to see why Germany’s culturati are on the defensive.
“The whole issue is loaded with emotions,” says agent Michael Meller, who adds that matters aren’t helped any by the fact that in Germany the publishers association and the booksellers association are one and the same. Clearly, Germany’s publishing establishment holds a passionate faith in the Buchpreisbindung, which has been in effect since the 1880s and exempts books, magazines, newspapers, calendars, maps, and globes from the free market. Thus Harry Potter fans had to shell out DM44 (about $20.40) for Goblet of Fire on Amazon.de, while UK readers had it for a breezy $13.50. By comparison, US readers could find it on Amazon for $15.57. Meller says that while price maintenance protects the small booksellers in theory, in practice those booksellers are being driven out of business by chains such as Hugendubel, Phoenix, Douglas, and Germany’s biggest bookseller by volume, Kaufhof. Then there’s a joint venture between Hugendubel and Weltbild called “Weltbild Plus,” a sort of book club that specializes in “Modern Antiquariat” knock-offs of successful titles. Meller also notes the irony that the recent McKinsey report to the Holtzbrinck Group expressly advised the publisher to stop cross-subsidizing titles — that is, subsidizing slow-selling literary titles with the proceeds from bestsellers — in order to re-establish profitability.
The ‘Cultural Exception’
Of course, Germany is not the only nation resisting a free market for books. The French have fiercely guarded the “cultural exception” that protects the nation’s culture from foreign incursion. French book prices are strictly maintained under the 1981 “Loi Lang,” named for former French culture minister Jack Lang, which permits a maximum discount of 5%. And last year, French culture minister Catherine Trautmann even vowed that her government would pursue a pan-European fixed-price regime when it assumes the six-month term of EU presidency this year. As in Germany, however, the state of literary affairs in France seems somewhat compromised. The Académie Française recently declared that a lack of interest in French literary life “is on the verge of completely eliminating knowledge and appreciation of literature.” And if they’re worried now, just wait till Amazon debuts in France this month.
As for the rest of Europe, several other nations have moved to block book discounts. Portugal passed a fixed-pricing law a few years ago, and Greece implemented a price regime last year. But most observers agree that the long-term tide seems to be turning against trade barriers. Finland and Sweden dumped fixed pricing in the 1970s, while in 1996 Italy junked an agreement between some publishers and booksellers not to supply books to retailers that discounted deeply. And Spain recently authorized the discounting of textbooks (they were considered too expensive), while Denmark has severely cut back its pricing scheme.
Meanwhile, all eyes are trained on the UK as a free-market case study. In 1995, British publishers abandoned their hundred-year-old price-fixing scheme, known as the “net book agreement.” But thus far, the predicted demise of small booksellers has not come to pass. “We were anticipating a very detrimental effect on the independents,” says Ian Taylor, director of international and trade services for the Publishers Association. “But it hasn’t been as damaging as we expected.” Independents who decline to discount titles such as Harry Potter are still “doing very well,” and a growth of wholesalers in the UK has had a cushioning effect, as discounts from publishers are passed on to accounts. Indeed, only about 900 titles were discounted out of the 150,000 published in Britain last year, according to Frank Fishwick, economic adviser to the Publishers Association, who adds that book prices have risen much more than general inflation. The country has also seen stronger sales of hardcovers, as consumers seem prepared to buy a discounted hardcover rather than wait for the paperback (which is the same phenomenon that killed the mass market biz in the US). Other evidence shows that the number of new titles has been growing at about 5% per year. And how do publishers feel about the end of price maintenance? “Most publishers in this country don’t have an opinion,” Taylor says. “They’ve simply moved on.”
Booksellers apparently feel much the same. “It’s over, dead, and buried as far as we’re concerned,” says Sydney Davies, trade and industry manager for the Booksellers Association. “The whole trade has changed since it was outlawed. Booksellers now see their competition more from the Internet and from American chain booksellers opening in the UK.” He says the number of bookshops has decreased only marginally since the end of price maintenance, while chains have opened more branches and nontraditional outlets are selling more books.
To some observers of the European price wars, the rhetoric on both sides of the issue has a familiar ring. “It’s an argument that’s been present in the book trade for a very long time,” says Laura Miller, an assistant professor at the University of Western Ontario who studies the book trade. “The idea is that books are not simply another commodity.” Miller points out that in the US, publishers formed the American Publishers Association in 1900 (along with the ABA, which is of course still with us) to battle price-cutting department stores. Then in 1913, she says, Macy’s won a lawsuit against publishers, and the APA was subsequently disbanded. The booming postwar years made price maintenance irrelevant, and the federal government put an end to such practices in 1975. By that time, however, discounting was considered a dandy way to sell books, and publishers couldn’t even recall what the ruckus over price maintenance was all about.
It’s still unclear whether the Europeans will take a similar turn. For the moment, German publishers have persuaded Libro to stop discounts on German titles. That agreement, however, was being reviewed by the EU for evidence of collusion to restrict cross-border trade. Meanwhile, trade warriors are keeping an eye on Belgian online bookseller Proxis, which sells to the Netherlands, France, and soon to Germany. As Meller sums up, “Now it’s all up to the courts and will take another decade to be resolved. In the meantime booksellers will disappear, publishers will be rudderless, and the Internet is the bogeyman!” Maybe bookselling in Europe isn’t so different from America after all.