The Work

Mechanics and Agency

Years ago, when I was running the product database at Barnes & Noble, I would occasionally get a call from a small publisher or an author, demanding to know why we were pricing a book below what they were charging on their own websites. “You’re undercutting me!” was the basic complaint.  At the time, B&N was huge on discounts, so the only response (which for diplomatic reasons I could not give) was, “We’re Barnes & Noble. That’s what we DO.” I would explain to whoever was on the other end of the phone that we bought the books outright and therefore could re-sell them at any price we wanted – boiling down the first sale doctrine into layman’s terms.

The agency model up-ends this, of course; the publisher sets the price and the vendor is now the agent of the book rather than the reseller of it. In practical terms, however, the vendor frequently dictates the price of the book – as Apple does with its “most favored nation” clauses. These stipulate that no other retailer can sell an ebook for less than Apple does. What this means is that publishers have to scramble around and make sure that no other retailer is discounting the book without their knowing. This happens.

I’m not sure any of this qualifies as collusion, but certainly it qualifies as a royal pain in the neck. Publishers have to check their ebook listings at all vendors to make sure that everyone is selling the book for at least what Apple is selling it. For midsize and smaller publishers, this is a manual process. There are penalties if Apple’s occasional spidering finds books being sold at lower prices elsewhere.

Agency or non-agency isn’t really the issue – it’s that “most favored nation” clause that is roiling people. Well, roiling everybody but Apple.

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