Publishers ask OFT to investigate rise of internet retailing

As The Bookseller's lead news story this week reveals the Publishers Association and the Independent Publishers Guild have called for a wider investigation into the book retail market, following a joint submission to the Office of Fair Trading objecting to Amazon's proposed acquisition of The Book Depository.

The PA and the Independent Publishers Guild have joined forces -- the first time they have done this, though an agreement to lobby together was in fact  put in place two years ago -- following the lead of the Booksellers Association, which last week said it would also object to the acquisition.

You might wonder what has taken publishers so long to realise that Amazon was becoming a dominant player in their marketplace, and risked distorting it with excessive demands for discount from suppliers that cannot now but help it undercut rival booksellers - and that was before the Kindle arrived.

It might be overstating it to call it the trade's Murdoch moment, but there is clearly a feeling abroad, and if the PA's call is heeded then there is an opportunity here to take a measured look at the rise of internet retailing and reflect on the state of the high street, and booksellers in particular - as the PA stated: "Whatever the decision in this particular case, we feel it is high time that competition authorities took a closer interest in the developments of the book retail market—especially given that data from BML shows that internet-only retailers have 31% of the retail market by value, and growing."

Options for the OFT include taking consumer or competition action, encouraging the business to self-regulate, making recommendations to government to change regulation or public policy, or referring the whole lot to the Competition Commission.

Realistically, it is difficult to see what measures the OFT could take around The Book Depository deal (given its UK turnover is actually quite small), aside from seeking assurances that the larger company won't use its market position to increase trade discounts to the smaller retailer: but on the wider issue the body could examine if internet retailing brings with it advantages not easily obtained by retailers with a high street presence, as appeared to be the case in California before its legislators chose to close the tax loophole that allowed Amazon to supply products to Californians without paying tax (Amazon is objecting, leading to strong strong words from the American Booksellers Association c.e.o. Oren Teicher).

There is no suggestion that Amazon Europe's Luxembourg location lends its similiar such overt advantages beyond the overseas VAT loophole that is already under review; but the UK Companies House accounts for a company known as Amazon.co.uk show that it paid tax of £517,000 on sales of £147m, after posting a loss of £2.5m, with Amazon blaming that loss on high "administrative expenses" for which it provides very little detail. The figures are modest on a number of levels: though Companies House accounts may not provide the complete picture. That said, the previous year it gained a tax credit of £1.3m.

Hopefully, the PA and IPG's call will lead to greater scrutiny of just what the factors are that have allowed Amazon to build up such a dominant position: if it turns out to be retail and strategic brilliance (which in truth Amazon demonstrates every day) then we might just have to admit it, and wait for the markets to provide the necessary corrective as they usually do: if however the markets are not functioning fairly for all sides then the OFT should investigate further.

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