The system of fixed book prices in Germany
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The system of fixed book prices in Germany
A short overview of the history, the regulations, and the impact of
retail price maintenance
Presented by
Dr. Verena Sich
German Publishers and Booksellers Association – Bö rsenverein
des Deutschen Buchhandels
Legal Department
Frankfurt / Seoul, November 20041
The system of fixed book prices in Germany
A short overview of the history, the regulations, and the impact of retail price
maintenance
Ladies and Gentlemen,
Distinguished Guests,
it is a great honour for me to be invited as a guest lecturer to the Korean Pu b-
lishing Forum.
I have been asked to present here today a short overview of the history, the
regulations, and the impacts of fixed book-prices in Germany. As Germany
has had a particularly long tradition of fixed book-prices, this is a subject that
is both rich and fascinating but, nevertheless, not free from controversy. In
fact, ever since its introduction - already 115 years ago - , the system of fixed
book prices has given rise to controversial discussions - and still does.
Please allow me to briefly introduce myself and the organisation I represent.
My name is Verena Sich and I am a lawyer in the legal department of the
German Publishers and Booksellers Association in Frankfurt— known in
Germany as the Bö rsenverein des Deutschen Buchhandels, or more simply,
the Bö rsenverein.
The Bö rsenverein is the leading organisation of the production sector, the
wholesale distribution sector, and the retail selling sector of the book industry
in Germany. The Bö rsenverein represents the interests of around 6,500
member companies, of which approximately 1,900 are publishers, 80 are
wholesale distributors, and 4,500 are retail booksellers. This means that u n-
like comparable professional associations, the Bö rsenverein brings together
under one banner all the tiers of one particular branch of industry. This hi s-
torically evolved three-tiered representative system enables the Bö rsenverein
to act as a unified body with a single voice on questions of both economic and
cultural policies. Additionally, it ensures its branche a high standard of ration-
alisation.
Ever since its foundation in 1825, the Bö rsenverein has contributed in a num-
ber of different ways to support and develop literary diversity. For example,
the Bö rsenverein has initiated and achieved the passage of certain fund a-
mental laws such as a number of copyright and publishing rights, reduced
postal rates, special tax regulations (VAT), and - last but certainly not least -
the current German law on fixed book-prices. These accomplishments were
in part a result of the Bö rsenverein’ s ongoing objective of establishing and
cultivating contacts with politicians and the parliament, professional associ a-
tions and cultural organizations, the public, and the press.
18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 12
Through its involvement in a variety of projects and campaigns, the Bö rsen-
verein is also committed to the promotion of reading. The B ö rsenverein’ s
dedication to its cultural policy mandate is quite prominent. For instance, the
Bö rsenverein (together with its subsidiary companies) is responsible for the
organization of the Frankfurt International Book Fair as well as the annual
presentation of the Peace Prize of the German Book Trade, one of the most
important cultural awards presented in Germany.
As I earlier mentioned, the Bö rsenverein has always been involved in estab-
lishing, safeguarding, and monitoring the system of fixed book-prices in Ger-
many. I would now like to give you an overview of the background behind
price fixing and to then explain why in our opinion price fixing is so vital to the
book trade. We will also take a look at the book price systems in other Eur o-
pean countries as well as the most important regulations of the law governing
German book prices.
History of fixed prices in Germany
I would now like to begin with a short glance back at the history of fixed book
prices in Germany.
In Germany, a fixed book-price system has been in existence since 1888. By
then, fixed retail prices were incorporated into the statutes of the B ö rsenver-
ein. Members of the Bö rsenverein were obliged to abide by the fixed prices,
as violations were met by sanctions.
Despite attacks by critics who viewed fixed book-prices as the building of
cartels, the system was left intact for the 40 years following 1888.
Nonetheless, after World War II, it was not possible to maintain this system of
fixed prices due to the partition of Germany into four occupied zones, with
each zone under the power of a different government.
Subsequently however, a new anti-trust law came into force in 1958 that i n-
cluded a paragraph permitting publishing houses to fix book prices under a
contractual price fixing system. The law stated that price fixing was legal upon
the signing of mutual retail price maintenance contracts.
In 1965 a contractual book price system was initiated by the B ö rsenverein
that was in compliance with these regulations of anti-trust law: According to
German anti-trust law, it was an indispensable precondition for the validity of
the price fixing system that the price maintenance be extensive, or watertight.
