The Monopolies Commission has submitted its Special Report No. 80, entitled ‘Fixed book prices in a changing market environment’, to the Federal Government and the legislative bodies. This special report, drawn up at the Commission’s own initiative, was prompted by a ruling handed down in 2016 in which the Court of Justice of the European Union (CJEU) found that the German fixed pricing system for medicines was incompatible with the European principle of the free movement of goods.
From a legal perspective, the protection of books as a cultural asset is, in principle, a cultural policy objective that should be recognised. However, this cultural policy interest must be balanced against the interest in undistorted competition. Competition within the single market is safeguarded by EU law. National regulations on fixed book prices significantly encroach upon the fundamental freedoms of market participants operating across borders and also constitute a serious market intervention. Under EU law, objective evidence would therefore be required to show that fixed book prices generate cultural added value sufficient to justify the associated market intervention. On the basis of the available information, it is questionable whether such evidence can be provided. At least as far as cross-border book trade is concerned, it cannot be ruled out – and, with regard to e-books, is even likely – that the European Court of Justice will, in preliminary ruling proceedings, declare fixed book prices to be incompatible with the European freedom of movement for goods. Should such a decision be made, companies operating across borders could gain a competitive advantage over domestic brick-and-mortar bookshops – which would remain subject to fixed prices – by sending printed books or e-books at a discount to German end consumers. The CJEU’s case law on fixed prices for medicines has shown that such an opportunity would probably be exploited sooner or later.
From an economic perspective, it is not possible to reach a definitive assessment of fixed book prices. The suppression of price competition at the retail level has mixed and, in some respects, unclear effects. Fixed book prices strengthen competition based on ancillary services, slow down structural change in brick-and-mortar bookshops and hinder the emergence of bookshops with strong purchasing power. At the same time, they impede the spread of efficient retail structures and the wider distribution of books through the acquisition of new customer groups. It prevents cost advantages from being passed on in the form of lower retail prices and acts as a barrier to market entry. The relationship between fixed book prices, price levels, the variety of titles and publishers’ profitability remains unclear.
Although fixed book prices slow down structural and functional change at all stages of distribution, they cannot prevent it entirely. This is particularly evident in the high-street book trade, which continues to lose market share – primarily to online book retailers – even whilst fixed book prices remain in force. Consequently, the question is increasingly being raised as to whether the traditional infrastructure for book distribution still fulfils the role assigned to it. Owing to digitalisation and consumers’ growing affinity for the internet, the importance of traditional bookshops and the book-related services they provide is tending to decline.
From the Monopolies Commission’s perspective – having weighed up all the factors – fixed book prices constitute a serious intervention in the market, justified by a vaguely defined cultural protection objective – ‘books as cultural assets’ – the effects of which are ambivalent or unclear and which does not take adequate account of market developments.
