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You may have seen news, or read commentary on Twitter and Facebook, about the likely repeal of “parallel importation restrictions” and what that means for publishers, writers and readers in Australia. My own view is that we are in for a fight and that the repeal is far from guaranteed – more’s the pity.
For those who don’t know, parallel importation restrictions (PIRs) are part of our Copyright Act and prohibit importing by booksellers for resale where an Australian publisher who has acquired exclusive rights and publishes the title within 30 days of original overseas publication. The bookseller can import an overseas edition from then on, but only if the book is unavailable from the local publisher for longer than 90 days.
The Final Report of the Competition Policy Review led by Professor Ian Harper was released in April this year. Its draft report last year had recommended the abolition of all the remaining PIRs, including those in the Copyright Act applying to books.
The government yesterday announced it had accepted that recommendation, subject to a review by the Productivity Commission (PC) into Australia’s intellectual property regime generally, and particularly any recommendations it may have regarding transitional arrangements.
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 was 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 parallel import restrictions on books will be repealed.
An old story
Harper’s reference to the hated PC and particularly its analysis of book prices in Australia compared to the US and the UK once again inflamed the local debate, 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 on The Conversation last year.)
The real question today is: should we be at all bothered about this issue any more? The Australian Booksellers Association thinks not. It’s completely moved on. It considers other competition issues, such as GST on low value imports and high Australian postal rates, far more significant.
Even the Australian Publishers Association submission (APA) 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 ago 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.
In truth, it would surprise me if we see the abolition of these outmoded, unwarranted and completely unnecessary PIRs any time in the near or even distant future, despite Scott Morrison’s embracing of that idea yesterday.
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.
An earlier version of this article appeared on Peter Donoughue’s blog Pub Date Critical.
Cheaper content, but not just yet. That’s the message in the federal government’s response to the parallel import recommendations by the Harper Review on competition policy.
Australians have long sought quick and cheap access to intellectual property, particularly copyright works such as books and recordings, by importing that content from legitimate sources located overseas. Copyright law has a territorial basis, potentially restricting cross-border movement of commercial quantities of books, videos, sound recordings, computer software, maps and other works. Licensing regimes give copyright owners exclusive rights in a particular territory such as Australia.
One result, highlighted by the Productivity Commission, Parliament and scholars such as Matthew Rimmer, is that copyright owners in the northern hemisphere have been able to charge Australian consumers a premium on products for sale in their own jurisdictions. Think of it as a form of copyright colonialism – the Australian student, mum, dad or academic pays 50% more than their counterparts in the USA. The premium isn’t justified by the cost of shipping the paper and plastic from Los Angeles and London, or from distribution centres in Singapore and Hong Kong.
Australian law currently allows consumers to import “non-commercial” (i.e. personal) copies of books and other content from overseas. The law however restricts importation by retailers. That typically benefits copyright owners and their licensees rather than consumers. That restriction is anti-competitive. It has accordingly been criticised by the Productivity Commission over the past two decades. It is axiomatic that timely and cheap access to content is a social good, irrespective of whether it’s a Justin Bieber clip or the latest tract from Giorgio Agamben.
In conducting a “root & branch” review of competition policy the Harper Committee recommended removal of the parallel import restrictions. By implication, retailers could source legitimate stock of books and other material overseas (i.e. not from pirates) and sell the products in Australia. The expectation is that supply would often be quicker and cheaper than current arrangements. Licensees would have an incentive to get their version of the product into the shops rather than delaying or engaging in egregious rent-seeking.
The Harper recommendations have been criticised by some publishers and authors, typically because changes will affect the profitability of local publishers (either overseas owned or relying on licensed sales of overseas material to fund local creators).
The bigger picture
The recommendations sit alongside ongoing structural change to Australian markets for content, with for example accessing software online and uptake of video services such as Netflix that operate on a global basis.
In responding to Harper the government has indicated it will remove the parallel import restrictions on books … but not just yet.
Removal will be “progressed” once the Productivity Commission’s inquiry into intellectual property is completed and there has been “consultation with the sector on transitional arrangements”. The Commission’s report is due in mid 2016, with action presumably taking place after a general election and potentially accompanied by industry support funding to local publishers.
Overseas car makers and Australian suppliers, pending the imminent demise of Australian production, have been comforted by retention of restrictions on parallel imports of second-hand cars.
The response needs to be read in context, with the government rejecting Harper’s recommendation for a “separate independent review” of “processes for establishing negotiating mandates” to incorporate intellectual property provisions in international trade agreements.
In other words, the government is relying on unsubstantiated claims that there are “robust arrangements in place to ensure appropriate levels of transparency” in agreements such as the TransPacific Partnership Agreement that favour overseas “old industries”.
The claims are deeply problematic. ALP and Coalition ministers have strongly resisted disclosure of information about those agreements. The Productivity Commission has condemned the “black box” approach to negotiation. There are perceptions that Foreign Affairs reads “best outcome” as announcement of a deal rather than lower cost to consumers/taxpayers through a tougher stance on patents, trademarks and copyright.
The parallel import reforms are a good thing for consumers and the overall economy. We need however to move to a more progressive IP regime, one where the temper is democratic and bias is Australian rather than privileging Unilever, Microsoft, Disney and Pfizer. The government’s other responses to Harper’s intellectual property recommendations are weak. That might be through lack of understanding or unwillingness to provoke key stakeholders such as Foxtel.
While cheering the prospect of cheaper books, let’s ask some hard questions about incentives for innovation in key sectors such as biotechnology and software. Are our policy-settings appropriate as we move into a borderless world where people consume bits rather than atoms?
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