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THE 1957 NET BOOK AGREEMENT. ARE BOOKS STILL DIFFERENT IN 19931 AN INVESTIGATION. by James Dearnley A Master's Dissertation, submitted in partial fulfillment of the requirements of the Master of Arts degree of the Loughborough University of Technology September 1993 Supervisor: Professor J.P.Feather Department of Information and Library Studies © J.A.Dearnley, 1993. Table of Contents INTRODUCTION 1 CHAPTER ONE. CHANGING OR UNCHANGING? PUBLISHING AND BOOKSELLlNG 1962-1992. 1.1 Introduction 5 1.2 Statistical sources. The problems 5 1.3 The publishing industry 1962-1992 6 1.4 Tities published 7 1.5 Publishers sales 8 1.6 Price indices 9 1.7 The bookselling trade 1962-1992 11 1.8 Bookshops - key data 12 1.9 Summary 13 CHAPTER TWO. RESALE PRICE MAINTENANCE AND THE NET BOOK AGREEMENT. 2.1 Introduction 23 2.2 Resale price maintenance - an overview 23 2.3 Resale price maintenance and the book trade 1829-1940 25 2.4 The Net Book Agreement explained 27 . 2.5 Resale price maintenance & UK law 1895-1962 29 CHAPTER THREE. ECONOMIC ASPECTS OF THE NET BOOK AGREEMENT. 3.1 Introduction and background 33 3.2 The Restrictive Trades Practices court 1962 34 3.3 The RPC judgement examined. The favourable Judgement 36 3.4 Criticism of the Judgment 39 3.5 Title production and consumer detriment 42 3.6 Book prices 43 3.7 Stockholding bookshops 45 3.8 Summary 48 CHAPTER FOUR. BACK IN COURT: THE NET BOOK AGREEMENT, UK LAW AND EC LAW. 4.1 Introduction 52 4.2 The Net Book Agreement and UK law 52 4.3 EC law 55 4.4 Background 56 4.5 The Net Book Agreement and EC law 58 4.6 The aftermath 62 4.7 Summary 63 CHAPTER FIVE. FOREIGN PERSPECTIVES. 5.1 Introduction 68 5.2 Belgium 69 5.3 Sweden 70 5.4 Australia 72 5.5 United States 76 5.6 Summary 78 CONCLUSION 82 REFERENCES 86 APPENDIX ONE The 1957 Net Book Agreement. 101 APPENDIX TWO Articles 85(1) and 85(3) of the EC treaty 104 List of Figures. FIGURE 1. Titles published 1962-1991 17 FIGURE 2. Publishers sales 1972-1991 18 FIGURE 3. CSO price index 1962-1981 19 FIGURE 4. Comparative price indices 1981-1989 20 FIGURE 5. USA I UK comparative statistics 1961 21 FIGURE 6. Bookselling key data 1976-1990 22 FIGURE 7. Booksellers and stationers 1986-1990 22 ACKNOWLEDGEMENTS My grateful thanks go to my supervisor, Professor J.P.Feather for his opinions and advice on this thesis and to Mr J.W.Sumsion for allowing me to use his archive on the Net Book Agreement. I would also like to extend my thanks to my mother and father, for their support during this course. ABSTRACT The 1957 Net Book Agreement is the last surviving example of resale price maintenance in the retail trade. It was last examined at the 1962 Restrictive Trades Practices court, which concluded that the agreement was in the public interest and that 'books are different' from other commodities. It concurred with the Publishers Association that abrogation would cause fewer titles to be published, fewer bookshops and higher prices for books. In the thirty years since the judgment the bookselling and publishing trades have changed in terms of their structure and practices, yet the Net Book Agreement remains in place. This thesis will examine whether the 1962 decision can be still viewed as relevant to the 1992 trade. To investigate, the thesis is split into five sections; an analysis of changes in the bookselling and publishing trades between 1962-1992; resale price maintenance and the Net Book Agreement; the economic arguments surrounding the judgment; the relationship between the agreement and UK and EC law, and the experience of counties which have abolished RPM on books. It will conclude that the evidence provided to the court was unsound and that the detrimental effects predicted at the court would not necessarily happen if the agreement was abolished. INTRODUCTION On the 30th October 1962 the Restrictive Trades Practices Court concluded that the 1957 Net Book Agreement (NBA) did not infringe the 1956 Restrictive Trades Practices Act. In his summary of the proceedings, Mr Justice Buckley concurred with the Publishers Association that abrogation of the NBA would have three direct consequences on the book trade:- i. Fewer and less well equipped stockholding bookshops. ii. More expensive books. iii. Fewer published titles. The NBA was found to be in the public interest. In the judgement Mr Justice Buckley, alluding to the problems publishers faced in producing books for which there was no guaranteed market commented in his summary:- "Books are different...may be accepted as true in two respects : for, first, no two literary works are the same or alike in the way in which or the extent to which two oranges or two eggs may be said to be; and, secondly, the production and marketing of books involve problems that are different from those which arise in connexion with most other commodities." (1) Consequently, the NBA was exempted from further investigation by the Restrictive Trades Practices Court, it has retained this exempted status through three changes to Restrictive Trades Practices law in 1964, 1968 and 1976, it remains as the last bastion of resale price maintenance in the retail trade. 