In other words, the system had to ensure that there was no gap within the
chain of distributors. Each publisher therefore needed to bind every final ve n-
dor of its books to a maintenance of these fixed retail prices – whether the
vendor was a traditional bookseller, a department store, or a supermarket.
In order to minimize complicated organizational details booksellers generally
made use of a special contract form, which was created by the B ö rsenverein,
18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 23 the so-called “Sammelrevers” . This system was a type of umbrella agreement covering a number of individual price-determining contracts. In order to avoid the situation where one retailer would have to conclude a contract with nearly every publisher on his own both the publishers and the retailers chose an authorized lawyer who signed the contract for the parties he represented. The contractual system thus offered publishers the opportunity to fix prices, but did not force them to do so. Under this contractual system, the prices of some 90% of all books published in Germany were fixed. This high percen t- age can be taken as an indication of the high level of acceptance that price maintenance has been given and is still given by German pu blishers. This contractual system lasted from 1965 until 2002, when it was replaced by a provision of law. The creation of the European Union in 1993 had a profound effect on the ” Sammelrevers” contractual system. With the creation of a European market, German booksellers were concerned with the threat of cross-border sellings within in the homogeneous linguistic area of Germany, Austria and Switze r- land endangering the watertightness of the national system of fixed prices. Therefore, a cross-border agreement between the German-speaking cou n- tries Germany, Austria, and Switzerland was established. This ” Three Country Sammelrevers” obliged retailers in each country to abide by the prices set by publishers, even across that country’s borders. However, when the European market was created in 1993, price maintenance systems— as far as they had cross border effects— became subject to the strict European law governing cartels and required the consent of the EU Commission. First the EU stated that - considering the advantages of the retail price main- tenance - the ” Three Country Sammelrevers” could be accepted. But it later changed its opinion and regarded the cross border ” Three Country Sammel- revers” as not compatible with the rights of the EU. As a consequence, the German ” Sammelrevers” was re-nationalized in 2000 so that cross-border price fixing was no longer possible. Austria and Switzer- land followed suit. During the disputes with the EU Commission the whole book branch was in fear that price fixing in general would be lost. With these fears in mind, the Bö rsenverein addressed the German legislators in 2001, pleading for a manifestation of the price fixing system by replacing the existing contractual system with a rule of law. 18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 3
4
In April 2002, the EU Commission finally stated that the contractual system
was in conformity with the rights of the EU. But in the meantime the prepar a-
tions in Germany for a law regulating price fixing had advanced to the point
where, in October 2002, the price fixing law came into force.
Interestingly, the law on fixed book-prices was approved by a rare unanimity.
The draft law was approved by all parties of the German parliament — from the
Greens to the Social-Democrats, the Christian Democrats, the Liberals, and
even the former Socialists.
The main difference betwceen price fixing under the present legal system
versus price fixing under the contractual system is that now, every publisher is
required to fix its book prices by law. Publishers no longer have the choice of
whether to fixing their prices or not. Accordingly, retailers are legally bound to
keep prices fixed as well.
Impact and significance of the price fixing system
Now, I would like to explain to you why fixed book prices in our opinion are so
vital for a functioning book trade.
For any society based on a market-oriented system – this applies to all EU
members and to Korea as well, of course – a regime of fixed prices must
seem to be quite a strange concept. Retailers cannot freely determine the
prices for their products, while prices would not be influenced through cus-
tomers’demand.
So therefore you may wonder what exactly is it making fixed book prices so
attractive to the Bö rsenverein that it initiated and supported the law on fixed
prices?
Books have two, sometimes contradicting, characters: they are objects of
culture carrying values, identities, experiences and history, as well as mer-
chandise goods meant for profit-making.
Thus, books are no ordinary commercial goods. They are also information,
education, and last but not least entertainment. Even more so: They are the
basis of intellectual life and make literature, science, information, and ente r-
tainment possible.
According to its own perception the Bö rsenverein’s mission is a cultural one.
The significance of books for the society’
s as well as the individuals’intellec-
tual and cultural development cannot be overvalued. We believe, that a sy s-
tem of fixed book prices is one of the most important instruments to enhance
and protect books as a cultural good.
The system of fixed book prices is thus based on the following three assum p-
tions:
18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 45
1. Books are inevitable for our society’
s and individuals’cultural develop-
ment.
