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Germany’s system of fixed book prices acts as a guarantor of quality and diversity on the book market – New research results presented

Independent research made use of the most up-to-date figures and largest data pool ever / Economic analyses show positive effects of fixed book prices on the dissemination of books and the diversity of content / Legal report confirms compatibility with EU
Erstellt am 08.11.2019

Germany’s system of fixed book prices and the extensive landscape of bookshops it supports play a key role in the dissemination of books as essential cultural goods, while also fostering the quality and variety of books available to consumers. The system is also in line with EU law. Last year, one research team made up of economists and one legal scholar were commissioned by the Börsenverein des Deutschen Buchhandels (German Publishers and Booksellers Association) to examine the impact and legitimacy of Germany’s fixed book price system in an independent and comprehensive manner using the most up-to-date information possible. The senior researchers presented their key results today in Berlin.

Georg Götz, Professor of Economics at Justus Liebig University in Gießen, Germany, explained: “With the help of an exhaustive and previously unavailable amount of data drawn from several countries, we were able to conduct an in-depth analysis of the economic impact of Germany’s system of fixed book prices. For example, among the many other positive effects it has on the book market, price fixing fosters the spread of books by allowing for a large number of bookstores. In turn, these bookshops boost the demand for books. We were also able to prove that bookshops play a decisive role in supporting new titles and lesser known authors”.

Andreas Fuchs, Managing Director of the Institute for Business and Commercial Law at Osnabrück University, noted: “Germany’s law governing fixed book prices, the Buchpreisbindungsgesetz, is compatible with EU law. Access to the German book market is not made more difficult for foreign mail-order companies. In addition, the protection of books as essential cultural goods provides sufficient justification for the exclusion of price competition. Indeed, the positive effects of fixed book prices – both on the book market and for consumers themselves – make up for any limitations on price competition”.

Alexander Skipis, Managing Director of the Börsenverein, argued the following with regard to the research findings: “Once again, it’s all there in black and white. Germany’s fixed book price system acts as a guarantor of quality and diversity on the book market. It is one of the factors contributing to Germany’s reputation as a role model across the globe and its status as the second-largest book market in the world. The findings show very clearly that fixed book prices fulfil their obligation to protect books, especially in the contemporary market situation. The study also shows that fixed book prices are compatible with European law. For almost 150 years now, Germany has had a system of fixed book prices. The system guarantees a dense network of bookshops that act as key locations for the dissemination of literature and as indispensable distribution channels, especially for small and medium-sized publishers. Precisely because of this key role, price fixing for books is also widely supported in the political sphere”.

Annerose Beurich, owner and operator of the bookshop stories! in Hamburg and Börsenverein board member, explained further: “The research findings show how indispensable the stationary book trade is, especially for cultural diversity in our country. When bookstores disappear, people lose important contact points and thus access to books. Bookstores are places that foster exchange among local residents, while also promoting literary education, cultural work, literacy and a love of reading. The study also showed that a number of highly interesting books and authors would never have been discovered without stationary bookstores.”

Key results at a glance

Economic studies conducted by the research group led by Professor Georg Götz (Justus Liebig University in Gießen)

Germany’s system of fixed book prices helps to sustain a broad network of independent bookstores.
While the number of independent bookshops in the UK fell by roughly 12 percent between 1995 and 2001 after the abolition of the system of fixed book prices there, Germany saw a decline of only 3 percent in the 1995 to 2002 period. In addition, Germany also has a much lower market concentration. In the UK, Amazon alone has a market share of roughly 45 to 50 percent, whereas small bookshops have only around 5 to 10 percent. In Germany, the online book trade accounts for only roughly 20 percent of sales, while roughly 30 percent is generated at independent bookshops and roughly 20 percent at chain stores.

The stationary book trade raises demand for books. Consequently, when bookshops close, there is a clear decline in book sales.
When a bookshop closes in Germany, an annual average of roughly 6,100 fewer books are sold. That means that there is only a partial migration of book buyers to online trade and e-books. A total of roughly 3.5 million fewer books were sold due to the closing of bookstores nationwide in the period from 2014 to 2017; this corresponds to roughly 56 percent of the total decline in sales. In fact, the decline in book sales in Germany doubled between 2014 and 2017 as a result of the impact caused by the closure of bookstores (2 percent rather than the hypothetical 1 percent that would have occurred if the number of bookstores had remained the same).

