Agency Pricing on Ebooks is Illegal in Australia – We Call Out Hachette, Which is Breaking the Law

With multinational companies chipping away at the edges of honesty, it’s easy to forget the simple things sometimes.

Make no mistake – anti-competitive (aka “Agency”) pricing is illegal in Australia.
Darryl Adams recently pointed this out on his blog Oz-e-Books – and it’s a timely reminder. In the face of large companies sending press releases “announcing” changes to their business practices to reinforce their “rights to set prices” across all retailers, sometimes we forget to question that.

Do they have that right? Do book publishers have the right to dictate the retail price of their products, when sold by third party retailers? Not the prices of some retailers – all retailers. The answer to that is no.
One of the jobs of Australia’s ACCC (our consumer watchdog, similar to the FTC in the US) is to ensure open price competition by retailers.

From Oz-e-Books:

With Random House entering the Agency Price Model with the rest of the 5 big publishers (Hatchet, Harper Collins, Random House, McMillan, Penguin and Simon & Schuster), there has been a lot of discussion about the practice.

Firstly, to be clear, Agency Pricing is illegal in Australia. As a form of Price Maintenance, the practice is specifically barred under the Consumer and Competition Act of 2010.

As per the ACCC: http://www.accc.gov.au/content/index.phtml/itemId/322982

Suppliers may try to impose a resale price to maintain brand positioning or to give resellers attractive profit margins.

Any arrangement between a supplier and a reseller that means the reseller will not advertise, display or sell the goods the supplier supplies below a specified price is illegal.


I’d say that’s pretty damn specific. So which publishers are breaking the law here?

Let’s investigate, shall we?

Method

1. I searched the Australian site for each publisher and picked titles at random, usually from their bestseller lists. Keep in mind some titles may be published under an imprint of the major publisher, but pricing rules (or lack thereof) still apply.

2. I went to the largest international ebookstore that has ties to Australia – and therefore stocks a decent number of titles that are available to locals here – Kobo.

3. I made sure the address set on my Kobo account was an Australian one – this was confirmed with prices at checkout appearing in AUD. Therefore the site recognised that I was “shopping” from Australia.

4. I went shopping – gathering price information on three books published by the local arm of each of the “Big Six” publishers, plus the largest independent Aussie publisher Allen & Unwin.

Criteria

  1. If there is a list price AND a sale price in the ebookstore, the publisher is not following “Agency” pricing, as no discount is allowed.
  2. The prices are usually higher with “Agency” pricing as no discount can be applied.
  3. Prices not affected by a discount – ie original (“Agency”) prices will generally end in .99 (as in $x.99)

Result

It’s obvious from these figures that Hachette Australia are following the “Agency” model of pricing for books sold to Australians. All three titles I looked at satisfy all three criteria (above) for agency pricing. The prices were higher, anded in .99 and Kobo had not applied any “our price” discount, as they had done with every other book from the other publishers. Why not – because they are not allowed to by the publisher. Therefore, as the ACC states here, Hachette Australia are acting illegally.

What you can do

If you too disagree with agency pricing, please pass this data around. Blog about it, share this post, Tweet it or spread it around Facebook. The more noise we can make about this, the more chance that the ACCC will take notice and investigate. Let’s put an end to anti-competitive pricing like this. Isn’t open competition the best situation for the consumer?

Here is the raw data from the ebooks I checked:

Macmillan

The Rules According To Jwoww

Jwoww and Jenni “Jwoww” Farley

List price: $16.19

Our price: $9.39

Thorn On The Rose

By Joy Dettman

List price: $17.99

Our price: $12.49


The Girl Who Played With Fire

By Stieg Larsson

List price: $13.49

Our price: $7.99

HarperCollins

Midnight

By Josephine Cox

List price: $26.39

Our price: $9.99

Booky Wook 2

By Russell Brand

List price: $28.00

Our price: $14.75

Bird Cloud

By Annie Proulx

List price: $22.39

Our price: $15.49

Random House

The Little Coffee Shop Of Kabul

By Deborah Rodriguez

List price: $32.95

Our price: $16.34

New York Valentine

By Carmen Reid

List price: $9.89

Our price: $7.69

Tick Tock

By James Patterson

List price: $26.79

Our price: $14.19

Simon & Schuster

The Secret

By Rhonda Byrne

List price: $14.19

Our price: $9.39

A Shore Thing

By Nicole “Snooki” Polizzi

List price: $24.39

Our price: $14.19

Hellhole

By Kevin J. Anderson Brian Herbert

List price: $20.29

Our price: $11.79

Penguin

I Am Number Four

By Pittacus Lore

List price: $10.89

Our price: $8.49

The Brightest Star in the Sky

By Marian Keyes

List price: $13.19

Our price: $9.19

The Lake of Dreams

By Kim Edwards

List price: $25.89

Our price: $11.89

Hachette

A Discovery of Witches

By Deborah Harkness

Price: $16.99

Death Of A Ladies’ Man

By Alan Bissett

Price: $12.99

The Mathematics Of Love

By Emma Darwin

Price: $12.99

Allen & Unwin

Jasper Jones: A Novel

By Craig Silvey

List price: $23.99

Our price: $9.99

The Girl Savage

By Katherine Rundell

List price: $6.69

Our price: $5.29

The Slap

By Christos Tsiolkas

List price: $22.72

Our price: $8.90

Action

I hereby call on the ACCC to follow the lead of consumer watchdogs in the US and Europe and investigate Hachette Australia’s business practices – specifically anti-competitive pricing – in retailing to those in Australia. If you work for the ACCC and you’re reading this, don’t bother taking notes – it’s all coming in an email.