2. A strong network of book stores with a great variety of books would be
most effective for enhancing the distribution of books as an object of
our society’
s culture.
3. The system of fixed book prices is the best instrument to achieve such
network.
In our opinion, the fixing of book prices secures the existence of numerous
independent publishing houses, helps to preserve and promote diversified
and colourful literature, and, especially, the availability of books as a cultural
product all over the country.
1. Publishing houses
Fixed book prices enable publishing houses to produce titles with a smaller
print-run, i.e. less profitable or unprofitable publications, which are “subsi-
dized” by better selling titles.
Fixed prices enable publishers to work with mixed calculations in order to ba l-
ance chances and risks. The earnings made with bestsellers or longsellers
can be used to promote new authors or to realize literary exper iments.
This kind of mixed calculation makes it possible to publish titles for readers
with specialized interests. Without fixed book prices, sophisticated but rel a-
tively unknown authors who address a very selective group of readers would
have great difficulties in finding a publisher willing to take the economic risk to
publish their work. Without fixed prices the book market would be more co m-
petitive and publishers would simply place more emphasis on the bestselling
section of their range.
Furthermore, the author benefits from fixed prices as well, since his rem u-
neration can be based on a percentage of the fixed price.
The positive effect of fixed book prices on publishing activities in Germany
can be seen from the fact that in Germany readers can choose from an i m-
mensely wide range of titles. In Germany alone among 920.000 book titles
are available.
2. Bookshops
Secondly, the system of fixed prices promotes the availability of the cultural
product ” book” all over the country. It ensures a dense net of distribution, a
wide range of bookshops with large supply and an extraordinary cultural
service.
You can find a great variety of book stores in most German cities, varying
from small specialized ones to the big bookstores with their wide range of
supply. Even in smaller communities on the countryside one can find at least
18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 56 one bookshop providing the inhabitants with all kinds of books, from school- books to entertaining literature. A fixed retail price guarantees booksellers a fixed mark-up and protects them from large retail chain book stores, department stores or internet companies offering bestsellers and other contemporary books at lower prices. Particularly smaller and medium-sized retail booksellers rely on the sale of popular books, which enables them to finance other less popular titles that might be d e- manding, quite specific or just harder to sell. Fixed prices thus prevent a price fighting that would otherwise be won by the few bigger chain stores, supermarkets and department stores. A warning example of such price fighting in Germany was noticeable when the English language version of Harry Potter V came out there. Foreign books written in foreign languages are not subject to the system of fixed prices. So each retailer was able to calculate the price of Harry Potter V freely. As a re- sult the big retailers in the cities excelled each other with low prices – some offered the book even at prices lower than the entrance prices – . Thus, smaller book stores had troubles to defend their well ca lculated prices. 3. Wholesalers Because of the existence of a wide and dense net of retailers and a great a- mount of available books a specialized and well-organized net of wholesalers is needed. It is obvious that a retailer is not able to have all of the 920.000 titles available in store. So the variety of books and the aim of fixed prices – to promote the availability of the cultural product book nearly everywhere r e- quires the existence of effective wholesalers. In Germany, the wholesalers are able to make available most books within 24 hours. By that a lively culture of reading is promoted, too, because one can get any book one wants even in the smallest bookstore on the countryside within a very short delivery period. It has to be underlined that fixed book prices have nothing to do with state- determined fixed prices. It is the publishers themselves who calculate the r e- tailing prices of their products. Also negotiation profit margins is a matter be- tween publisher, book wholesaler, and retail bookseller and it is therefore not subject to any state control. The publisher is the “Lord of Price Maintenance” , an expression that is used in Germany to highlight the pu blisher’ s position. Also, competition between publishers and competition between bookstores with regard to service and performance are unaffected. Fixed price-systems are thus a way of taking into account the specific cultural and economic character of books and giving readers access, under optimum conditions, to the widest possible supply. 18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 6
7
The possible disadvantages of fixed prices are thus counterbalanced by si g-
nificant cultural policy advantages which moved not only the German legisl a-
tors, but also the legislators of most European countries to either grant pe r-
mission for price fixing for the print media or to install price fixing by law.
