Net Book Agreement (Abolition) (Hansard, 21 February 1989)

§ Mr. David Shaw (Dover)
I beg to move, That leave be given to bring in a Bill to increase competition in the sale of books.
The market for books in this country has been described as a bilateral oligopoly, with about 20 major publishers and only about 20 major retailers who control most of it. They are cemented in an anti-competitive relationship by the net book agreement, which my Bill seeks to abolish. The net book agreement, or NBA as it is commonly referred to, prevents booksellers from discounting the price of about 90 per cent. of the books sold in Britain. At present, every time that a bookseller discounts or expresses a wish to discount books, he is threatened with legal action by the Publishers Association. That legal action prevents the consumer from paying a lower price for books by shopping around.
I am sure that the whole House will be concerned that not just the housewife, the pensioner and the nation's children have to pay more than they need for many books. The public sector cannot negotiate its own discounts. They are fixed by the publishers' net book agreement. Local authorities—their libraries and schools—the Ministry of Defence, with its military libraries, and doctors, dentists and nurses have to pay more than they need because of the net book agreement. One supplier of medical books is trying to sell books at a discount at the moment, but it is under threat of prosecution by the Publishers Association.
However, the principle of the agreement is broken by the publishers in such a way as to cause disadvantage to the small stockholding bookseller. That is done by direct supplies to local authorities that bypass the local booksellers; large retail chains are given special extra discounts by publishers which the small local bookseller cannot get; and poor service means that it often takes three weeks for the small bookseller to be supplied with books. Discounts are also given to book clubs. Last weekend one book club was offering in the newspapers the best selling non-fiction book, as part of a special offer, at £1. However, if my local bookshop in my constituency had attempted to make the same offer, it would have contravened the publishers' net book agreement. That agreement results in one rule for the large book club and another for the small local bookseller.
All hon. Members will be aware of the privileged position of the booksellers. First, they have the price maintenance agreement that my Bill would abolish. Secondly, there is no value added tax on books.
The ability of book publishers to control the price of books dates back to the 1800s when one Alexander Macmillan, a relation of someone who is well known to this House, helped to put together an agreement to control book prices. Over the years, that agreement was changed many times until the present one came into being in 1957. The net book agreement of 1957 was approved in a most curious and strange judgment by the restrictive practices court in 1962. The court's judgment stood economics on its head. It was carried away in a romantic world where "books are different". The judgment supported the publishers' case and argued that if the net book agreement was abolished and competition resulted, prices would rise 850 and that the small stockholding bookseller would go out of business. That is exactly what has happened under the net book agreement.[Interruption.]

§ Mr. Speaker
Order.

§ Mr. Shaw
Prices have risen by more than inflation. The small bookseller has lost business to the large retail chains and to the book clubs. Last year the Monopolies and Mergers Commission said that the market conditions on which that judgment was made no longer apply. In other words, the judgment is out of date.
Hon. Members may wonder why the restrictive practices court came to such a strange judgment. It is clear that the judges were very influenced, among other evidence, by the statements of a wonderful spinster lady who is mentioned twice in the judgment. Her name was Miss Babbidge. Miss Babbidge owned her own bookshop in Havant. Sadly, Miss Babbidge died some six years ago and I am informed that her bookshop has closed and that the shop has now become a kitchen shop. The net book agreement did not, as the judges thought it would, prevent Miss Babbidge's bookshop from succumbing to market pressures. As another lady, for whom I have immense respect, once said, "You can't buck the market." The judges attempted to buck the market in 1962. I, and many others, believe that their judgment did not consider the economic facts of life.
Hon. Members may ask why a Bill is necessary and why the Office of Fair Trading cannot take action. [Interruption.]

§ Mr. Speaker
Order.

§ Mr. Shaw
The answer is that the 1962 court decision is very nearly unchallengeable. The Office of Fair Trading has an almost impossible legal task. Unfortunately, when Parliament passed legislation on restrictive practices, no provision was made to empower the Office of Fair Trading to review such agreements without returning to the restrictive practices court. The fact that the NBA has not been reviewed by any authority acting on behalf of the consumer in nearly 30 years is, I believe, against the public interest. [Interruption.]

§ Mr. Speaker
Order. I must ask the hon. Members to listen to what the hon. Gentleman is saying and not to engage in private conversations.

§ Mr. Shaw
The fact that there is also a private and exclusive drinking club called the Possum club, which discusses the net book agreement and other publishing agreements, suggests that the publishing industry is operating a price-fixing cartel that takes advantage of the consumer and the taxpayer.
The book publishers do not and have not been able to argue that competition would reduce the number of books sold. Retail consultants have estimated that abolition of the net book agreement would increase sales by 11 per cent. In the United Kingdom, people buy fewer books than in the United States and Australia where there is no price maintenance. In both of those countries there is a healthy, unrestricted market in the sale of books, with good volume sales and exciting and interesting bookshops that stock about the same number of titles as are published in the United Kingdom. In the United Kingdom, however, book sales volume has been relatively static, and retail consultants have estimated that price increases have been 851 up to 50 per cent. more than inflation, as measured by the retail prices index. I should mention that the publishers deny that, but I have checked prices for certain books over a 10-year period and have found it to be true.
The conclusion is that the United Kingdom book market needs more competition in it. By passing my Bill, the consumer—the housewife, the pensioner, the child and the taxpayer—will be better served at better prices. I hope that the House will give me permission to introduce my Bill today.