1 It remains to be seen whether the NBA will survive to celebrate its centenary in the year 2000 either in its present form or at all, events in recent years point toward its downfall or a substantially altered agreement; it has been attacked head-on by one major book chain and one major publisher; it has been attacked by the European Commission and it is coming under increasing attack from the growth of book clubs. So, in 1992 has the book trade changed sufficiently in the thirty year period since the judgement to make the decision outdated? Were the conclusions reached by the court valid in 1962, and can they be viewed as valid in 1992? Do other country's experiences of RPM on books support the conclusions made by the court in 1962? Are books still different in 1992? To answer these questions, the thesis is divided into five sections: Chapter one will examine trends in the publishing and bookselling trades between 1962-1992, in particular it will analyze the growth of titles published, publishers sales, book prices during the period and key data on the bookselling trade. Chapter two will give a brief overview of resale price maintenance (RPM), the book trade's relationship with RPM since 1829, an explanation of the 1957 Net Book Agreement and a summary of UK law relating to RPM up to 1962. Chapter three will examine the 1962 Restrictive Trades Practices court, how the agreement was defended and criticism of the court's judgement. It goes on to examine the book trade between 1962 and 1992 and whether the NBA continues to be in the public interest. 2 Chapter four will examine the NBA's survival through more stringent RPM laws in the UK and will analyze the European Commission's ruling on the NBA and EC interstate trading laws. Chapter five will examine the experience of three countries who have had experience of abolishing RPM on books and will analyze the United States book trade, which has never had RPM on books. I 3 REFERENCES 1. Barker, R.E. & G.R. Davies. Books are different, 1966, p. 4. 4 CHAPTER 1 CHANGING OR UNCHANGING? PUBLISHING AND BOOKSELLlNG 1962- 1992. 1.1 INTRODUCTION This chapter will examine trends in the publishing and bookselling trades, providing brief overviews of the respective trades between 1962-1992. In addition, it will analyze four major developments over the period:- i) The number of titles published. ii) Publishers sales by category. Hi) Book price indices. iv) Key data on the bookselling trade. 1.2 STATISTICAL SOURCES: THE PROBLEMS Observation of trends between 1962 and 1992 is made difficult, and in many cases impossible by the lack of statistical measures which encompass the whole period. In 1992 the trade is well provided with a large range of statistical data from different sources. Material in this chapter comes from a variety of sources; The Department of Trade and Industry publishes the twice yearly Business Monitor PO 4753, which gives total sales in the industry and the Retail Enquiry SDA 25 annually, which collects 'key data' on bookselling, including number of outlets, turnover and gross margins. The Department of Employment publishes the index of Retail Prices, based partly on consumer expenditure on books. In addition, 'The Bookseller' publishes the 'Bookseller Price Index' on a six monthly basis, based on Whitakers list of new books and 5 new editions. The Publishers Association (PA) collects data for its PASCS (Publishers Association Collection Scheme), which is used to calculate price indices. In addition, the 'Book Report', published by Euromonitor, 'Book Facts' published by Book Marketing Ltd, and the 'PA Book Trade Year Book' all draw together statistics from the various sources and present them on a yearly basis (except Euromonitor, which is bi-annual). 1.3 THE PUBLISHING INDUSTRY, 1962-92 Evidence given to the 1962 Restrictive Practices Court claimed that 1,750 publishers operated in the UK, leaving a further 2,000 more 'fringe' publishers who published intermittently (1). By 1992 the figure had climbed to an estimated 15,000 publishers, of which there are an estimated 13,000 'fringe' and 'vanity' publishers, who publish intermitantly or on a one off basis (2). In 1992 there were 400 members of the Publishers Association (PA)(3), compared to an estimated 360 in 1961 (4).The reason for the slight growth in numbers is probably due to the more concentrated nature of the trade in 1992.

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