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On Booksellers and ‘Fair Trade’

Against the monopoly of Amazon, a free marketplace for books may mean coordination of resale pricing.

Recent issues of TAC have contained lamentations about the disappearance of independent booksellers and Amazon’s near-emerging monopoly on bookselling, with its cancellation of works praising Justice Clarence Thomas and questioning transgender orthodoxy. The usual remedy proposed is voluntary patronage of the few surviving independent booksellers. But it may surprise readers to know that there was once, and still is in many parts of the world, a legal regime, not dependent on government, that accords authors and publishers the means to assure a level playing field in bookselling.

That regime is resale price maintenance, once called “fair trade,” that allows publishers to set and enforce firm resale prices for the works they publish. This right does not eliminate competition among booksellers. It curtails price competition to be sure, but diverts it to competition in inventory, pre-sale advice, delivery and other services, and in amenities including social events, book fairs, and book talks.

Destructive price competition in the book trade usually manifests itself not in across-the-board price reductions that still leave prices above retailers’ costs, but in “loss-leader” selling of a handful of “best sellers” designed to attract customers of above-average income who will purchase other products. The proprietor of a New York department store admitted as much in 1914: “My own firm seldom, if ever–with the exception of books–uses these restrictive price articles for advertising purposes.”

Price maintenance was generally prohibited as a violation of the Sherman Antitrust Act by the Supreme Court’s Dr. Miles decision in 1911 over the vehement dissent of Justice Oliver Wendell Holmes that businessmen “should be left to do their own business in their own way, save where the ground for interference is very plain.” Its legalization was urged by Louis Brandeis, whose efforts and those of others, including the copyright lawyer Morris Ernst, ultimately gave rise to the National Recovery Administration booksellers code in 1934 and the more general Miller-Tydings Fair Trade Act of 1937 and McGuire Act of 1952, later eviscerated by activist Supreme Court decisions before being repealed in 1975. However, the Dr. Miles case was later overruled, resale price maintenance now not being absolutely prohibited but subject to a “rule of reason.”

In Great Britain, the first book to be price maintained was Sir Alfred Marshall’s Principles of Economics at the turn of the 20th century; government commissions, including one with John Maynard Keynes, upheld the practice as in the public interest in 1920 and 1949. The Restrictive Practices Act of 1956 required its scrutiny by a Restrictive Practices Court, which upheld the practices in 1962, declaring: “There may not be many mute inglorious Miltons about, but there may be some, and we think that the chances of their muteness might be increased if publishers were constrained to be less adventurous than they are now.”

In 1997, under a new statute, the practice was invalidated by an economically doctrinaire judge, resulting in the early disappearance of about half of Britain’s independent booksellers. An attempt to ban resale price maintenance in the French book trade was reversed by the Mitterand government, which enacted the loi Lang, named after its culture minister. Price maintenance is still practiced in the book trades of Argentina, Austria, Belgium, Croatia, Denmark, France, Germany, Greece, Hungary, Italy, Japan, Mexico, the Netherlands, Norway, Portugal, Slovenia, and Spain.

Given the overruling of Dr. Miles, a brave publisher could try to enforce it in the United States by refusing to deal with price-cutters; expensive litigation would ensue. The needed remedy is statutory—it would be difficult to achieve, but worth the effort. The concentration in bookselling has given rise to a concentration in publishing, with five (soon to be four) major trade publishers in place of dozens, and the disappearance of middle-market books save those subsidized by universities.

George Liebmann, the son of a New York bookseller whose shop closed in 1961, is president of the Library Company of the Baltimore Bar and author of various works on law and public policy.

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