Book price systems within the European Union
Within the European Union, most Member States are familiar with the system
of fixed publication prices. In several countries, fixed book prices have been
in existence for a long time— in the lead is Denmark, which adopted fixed
prices over 150 years ago. Other countries have proposed and implemented
fixed prices only more recently: Spain, Greece, Portugal. The most recent
example is Slovenia, where the law on fixed book prices will enter into force in
January 2005.
Other EU members with a fixed price system in place include Italy, the Net h-
erlands, France, and Austria. Although not a member of the EU, Switzerland
can also be counted in this group.
Interestingly, three European countries have taken the opposite road by
abolishing their system of fixed prices: Sweden, Great Britain, and France.
Though France legally reestablished its fixed book prices only three years
after abolishing them, Sweden and Great Britain have maintained a system
devoid of fixed prices.
Which consequences arose from the abolition of fixed book prices in these
countries?
Sweden liberalized its book market in 1970. In Sweden, department stores
and supermarkets entered the book market and were the first to lower the
prices of best-sellers, while at the same time increasing the prices of all other
books. Many booksellers could not withstand the competition and simply went
out of business. Although the situation has since stabilized, in Sweden the
negative effects are mitigated by a system of subsidies for publishing houses
and bookstores.
Meanwhile, in Great Britain, the Net Book Agreement (dating from 1900)
ended in 1995 when some major publishers left the agreement (1991 Reed
Group, 1995 Harper Collins, Random House). This abolition of fixed book
prices had similar consequences as in Sweden: The large retail booksellers,
supermarkets, and internet booksellers reduced the prices of a limited nu m-
ber of bestsellers. But overall, the prices between 1995 and 2000 rose 8 %
higher than the customer price index 1.
1
Nevertheless, one positive effect of the abolition in Great Britain seemed to be an increase in
book sales, notably in low-income households. A reason for this was seen in the lower prices
for bestsellers and the greater overall presence of books outside the classical bookshops,
namely in supermarkets, department stores, and gas stations.
18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 78
In France, fixed book prices were abolished in 1979. When the large whol e-
saler FNAC decided to sell books at a 20% discount, regular booksellers had
to sell their bestsellers at prices that were almost as low as purchase prices.
They tried to cover their losses by raising the prices of less popular titles.
Meanwhile, a great number of small to medium-sized bookstores went out of
business. This development led the French Ministry of Culture to reintroduce
fixed prices in 1981.
The regulations of the system of fixed prices
Finally I would like to introduce to you the most important regulations of the
German law on fixed book prices.
The law is relatively short, as it consists of only 10 articles.
§ 1 reemphasizes that it is the overall intention of this law to protect books as
a cultural good.
According to Art. 2 the law applies to all sorts of books, i.e. printed works.
This includes not only printed books, but also music notes, cartography pro d-
ucts like maps and globes as well as substitutions or reproductions of books.
According to Art. 5 the publisher or importer of a book shall determine the
retail price of such book for the German territory. Foreign language books
which are almost exclusively sold outside of Germany are not included in the
law’s scope of application.
Art. 3 obliges the vendor of the book to keep this determined price. Any r e-
tailer is forced by law to keep the fixed price. Consequently also the publisher
himself has to keep its own fixed prices if he sells a book directly to custom-
ers. However, the law does not prevent the publisher to change such fixed
prices at his discretion. He is free to adjust the applicable fixed prices ac-
cording to market conditions or any other considerations he may have.
The fixed prices have to be published in an appropriate manner so that every
retailer is informed about the respective price. This is usually done in Germ a-
ny through the publication in the so-called ” List of available books”
(” Verzeichnis lieferbarer Bü cher” ) where all titles that are available in Ger-
many are being registered. Certainly every publisher may choose any other
means to disclose the prices for his books.
According to Art. 8 publishers may cancel the fixed price if the edition of one
particular book has been published for more than 18 months. After this period
of time the publisher may announce that the book is no longer bound by the
price fixing. The retailer can then determine the price on his own and grant
18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 89
any discount at his discretion. In practice most of the publishers - especially
the well-known publishing houses like Suhrkamp, Fischer or Rowohlt - keep
the prices fixed for a much longer period. The so-called ” longsellers” like for
example the books from Thomas Mann or Hermann Hesse and many others
are still fixed in price.
According to Art. 5, the publishers may set different prices for different edi-
tions of one particular title if this is justified by underlying facts. Such facts
may be a difference in “hardware quality” of the books such as paper, repro-
duction, cover, or if the cheaper version of this title is distributed in so-called
” book-clubs” – such as the Bertelsmann BuchClub – at a later time compared
to the more expensive editions available at ordinary bookstores.
