The Logic of the Buchpreisbindung

I've blogged before about the Buchpreisbindung, a German law that forbids price competition among booksellers on newly-published books. One of the points of the BPB, if I may call it that, is to preserve smaller independent bookstores from extinction at the hands of large chains, whose size permits them to command steep discounts from publishers. There's a lot of commentary back and forth about whether the BPB is a good idea, and I can see upsides and downsides. But this fascinating piece on the impact of chain stores and Amazon on the American publishing industry shows what happens when there's no BPB:

For most of their modern history, the primary goal of publishers was to find brilliant writers and produce books. Publishers left it to other book lovers—independent bookstores across the country—to sell the fruits of their labors. Booksellers not only carried books tailored to their local audiences, but also promoted their favorite new books through personal recommendations to their customers. All indies ordered books at a standard discount—somewhere around 40 percent off the list price. In the ’70s and ’80s the number of new book titles grew steadily, as did the number of independently owned bookstores.

But this trend came to a halt when chain superstores such as Barnes & Noble and Borders began taking over in the late ’80s. They set up shop down the street from successful independents, lured customers with a broader array of books and lower prices, and put their competitors out of business. In the early ’90s there were roughly 6,000 independent bookstores across the country. Today, that number is closer to 2,200.

There is not a whole lot of mystery behind these stores’ runaway success. Barnes & Noble wasn’t getting rich by offering caffeine with the classics; it was negotiating better discounts from publishers.

In 1994 the American Booksellers Association (ABA), a group that represents independent bookstores nationwide, filed suit against five major publishing companies for offering discriminatory discounts that weren’t justified by costs. One large publisher, for instance, was requiring that bookstores order 3,000 of their books in order to get a 48 percent discount. A smaller order would net a 40 percent discount. That meant that smaller stores, making smaller orders, could not afford to meet larger retailers’ prices. With even the higher-volume indies unable to compete, small bookstores across the nation were forced to close their doors.

While publishers were guilty of providing two-tiered discounts, there was reason to believe that the chain stores were using strong-arm tactics to demand these discounts of larger publishers. Bruce Spiva, one of the lawyers who brought the ABA’s case, recalls hearing that the chain stores had threatened to remove publishers’ books from stores if they didn’t cooperate.

The five publishers (Houghton Mifflin, Penguin USA, St. Martin’s, Rutledge Hill, and Hugh Lauter Levin) settled, but in 1997 the ABA found that the chain bookstores were still demanding and receiving discounts that weren’t being made available to independent bookstores. The ABA sued Barnes & Noble and Borders directly for leveraging discriminatory discounts. In 2001 this lawsuit, too, was settled, on the condition that a large amount of the evidence the ABA had collected against the chain stores be destroyed.

There's much, much more, and it's all fascinating. As they so often say, go read the whole thing…

One thought on “The Logic of the Buchpreisbindung

  1. Well, the Buchpreisbindung is from 1888. So it’s not about preserving small stores, but it helps them to stay in business. That might be a small side effect in these days.

    If the retail price of a book is the same all over, the big chains in Germany still have higher margins and more profit to push small stores away, just by opening news stores and offering a bigger selection.

    The idea of the BPB was to preserve small publishers and encourage all publishers to publish a large variety of books. The second point is that the price of book should be the same in Frankfurt and in Oberviechtach, so that people in remote parts of the country have an equal access to culture and information (cf. price of newspaper)

    Like

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