Fixed book prices make books less expensive on average.
Following the abolition of the system of fixed book prices in the UK, the average price of books there rose by 80 percent between 1996 and 2018. The increase was much stronger than in the same time period in countries that have fixed books prices, such as France (+24 percent) and Germany (+29 percent). Only bestsellers are less expensive in the UK than in Germany. With roughly the same share in overall sales, the 500 top-selling books make up roughly 26.6 percent of total revenue in Germany; in the UK, they make up 21.5 percent of total revenue. The analysis of the 50,000 best-selling books in the UK from 2005 to 2018 showed that the higher the sales rank a book has, the higher the average discount retailers offer on the publishers’ suggested retail price, and therefore the less expensive the book will be for the client.

Fixed book prices foster the sale of titles beyond bestsellers.
In Germany, the demand for books is more widely distributed across the entire range of titles. For example, titles ranked 15,000th to 50,000th in terms of revenue have a 20.5 percent share of the books bought in Germany, which is significantly higher than in the UK (15.3 percent sales share).

The stationary book trade fosters the discovery of unknown titles and authors.
The studies showed that sales at stationary bookshops foster the future success of a large number of lesser-known titles and authors. Out of 420 fiction titles that did not reach the top twenty spots on the bestseller lists until after three weeks or more between 2011 and 2018, sales in local bookshops were solely responsible for that rise in 237 cases (56.4 percent) and largely responsible for that rise in the case of 171 other titles (40.7 percent).

The research project overseen by Professor Götz and his team will be continued. Their results will be published cumulatively in the form of essays in academic journals.

Legal report by Professor Andreas Fuchs (University of Osnabrück)

The system of fixed book prices in Germany does not hinder market access for foreign mail-order companies or online sellers.
In addition to price competition, mail-order companies have sufficient other competition opportunities that enable them to gain a foothold on the German book market and remain competitive there. For example, this was demonstrated by the steady increase in the market share of the mail-order business to 20.7 percent recently, and especially the economic success of the online retailer Amazon, which became the largest book retailer in Germany and has a share of roughly 50 percent of the online book trade.

If, in a hypothetical case, there was an existing interference with the free movement of goods, it would be justified by the protection of books as essential cultural goods.
 The protection of books as key cultural objects is also generally recognised by the European Court of Justice (ECJ) as an overriding requirement relating to the public interest. This protection of cultural goods can justify restrictions to the free movement of goods, provided that they are appropriate and necessary to achieve the target objective pursued by the legislature. Germany’s system of fixed book prices in fact achieves the positive impact attributed to it with regard to the distribution of books and the enhancement of cultural diversity. For example, this is demonstrated by research studies such as the one conducted by Professor Georg Götz. The replacement of fixed book prices by means of alternative incentives, such as comprehensive state subsidies, would not only be associated with tremendous costs, it would also be questionable in constitutional and regulative terms.

Germany’s system of fixed book prices is compatible with European competition law.
Germany’s fixed book price system does not adversely impact on the practical effectiveness of EU competition law. It also does not fall under any of the cases recognised by the ECJ as part of its so-called “effet utile” doctrine with regard to a violation of the loyalty obligation of member states. Even if the ECJ extended its jurisdiction in the future and expanded it to include state measures without linking them to any anti-competitive behaviour on behalf of companies, the system of fixed book prices would not represent a breach of competition rules. Indeed, the positive effects of the system of fixed book prices on the market and consumers offset the adverse effects caused by the elimination of “product-internal” price competition at the retail level. Germany’s system of fixed book prices contributes to an overriding number of efficiencies, including the following: the preservation of a comprehensive structure of bookshops, increases in the demand for and sale of books, improvements in services, lower average book prices, reductions in transaction costs and improvements in market access for small publishers and unknown authors. Furthermore, competition is not entirely eliminated; instead, there continues to be intense competition between publishers as well as between booksellers, for example with regard to services (customer service, product range design, product presentation, live author readings, ordering processes and delivery services).

Professor Fuchs’ legal report will be published in book form in 2020.

Historical background of Germany’s fixed book price system:
Germany’s system of fixed book prices ensures that books have the same price at every point of sale, whether in a local bookshop or online. Publishers determine a binding retail price for every format (hardcover, paperback, e-book). Publishers can cancel the fixed price after 18 months. There are also a number of exceptions, for example in the case of defective copies or bulk prices. The system of fixed book prices has been in existence in Germany since the end of the 19th century and regulated by law since 2002. Fixed book prices and/or sector-wide pricing agreements are in place in 13European countries, including Austria, Spain, Italy, the Netherlands, Norway and Hungary. One also finds fixed book price systems in countries such as Mexico, Argentina and Japan.

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