Net Book Agreement (Hansard, 21 November 1991)

Viscount Astor
My Lords, the operation of the net book agreement is essentially a commercial matter between publishers and booksellers.

§ Lord Jenkin of Roding
My Lords, is my noble friend aware that the agreement, which rests on the judgment of a court nearly 30 years ago, is one which actually stops booksellers, almost alone in our trading community, being able to offer discounts to their customers in order to price them into their shops? Does he not believe that there has been a material change in circumstances in that some of our leading publishing houses have now withdrawn from the agreement? Reed is one example and there are famous names such as Heinemann, Secker, Hamlyn, Octopus, Methuen and a number of others. Does that not show that this outdated agreement ought to be scrapped? In the light of all this information, will he encourage the Director General of Fair Trading to refer the matter back to the court?

Viscount Astor
My Lords, as recently as 1989 the Director General of Fair Trading carried out an extensive investigation into the book trade. He concluded that, despite the many changes in the book industry, there was no strong basis to justify his making an application to the court to re-open the case. However, Section 4 of the Restrictive Trade Practices Act provides for the court to review its decision on an application from the Director General of Fair Trading or from the Publishers Association or any individual publisher. Leave for such an application must first be obtained from the court and may be granted if there 1012 is evidence of a material change in the circumstances relevant to the reasoning of the court's original finding.

§ Lord Strabolgi
My Lords, is the noble Viscount aware that the net book agreement is supported by the Publishers Association, the Booksellers Association and many book shops throughout the country? Is he further aware that it is opposed by one chain, which comprises most of the book shops mentioned by the noble Lord, Lord Jenkin? Will the Government therefore be very careful before deciding to make changes that will mean the demise of many small country book shops?

Viscount Astor
My Lords, the net book agreement is a voluntary arrangement by which publishers agree to enforce common pricing rules. Virtually all United Kingdom publishers are party to the arrangement. Under the net book agreement each publisher is free to decide which of his books are to be net books. He can alter the net price of a book at any time and convert any net books into non-net books whenever he chooses.

§ Viscount Montgomery of Alamein
My Lords, does my noble friend agree that the net book agreement is a restrictive practice and is wholly inconsistent with the Citizen's Charter, which sets out to espouse consumer rights? The consumer is very important in this matter.

Viscount Astor
My Lords, there is a good deal of disagreement about whether the net book agreement improves the lot of the consumer or of the publisher. People have different views on whether it is fair, whether it encourages more books to be published or whether indeed it affects the consumer by making him pay higher prices. There are two sides to the argument.

§ Lord Bonham-Carter
My Lords, is the noble Viscount aware that if the net book agreement is abandoned the likely consequence is that the price of books, except for best sellers, will rise, the choice to the consumer will be reduced, the number of small book shops will be reduced and the result for the consumer will he generally retrograde, whatever the noble Viscount, Lord Montgomery of Alamein, may think?

Viscount Astor
My Lords, that is one of the views on one side of the argument on the net book agreement. There is also an alternative view that book prices would come down, enabling the consumer to buy more books and publishers to print more books to sell to the consumer.

§ Lord Hailsham of Saint Marylebone
My Lords, was it not precisely because the net book agreement is avowedly a restrictive practice that justified the original reference to the court? Having regard to the fact that several noble Lords have already expressed a differing view from the judgment of that court, is it not open to any one of them, by leave of the court, to make a re-reference on the same subject to the court rather than trying to ventilate the issue in this House?

Viscount Astor
My Lords, my noble and learned friend is correct regarding the Restrictive Trade Practices Act. However, I understand that only those who were signatories to the original agreement may apply to the court and so it has to be someone from the Publishers Association or any individual publisher.

§ Lord Beloff
My Lords, does my noble friend agree that the consumers of books are those who read them? Their interest must surely come first. The experience of the United States, where there are massive discounts, shows that it is almost impossible to buy a particular book in any book shop other than a recent best seller. Do we really want to go down the road of encouraging mass illiteracy?

Viscount Astor
No, my Lords, I do not think that we want to go down that road. I must point out to my noble friend that last year books to the value of more than £1 billion were sold. The British Library accumulates some five miles of newly published books every year. That shows that the book industry is in a healthy state.

§ Lord Williams of Elvel
My Lords, can the noble Viscount tell the House whether there have been any applications to the court, which was set up specially under the Restrictive Trade Practices Act for the purpose of passing such judgments, on the net book agreement since the original judgment? If so, can he say by whom the application was made and whether the court gave leave?

Viscount Astor
My Lords, I am not aware of any specific application. However, I shall look into the matter and, if I am wrong, I shall write to the noble Lord. I can say that a decision of the European Commission was adopted in December 1988 which found that the net book agreement infringed the prohibition on restrictive agreements under Article 85. The Publishers Association has appealed to the European Court of Justice against that decision. The court's judgment is likely to be delivered next year; but it only affects inter-state trade of books.

§ Lord Jenkin of Roding
My Lords, is my noble friend aware that those who argue that ending the agreement would mean the end of small bookshops are very wide of the mark? When a similar agreement was ended in America the number of bookshops rose over the past few years from around 10,000 to about 17,000 at present. Is my noble friend also aware that in Australia the number of bookshops is about the same now as it was when the agreement was in force? That argument no longer carries any weight.

Viscount Astor
My Lords, my noble friend makes an important point. However, I must point out that, under the net book agreement, any publisher is free to decide which of his books he wishes to be net books and which should be non-net books. If he so wishes, a publisher can decide that none of the books he publishes need belong to the net book agreement.