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South Korea's Fixed Book Price Policy

 

2019.08.05

 

Fixed book price policies are rules that set consumer prices for books at levels the publishers select. Countries where these policies exist, sell books at the same price anywhere you go. Instead of competition through prices at the commercial sale level, price competition takes place at the production stage between publishers, boosting the diversity of distribution channels and convenience of readers.
The global publishing market is divided into countries that have fixed book prices and those that do not. English speaking countries like the United States, the United Kingdom, Canada and Australia, which all form one giant market do not have fixed book prices. Non-English-speaking advanced countries like Germany, France, Spain, the Netherlands and Japan all have fixed book prices. Those that do have this policy have diverse ways to enforce it. For example, in Germany and France, the governments have passed special laws for fixed book prices that have banned all discounts for physical and electronic books. In France, books ordered online cannot be shipped for free. Meanwhile, Japan enforces fixed book prices for paper books, but it does not for e-books. Spain has a very stringent fixed book price policy, but it has shown flexibility and allows discounts for books sold at book fairs.
South Korea has a fixed book price system that is enforced by law. Among the countries that have fixed book price systems, South Korea has the biggest discount percentage and also allows vendors, etc. to freely negotiate prices amongst themselves. Why this came to be was because the government needed to accommodate both sides of the spectrum: those who strongly pushed for fixed book prices (brick and mortar bookstores) and those who were opposed (online bookstores).

 

South Korea has a fixed book price policy in place, but from the consumer's point of view,
there is a 15 percent price difference from the listed price.

 

Currently, according to the publishing culture industry promotion law, South Korea has enforced fixed prices on both paper books and e-books. There is no limitation to the category for which the fixed prices are to be used and no term limit. However, magazines are the exception to this rule. Retail bookstores can provide up to a combined 15 percent discounts on books and consumer benefits equal to that amount. Direct price discounts may only be given up to 10 percent of the listed price. So usually, large-scale online bookstores will provide the 10 percent price discount in addition to a 5 percent cashback in mileage points. They use all the legal space that is available for discounts. However, most small to medium-sized brick and mortar stores cannot afford to give discounts, and they sell books at listed prices. Although South Korea has a fixed book price system in place, from the consumer's point of view, there is a 15 percent price difference from the listed price, hence taking away from the policy's original aim of having one price for every book. This is in contrast with daily newspaper prices (for one copy or subscriptions), which are the same anywhere in the country.
In the process of book sales in South Korea, prices have up to a 15 percent difference depending on whether consumers buy their books at an online store or brick and mortar store because of the book provision rate that is set by publishers (the price at which publishers provide books to wholesalers or large-scale online/offline bookstores compared to listed prices = margin rate for distributors, sellers). Despite the fixed book price policy, book prices can be different depending on the location, turning the law into a 'discount limit law'. Meanwhile, problems continuously arose when online bookstores provided additional discounts through agreements with credit card companies, and eventually, those discounts were capped at 15 percent in 2018 via independent agreements with the private sector. Now, the reality is consumers can buy some books at online stores and receive up to a 30 percent discount if they meet the right standards. Because books and e-books in South Korea are exempt from the value-added tax of 10 percent, there have been voices saying the maximum 30 percent discount rate is neither part of a fixed book price nor free market trade.
The beginning of South Korea's fixed book price policy goes back to 1977 when a group of publishers and bookstores agreed to start selling books at contracted listed prices. The fair-trade law which was enacted in 1980 banned resale price maintenance acts for all products except written work, like books. This aided the dissemination of fixed prices for books nationwide, and the number of bookstores grew. However, in the mid-1990s, the emergence of large-scale shopping malls brought large price discounts and books were no exception. By the late 1990s, online bookstores came onto the scene, started providing steep discounts on books and the existing fixed price policy hit a wall. The policy had, in reality, become useless as there was no law at the time that regulated new book distribution channels which did not enter fixed book price agreements.
South Korea's publishers and bookstores began new efforts for an amendment to the fixed book price policy and succeeded in getting an amendment passed in 2002 that included mandatory fixed book prices. However, despite this effort, books on discount were still available because an article existed under the law that allowed them, thanks to online bookstores and members of the public who strongly opposed fixed book prices. This article stated books were only subject to fixed book prices until one year after publication, and during that one year, only up to a 10 percent discount could be provided. The law also had a sunset clause of five years. The situation grew worse compared to before the law was passed, as online stores would heavily compete with each other and slash prices of books that had passed one year after the date of publication, providing more than 50 percent in discounts. The law was amended several times after that, and today, the fixed book price policy is where it has been since November 2014.

