Australian publishers' reactions to the Harper Competition Policy Review: same old, same old.

The Final Report of the Competition Policy Review led by Professor Ian Harper was released this week. Its draft report last year had recommended the abolition of all the remaining parallel importation restrictions (PIRs), including those in the Copyright Act applying to books.

In a lengthy discussion about parallel importation generally, and what previous reviews have recommended over the years, and after assessing all the submissions on the issue from publishers and others, Harper's conclusion is this:

On the basis that the PC [Productivity Commission] has already reviewed parallel import restrictions on books... and concluded that removing such restrictions would be in the public interest, the Australian Government should, within six months of accepting the recommendation, announce that... parallel import restrictions on books will be repealed. 

The reference to the hated PC and particularly its analysis of book prices in Australia compared to the US and the UK has once again inflamed the local debate of course, but it's a debate that's by now tiresome in the extreme. The PC looked at industry practices in 2008/9, a long time ago in this Internet age.

Harper seems unaware that things have changed rather dramatically in pricing and importation practices since then. In response to a surge in online ordering by consumers from Amazon and The Book Depository given the strong Australian dollar, publishers finally reacted and the high markups on imported titles have been virtually eliminated. (I wrote in detail about this last year). 

The real question today is: should we be at all bothered about this issue any more? The booksellers association (ABA) thinks not. It's completely moved on. It considers other competition issues, like GST on low value imports and high Australian postal rates, far more significant.

Even the publishers association (APA) submission considers the PIRs today 'low impact'. Their removal would provide 'no benefits to consumers'.  

My view is we definitely should be bothered. The PIRs should finally be abolished, buried and cremated so they don't rise like zombies in a quite different future. Many individual publishers operating in the Australian market are adamant they play a vital role and need to be retained.

Their basic argument is this: The PIRs construct Australia as a separate rights territory, and this reality is absolutely critical in enabling the purchase of Australian rights to overseas titles and the sale of rights to original locally published titles into export markets. The PIRs grant exclusivity both ways, and therefore rights trading can be done with full confidence. 

The problem with this argument has always been its profound conceptual confusion.  The PIRs don't make Australia a rights territory at all (referred to as 'territorial copyright'). All they do is disallow importation for commercial purposes by booksellers. The territorial rights are granted by contract with an overseas agent or publisher, and it makes sense to buy separate Australian rights because our population size is big enough to support local printings; our borderless, distant continent inhibits 'buying around' by booksellers; and our mature book trade infrastructure (distributors, retailers, freight systems, publicity channels, etc) facilitates immediate availability and sales.   

Protection and exclusivity can be guaranteed commercially, in other words. An arcane importation provision shoved into our Copyright Act 100 years under pressure from panicky British publishers is  not at all necessary, and for decades now, in its anti-consumer bias, has done way more harm than good. Publishers should have been forced to gain protection by operational excellence, not by a trade protectionist law guaranteeing over-pricing and under-servicing.

The PIRs have always protected the weak and uncompetitive publishers, and hence disadvantaged those who wanted to play the game fairly and professionally and with a sure customer focus.

But surely, publishers argue, without the PIRs booksellers will be free to import cheaper overseas editions, or even remainders, thus severely undercutting local rights holders. How can that not do enormous damage to local publishing and authors and eventually readers? 

Publishers can quite easily make buying around an unprofitable thing for a bookseller to indulge in. They need to watch their pricing far more actively than they've been in the habit of doing. Maintaining a high Australian RRP when a standard US edition is significantly cheaper is no longer viable. Individual consumers are already able to buy direct via Amazon, and retailers should also be able to exploit opportunities to compete if the local supplier remains unresponsive to overseas prices and exchange rate fluctuations. Retailers have to do everything they can to attract that consumer into their stores. But they also have to pay freight, absorb currency losses and can't return overstocks, so importation is never going to be the usual method of supply unless the local offer is simply not competitive.

Under the current regime the 'policing' of local retailers, chastising them and threatening them with possible litigation is no way to build and maintain their loyalty. Australian booksellers universally want to support local publishers and the thriving literary and cultural scene on which their livelihood depends. Unresponsive pricing and stocking, and miserable trading terms, are the culprits, not the retailers who are simply trying to offer a fair deal to their customers.

The natural protection available to responsive publishers will more than guarantee that their local edition will dominate the market. There will inevitably be leakage at times, but it will be minimal in impact.   

Publishers need to stop indulging in apocalyptic fantasies of doom and destruction. They are the common argot of industry associations across the board who feel threatened by increased competition, and they do the industry no good at all in terms of public image. Expressions such as 'a radical instrument of cultural engineering' have no empirical basis whatsoever and are simply absurd.

They are also illogical. The APA, for example, proclaims that there will be minimal advantage to consumers from abolishing the PIRs, yet such reform will cause Australian publishing to suffer immense damage. Both can't be true. 

As for the claim that foreign publishers will likely 'take over' the Australian territory absent the PIRs (because, you know, no Australian Territorial Copyright!) by demanding Australia be deemed a non-exclusive territory in rights contracts so the foreign edition can compete, I doubt there's a more insulting interpretation of how a PIR-absent market would work. Rather than cower toward ignorant UK or US publishers and their insistence on non-exclusivity, Australian publishers will need to muscle up and clearly explain the facts of the Australian market to their colleagues. 

Finally, this Harper Review is only a series of recommendations to government. And there are so many of them that have traditionally frightened the pants off even popular governments let alone the deeply unpopular one we have now. I feel no confidence whatsoever that we'll see the abolition of these outmoded, unwarranted and completely unnecessary PIRs any time in the near or even distant future. The political battle is still to come and remember that the author community, egged on by their  publishers, will vigorously engage as they have on every previous occasion. Authors are the most articulate and powerful lobby group in the country - beloved public figures with ready access to every media platform.

It's once again going to be ugly, and that's a real shame. Unless of course the Abbott government decides up front to not entertain any reform, which is probably what they'll do.