Via Jason Davis’ Book Bee site

4 Comments on Agency Pricing on Ebooks is Illegal in Australia – We Call Out Hachette, Which is Breaking the Law

  1. Does Australia not allow this for “agents”? This is anti competitive in North America as well but there are exceptions for agency arrangements. They’re using this loop hole to pretend that the resellers are “agents” instead of resellers. The laws need to change so companies can’t be “agents” only individuals can be. It needs to be clarified that you can’t be both a reseller and an agent.

  2. Pretty much. A law with zero credibility when all they have to do is put a sign up saying ‘I’m an agent’, whatever the entity.

  3. Quote: “Do book publishers have the right to dictate the retail price of their products, when sold by third party retailers?”

    Actually I find far more upsetting the sales contracts from Apple and Amazon that demand that a publisher (and an author) not sell its books any cheaper than their Apple/Amazon retail price, even on its own site. And given that sort of contract condition, publishers have to adopt a pricing scheme that gives them the power to keep other outlets from underselling. Those Apple/Amazon contracts gives them no choice.

    Quote: “Let’s put an end to anti-competitive pricing like this. Isn’t open competition the best situation for the consumer?”

    But will open competition exist for very long if a major online retailer like Amazon is able to destroy its competitors by selling ebooks below costs for a time. And will open competition exist if Apple implements the worst interpretation of a still unclear policy that seems to suggest that all publications bought for their iStuff must give Apple a chance to make a hefty 30% markup without charging less for outlets that don’t have that hefty markup?

    Quote: “Part of the problem was that Amazon was setting a price (generally US$10 or lower), in order to promote e-books generally and specifically promoting the Kindle. Suppliers thought that the price was too low, hence when Apple entered the book market, Publishers pushed the Agency model where they set the price to the retailers.”

    Oh, I’ve got a bridge in NYC I’d like to sell you. Amazon’s interests certainly didn’t lie in “e-books generally” (it doesn’t even follow ebook standards) and only loosely in “promoting the Kindle,” particularly since the latter either is or will probably soon become a loss-leader. Amazon was selling below cost because only it could afford do that for very long. It’s goals were no more altruistic than those of the major publishers and the risk side of it achieving its goal was far greater. Amazon-chosen pricing for Amazon could mean that very soon Amazon would be setting the price for everyone. Agency pricing means that numerous competing publishers set prices. Price too high, and people read books from someone else. Competition still exists.

    Quite frankly, I don’t like how any of the major players in this matter are behaving. They’re all trying to grab an undue advantage for themselves, although I suspect the major publishers are the least badly behaved. Nothing is going to change the fact that they’ll continue to compete with one another, and they know that. But Apple, Amazon and Google do seem to entertain hopes that they’ll be able to carve out an area where their domination is total and that is driving many of their deeds. That’s why I don’t think it’s helpful or constructive to demonize one of the players, as if they were the sole cause of the problems.

    I’m also less than impressed with the facts that an “agency model” is illegal in Australia. Australia is a content-consuming country not a content-creating one, so its laws are likely to be unbalanced. I don’t care for agency pricing myself, but speaking as a writer, it does have advantages. in addition to preventing a retailer from destroying competition by selling below cost, a classic monopolist move, and one which would be very bad for me as a writer, agency pricing also means that, as an author I can price a new ebook at zero to stimulate interest. With agency pricing, retailers have to follow that move. Without agency pricing, they can still sell if well above zero and make money while not paying me a penny.

    No, we need to be patient. Digital publishing is a new area and it’s going to take some time to work out a fair set of rules that are fair for all involved. I doubt the debate is helped by criminalizing behavior that may prove beneficial, at least for a time and in some situations.

    –Michael W. Perry, author of Untangling Tolkien

  4. This is a very poor analysis. Agency pricing is not prohibited in principle under Australian law. “Agency pricing” and “anti-competitive pricing” are certainly not synonymous (one might expect all observers to understand this intuitively, given the broad range of agencies that have been operating across all industries throughout Australia for many decades, if not centuries).

    The key word in all of this is “resale”. Resale price maintenance is indeed prohibited in Australia but as its name suggests it is a resale price that must be maintained. Furthermore, where there is a true agency there is no resale. So a publisher acting through an agent is perfectly free to set the price at which that agent supplies a good to an ultimate customer (to ban this would be as absurd to ban a company dictating to its own employees what prices to accept).

    Usually, the existence or non-existence of an agency is essentially a question of legal title. If the middleman acquires legal title, a resale occurs and therefore RPM comes into play. For example, if a bookstore acquires legal title to the physical books upon delivery, then it is by definition not an agent for the publisher/supplier, and an attempt by the publisher/supplier to maintain a minimum retail price would be illegal. However, if a bookstore were appointed a mere agent, so that title in the books passes straight from the publisher/supplier to the ultimate customer, then clearly there is no “resale” and the publisher/supplier would be free to direct the bookstore agent not to accept less than a specified amount for each book.

    It may get tricky in the case of e-books, since the question of property in the goods or services is not so clear cut as for a physical book. I don’t have any answers there (I’m no IP lawyer) but the name of the new model – agency – might be a bit of a clue.

    Finally, I think we all need to get used to the fact that various middlemen are being abolished by technology, which is something to be welcomed rather than lamented or opposed.

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