 

There were many who opposed, including the general public
that insisted consumer prices would go up because of the law,
but the South Korean parliament eventually agreed a fixed book price policy was needed.

 

After the current law was enacted, all books were now subject to the same discount caps no matter when they were published. Books to be sold to public institutions and libraries also had to abide by the rule, when previously they were exempt to it. There were many who opposed, including the general public that insisted consumer prices would go up because of the law, but the South Korean parliament eventually agreed a fixed book price policy was needed. It made a compromise, allowing some discounts to be made for consumers. The last amendment was effective in the fact that it narrowed discount rates. The current law is to be reconsidered by the culture minister every three years, and it can be changed through amendments. Online bookstores have sustained their growth with discounts and convenience as weapons, brick and mortar stores have slowed in their decline while more unique, smaller bookstores are growing in number.
One can become curious at this point about the opinion of those who are directly involved with book publishing. According to a survey conducted in 2016 by the Korea Publishers Society, 90.9 percent of bookstores said the current law should be sustained or even strengthened (lower discount rate). 74.6 percent of publisher respondents agreed, while 64.8 percent of reader respondents said the same. In a survey of 379 publishers, bookstores and readers published in a webzine called Publishing N by KPIPA in 2019, there were twice as many more respondents who supported a stronger fixed book price policy (53.8 percent) than there were those who called for the law to be relaxed (23.8 percent). However, there are many consumers who oppose the current fixed book price policy because it limits discounts. This is because most people equate discounts to low prices and there are few people who try to understand the characteristics of books, which are vast in variety and few in copies in comparison.

 

〈Opinions on fixed book price policy changes and direction
(Respondents: publishers, bookstore executives, researchers)〉

(Unit: %)

도서정가제의 개정 방향에 대한 관계자(출판인/서점인/연구자)의 의견

• N=379.

• Reference material: Fourth issue (May 2019) of KPIPA webzine Publishing N under “Focus feature - Potential for publishing content utilization seen higher than paper books (Written by Kim Bo-gyung, head of publishing company Jiwain Books)”. The graph in the article has been converted into percentages(http://nzine.kpipa.or.kr/detail.php?idx=64)

 

As the size of the e-book market grows bigger and newer services emerge, a more complicated solution to the problems that the fixed book price system faces in South Korea is required. For example, the unlimited subscription plan that Amazon provides for its Kindle readers allows readers to read tens of thousands of books a month at a minimum price of about 5,500 won. In a country where there is no fixed book price system in place, this kind of service causes few problems, but for a country that does have one, the situation changes. Several e-book providers have already adopted this business model, and there is no legal article to say they are breaking the fixed book price rule. An e-book can be sold at full price when it is bought separately, but under unlimited subscription plans the book is provided at nearly no cost, causing conflict under the current law.
The South Korean government (culture ministry) is scheduled to review the current fixed book price law, which is in its fifth year and is seeking opinions on the assessment of the law and what direction it should take. It has been collecting views from a variety of people who are affected by this law. In September 2019, a public hearing will be held in parliament to discuss amendments to the law. In South Korea, the fixed book price issue is still as hot as any.

 

 


Written by Won-Keun Baek (Books & Society Research Institute, President)

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Won-Keun Baek (Books & Society Research Institute, President)

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