Beside these regular retail prices, publishers may also fix mandatory discount
prices. The range of possible discount prices is regulated by law which the
publishers must not deviate from. They shall announce such discounted
prices in the same way as ordinary fixed prices. Other discounts shall not be
granted by publishers.
So what kind of discount prices can be set by publishers? First of all there are
bulk discounts. The retailer is obliged to grant them if several copies of one
and the same book are sold to one single customer. Furthermore, the pu b-
lisher may grant a discount price for a series of books. Series of books are
those books having the same author or dealing with the same topic and ha v-
ing the same outer appearance. Such series may be assigned with a special
fixed price. Furthermore subscription rates may be granted before the publ i-
cation of the book is complete.
All these discount prices must be observed by the retailer in case they have
been set by the publisher. Without such publisher’
s initiative the retailer is not
allowed to give any of the afore-mentioned discount prices.
Art. 7 stipulates two cases where the retailer is either obliged to grant dis-
counts on sold books for certain user groups or is allowed to do.
The first case are school books if the school books are paid by public author i-
ties. This discount is a special kind of bulk discount and it is applicable if
communities provide schools with school books to be given for free to st u-
dents. The amount of such discount depends on how many books are ord e-
red by the communities (or the value of the order, respectively) and usually
ranges between 8 and 15%.
The second case is the sale of books to academic and public libraries. Retai l-
ers are allowed to give discounts up to 5% to academic libraries and up to
10% to public libraries. In opposition to the discounts for school books the
discounts for academic and public libraries are not mandatory and lie in the
discretion of the vendor. But in practice, retailers usually grant the discounts
as they would otherwise loose their customer.
Finally retailers are free to determine retail prices for damaged books.
18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 910
Art. 5 mentions some exceptions from the general rule that the retailer must
not deviate from the fixed prices. For instance, retailers may deviate if the
book is sold to a publisher, to another retailer or to one of their employees,
provided that this book is not for further sale.
Besides these exceptions the retailer has to keep the fixed prices. Generally
he is not allowed to give the customer any other goods for free on the occas i-
on of a book purchase. Any addition for free would mean an indirect violation
of the fixed price and therefore of the law. One exception is made by law:
Retailers are allowed to grant goods on the occasion of a book purchase if
they are moderate in value. So the value of the good the customer gets for
free can be up to 2% of the turnover that is made with the customer.
Cross-border sales of books to final purchasers are generally not subject to
fixed prices. But, according to Art. 4, the fixed price has to be maintained in
those cases where German books are exported in another country and then
re-imported from this country with the mere intent to evade the rules of the
system of fixed prices. In other words, cross-border sales are subject to the
fixed price if they are intended to circumvent domestic fixed prices.
According to Art. 8 the legal department of the Bö rsenverein or a lawyer act-
ing as a trustee on behalf of the publishers or on behalf of the booksellers
may impose sanctions on any violator of this law. Procedural-wise a dissu a-
tion would be issued in connection with requesting the respective person to
refrain from such violating behaviour. The violator may be asked to sign a
declaration of forbearance. If that person violates the fixed price system again
he would be liable to pay liquidated damages according to the reminder i s-
sued before.
Conclusion
I would like to conclude my presentation with a very positive evaluation of the
system of fixed retail book prices. This system has been able to maintain and
improve the general quality of books in Germany, in regard to both its content
and its presentation such as paper quality and pictures. If there were no fixed
price system bestsellers would be able to enter the book market on a consi d-
erably lower price compared to other books which would soon need a further
price increase due to weak demand. As a consequence such books, high-
quality literature in many cases, would be prevented from being published,
and a major part of our country’ s culture would be lost. We believe, the fixed
prices are an adequate instrument to balance the different interests of pu b-
lishers, book retailers, authors and the public.
If you decide to further establish a system of fixed prices by law the B ö rsen-
verein would be more than happy to give any assistance whatsoever required.
Our experience may be helpful to reconsider the currently applied price sys-
tem for books in your country.
18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 1011 Thank you very much for listening so attentively. If you have any questions right now, please do not hesitate to ask them. Frankfurt am Main / Seoul, November 2004 18.11.2004, Verena Sich, German Booksellers and Publishers Association, Legal Department 11
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