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Swiss ebookstore Ex Libris now being blackmailed over Agency pricing

If you follow publishing news then you might know that there’s a fix price law in Germany for book (and ebooks). You might also know that Switzerland doesn’t have such a law, much to the dismay of German publishers.

Ex Libris are a Swiss online retailer. They sell books, music, gadgets, etc, and they also used to sell ebooks. The problem here is that Ex Libris want to sell ebooks at a competitive price, and their German suppliers disagree. The German publishers, including Random House, have cut off Ex Libris until the retailer agrees to stop discounting the ebooks. Ex Libris had been selling them at 30% off list.

BTW, the most important detail here is that Ex Libris offered the discount from their own share of the list price. They never paid their suppliers less than the full share.

But think about this for a second. The German publishers are choosing higher ebook prices over legitimate sales. They’re making it difficult for some customers to buy their ebooks. They’re basically saying that they’d prefer to have someone pirate the ebook rather than get a discount.

P.S. My position on this has always been clear. I’ve always been in favor of price competition. A free market is better for the customer.

Ex Libris via Boersenblatt

image by JackSim

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Chris June 21, 2011 um 12:45 pm

One of these days, these knotheads will figure out that price controls are counterproductive… nah. Probably won’t.

Tim June 21, 2011 um 10:41 pm

Regardless what you think of the agency pricing model the story behind this is not about blackmail or boycott.

The contract between the publishers and Ex Libris stated that that Ex Libris was not allowed to sell the ebooks below the set price. Instead of fighting this in court or finding a creative way to offer discounts (gift certificates, bonus miles, …) Ex Libris chose to simply break the contract. If there is no contract they don’t get the ebooks from the publishers.

Regardless of the fact that there is no fix price law in Switzerland (and what strategy publishers should choose in your opinion) publishers do have the right to choose under which conditions and at what price they sell the ebooks. Some customers will be willing to pay the higher price other’s won’t.

One key advantage of fixed prices for the publishers is that it is less likely that one large ebook-seller (such as Amazon) pushes all competitors out of the market and can then dictate conditions.

Chris June 21, 2011 um 11:17 pm

These "large ebook-sellers" cannot dictate conditions in a free market. If they try to gouge consumers, other, smaller outfits will arise offering lower prices. Monopolies only work when a government agency is there to tilt the laws in the favor of a given company. Price controls (read: government controls), are not the answer.

Tim June 22, 2011 um 1:00 am

Large companies can (and in some markets do) easily dictacte conditions on a free market by keeping the market entry barriers high. They don’t even need a monopoly for that, an oligopoly is sufficient. How would a smaller competitor be able to enter a market where devices are restricted to proprietary DRM mechanisms of a large incumbent companies? Each time a smaller competitor tries to enter the market it faces high costs in establishing the necessary system/infrastructure, advertising, etc. It could then be easily crushed by large incumbents who temporarily lower their prices until the new competitor is bancrupt.

Fortunately the ebook market still in a phase where it is dynamic and market growth is more important. Furthermore outside the US epub (with Adobe DRM) seems to be the prevalent system making it easy for customers to switch between stores.

I do agree with you that government price controls are generally a bad idea. My main point was that in the case of Ex Libris the german fix price law is not the real issue. The publishers are merely making use of the freedom of contract specifiying the conditions at which the ebook can be sold.

The reason why this works with German ebooks in Switzerland (and according to Boersenblatt actually worldwide) is the fact that DRM makes it extremly difficult if not impossible to resell ebooks, leaving ebookstores with no other supplier than the publisher. Printed books on the other hand can be easily resold. Therefore publishers have no means to insist on a certain price for the printed version of the same books in Switzerland.

Chris June 22, 2011 um 5:18 pm

With formats like epub, even ones with the Adobe DRM, that’s a less likely scenario than say, Amazon. And even then you publish in the format without DRM. Do larger companies lower their prices in response to newer, smaller (with significantly less overhead)? They sure do. That’s what keeps the "monopolies" from sticking it to the consumer. In the end, the problem with monopolies isn’t that they can price their competitors out of business (which is why folks need to be very, very careful about govt involvement as it, more often than not, results in regulations that are a benefit to the larger companies), its their ability to gouge the consumer.

That said, I totally agree with your point about this being an issue contracts.

Robert Mitchell June 22, 2011 um 7:56 am

Yeah, and more likely big publishers (owned by people like Rupert Murdoch) et. al. can arrange things in their favour.



grant January 23, 2012 um 9:23 am

Tim // Jun 21, 2011 at 10:41 pm
Regardless what you think of the agency pricing model the story behind this is not about blackmail or boycott.

The contract between the publishers and Ex Libris stated that that Ex Libris was not allowed to sell the ebooks below the set price

This is illegal in Australia under the Trade Practices Act and should be fully prosecuted , but for some reason it has never even been mentioned.
One can only assume that information about price rigging is being willfully withheld by the publishers.
It is very short sighted and will and must be brought to the attention of Class Action Lawyers to prosecute this predatory behavior.

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