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.