Apple Spanked for Selling Discounted eBooks in Germany

Discounted gift cards are an old retailer trick as well as one we've all enjoyed at one time or another. It gets customers in the door and gives retailers an opportunity to use the funds long before they're spent. But have you ever consider what would happen when the gift card comes up against a market where the retailer isn't allowed to offer discounts?

That's what is happening right now in Germany.

The German Apple blog iFun is reporting this morning that Apple has temporarily blocked access to the German iBookstore. It seems that German retailers like offering discounted iTunes gift cards just as much as US retailers (Walmart has an iTunes gift card on sale right now), which Apple is more than happy to accept. Unfortunately, Germany also has laws regulating the price of books and ebooks.

Last week the Buchpreisbindung, the price regulator for the German book market, sent a letter to Apple complaining about the discounts and pointing out how they violate German law. Unlike the US, Germany has strict laws covering the discounts that retailers can apply to books and ebooks. Attempts to skirt those laws can lead to a lot of expensive lawyers buying expensive cars, though I'm sure most retailers comply before that point.

In response, Apple has restricted access to the German iBookstore, resulting in a rather odd situation where Apple has to block a subset of their customers from using validly purchased gift cards to buy validly for sale ebooks.

If you're wondering how Apple can tell the difference between a gift card sold under a discount and the rest of the iTunes gift cards, that's where things get interesting. These cards sell for a 20% to 30% discount, and I seriously doubt that the money is coming out of the retailer's pocket.  That suggests that Apple is giving up the discount, so they are likely also initiating the sale. It would seem that they are in a position to issue specific gift card numbers to the retailer who is selling them, numbers which could then be recorded.

If my supposition is correct then Apple wasn't just an accidental violator. They were the ones organizing the sale of the gift cards, so they really should have known they were breaking the law. Whoops.

But as much as we might enjoy pointing fingers at Apple, they're not the first to run afoul of Germany's book price laws. For a while there Amazon thought they could get around the restrictions on discounts by offering free shipping. Needless to say, that didn't work.

Germany enacted these laws to protect local booksellers and prevent the rise of the big box bookstores like Waltons, B&N,  Borders, and others.  The laws didn't succeed completely, considering that Thalia has 200 bookstores in Germany, but Thalia's smaller competitors aren't under quite as much pressure as indie booksellers in the US. And that's a good thing.

iFun

About Nate Hoffelder (11579 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

6 Comments on Apple Spanked for Selling Discounted eBooks in Germany

  1. That might be a good thing for the (protected) booksellers but not for consumers.
    More, by protecting the booksellers from the first two retailing revolutions of the recent past (chains and megastores) they left them easy prey for online (Amazon) and ebook competition.
    Price isn’t the only way companies can compete, just the easiest. Protected companies often make the easiet prey once the walls come down. Which they will, as soon as ebooks get mainstreamed there… a matter of time, that.

    • “That might be a good thing for the (protected) booksellers but not for consumers.”

      World’s tiniest violin for them.

  2. Obviously the only solution is for Amazon.de to get together with the gift-card retailers and allow an entirely non-collusive and perfectly legitimate new model to spontaneously arise (without any hint of collusion) in order to save the industry from Apple’s predatory pricing.

  3. One common consumer response to artifically high prices, whether they result from industry setting the price or from governments setting the price, is an increase in piracy.

    The German government cannot protect local German bookstores against bit-torrent sites running on servers located who-knows-where.

  4. Incidentally, German “Buchpreisbindung” has been in existence “forever” and historistically nothing to do with the book *seller*, but with the book *author*.

    The idea behind the Buchpreisbindung is that the creator is guaranteed an income from his works, one which is not subject to price competition through discounts; the whole idea is to regulate the market in order to support and promote diversity. The English Wikipedia at http://en.wikipedia.org/wiki/Fixed_Book_Price_Agreement gets this quite right.

    Note that the Buchpreisbindung only governs relations between the individual customer and the final commercial seller (“the book store”); there is heavy discounting and subsidized fighting for (virtual) shelf place going on between sellers and publishers. And that’s where the larger chains such as Thalia (and Amazon.de) really make the money – they sell at a guaranteed price and exert pressure on publishers so that they can buy at the lowest price. This is heaven for a large chain with purchasing power.

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