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Fixed Book Prices in a Changing Market Environment

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Fixed Book Prices in a Changing Market Environment Fixed book prices in a changing market environment Special Report No 80 Special Report by the Monopolies Commission pursuant to section 44(1)(4) of the Act Against Restraints on Competition 2018 Table of contents I Table of contents Preamble .................................................................................................................................................................... 1 Summary .................................................................................................................................................................... 3 Chapter 1 ................................................................................................................................................................... 5 Introduction ................................................................................................................................................................ 5 Chapter 2 ................................................................................................................................................................... 8 The market for books: product characteristics, market structure and market developments ...................................... 8 2.1 The book as an asset .................................................................................................................................. 8 2.1.1 Product features of the book ..................................................................................................................... 8 2.1.2 Title diversity and product categorization .................................................................................................. 9 2.2 The structure of the book trade ............................................................................................................... 12 2.2.1 The author: creator of books and starting point of the book market ....................................................... 12 2.2.2 The publisher as duplicator and distributor ............................................................................................. 13 2.2.3 The intermediate book trade: more than just a logistics service provider ............................................... 15 2.2.4 Book retailing: hinge between publishers and readers ............................................................................ 18 2.2.4.1 Competitive factors in the brick-and-mortar book trade ......................................................................... 21 2.2.4.2 Competitive factors of Internet booksellers ............................................................................................. 22 2.2.4.3 Amazon’s special role in the online book market ..................................................................................... 23 2.2.5 Great heterogeneity on the customer side .............................................................................................. 25 Chapter 3 ................................................................................................................................................................. 29 Book markets in Europe and experience with the abolition of fixed book prices ....................................................... 29 3.1 European book markets: an overview ...................................................................................................... 29 3.1.1 Fixed book prices in Europe: a mixed picture ........................................................................................... 29 3.1.2 Clear differences between national book markets in Europe ................................................................... 31 3.1.2.1 Per capita book sales vary widely ............................................................................................................. 31 3.1.2.2 Large differences in title production ........................................................................................................ 31 3.1.2.3 Bookseller density in Europe is very heterogeneous ................................................................................ 32 3.1.3 Fixed book prices are neither a prerequisite nor a guarantee for a functioning book market ................. 33 3.2 Experience after the abolition of fixed book prices in selected countries ................................................ 33 3.2.1 The United Kingdom: title production, sales figures and publishing sales increase, brick-and-mortar book trade loses ....................................................................................................................................... 34 3.2.2 Switzerland: Abandonment of fixed book prices has not endangered the book market .......................... 39 Chapter 4 ................................................................................................................................................................. 44 Objectives and effects of the German Book Price Fixing Act ...................................................................................... 44 4.1 The objectives of the Act ......................................................................................................................... 44 4.1.1 Protection of the book as a cultural asset and related sub-objectives/intermediate objectives .............. 44 4.1.2 First problem: unclear protection objective makes practically effective protection difficult .................... 47 4.1.3 Second problem: confusion of objectives and the means used to achieve them .................................... 48 4.2 Ambivalent effects of statutory fixed book prices .................................................................................... 50 4.2.1 Ambiguous welfare effects of vertical price fixing in economic theory .................................................... 51 Table of contents II 4.2.2 Theoretical models only partially applicable to fixed book prices in practice .......................................... 52 4.2.3 The importance of fixed book prices for the book trade in general ......................................................... 53 4.2.3.1 Service instead of price competition ........................................................................................................ 53 4.2.3.2 Fixed book prices cannot completely prevent price competition ............................................................ 55 4.2.3.3 (Small) brick-and-mortar booksellers are also under pressure in service competition ............................ 57 4.2.3.4 Unclear relationship between fixed book prices, willingness to stockpile and variety of titles ................ 58 4.2.3.5 Fixed book prices slow down structural change without preventing it .................................................... 59 4.2.3.6 Declining importance of brick-and-mortar booksellers for customers ..................................................... 60 4.2.3.7 Fixed book prices complicate market entry.............................................................................................. 62 4.2.4 Fixed book prices slow down functional change in the intermediate book trade .................................... 63 4.2.4.1 Traditional business areas are protected, the expansion of new ones is inhibited .................................. 63 4.2.4.2 Fixed book prices secure negotiating power of the intermediate book trade .......................................... 64 4.2.5 Effects on the publishing industry ............................................................................................................ 64 4.2.5.1 Fixed book prices change publishers’ competitive parameters ................................................................ 64 4.2.5.2 No clear correlation between fixed book prices, price levels and publishers’ earnings ........................... 67 4.2.5.3 Unclear relationship between fixed book prices and title diversity.......................................................... 69 4.2.5.4 Declining importance of the protected retailing infrastructure for publishers ......................................... 71 4.2.5.5 Fixed book prices protect publishers’ negotiating position only to a limited extent ................................ 72 Chapter 5 ................................................................................................................................................................. 73 Legal assessment of the current fixed prices for printed books ................................................................................. 73 5.1 Introduction ............................................................................................................................................. 73 5.2 Potential infringement of the free movement of goods (Art. 34 ff. TFEU) ............................................... 73 5.2.1 Possible finding of a “measure having equivalent effect” (e.g., a quantitative restriction) ...................... 73 5.2.2 On the justification of the price fixing requirements ............................................................................... 77 5.2.2.1 Benchmark: Relevant items of protection and verification requirements ................................................ 77 5.2.2.2 Books as cultural objects .......................................................................................................................... 78 5.2.2.3 The contribution of traditional distribution infrastructure ......................................................................
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