Or, how governments harm consumers at the expense of the politically connected.
This little story from the New York Times about booksellers in France is just one example of how governments will rarely take action to protect the consumer, preferring instead to protect the interests of those that are politically connected.
December 12, 2007Nevermind that such a ruling simply forces French consumers to subsidize sub-standard bookshops into perpetuity.
Amazon Ordered to End Free Delivery on Books in France
By PETER SAYER, IDG News Service\Paris Bureau, IDG
Amazon.com may not offer free delivery on books in France, the high court in Versailles has ruled.
The action, brought in January 2004 by the French Booksellers' Union (Syndicat de la librairie franÃ§aise), accused Amazon of offering illegal discounts on books and even of selling some books below cost.
The court gave Amazon 10 days to start charging for the delivery of books, which should at least allow the company to maintain the offer through the end-of-year gift-giving season. After that, it must pay a fine of e1,000 (US$1,470) per day that it continues to offer free delivery. It must also pay e100,000 in compensation to the booksellers' union.
Retail prices, particularly of books, are tightly regulated in France.
Using "loss-leaders," or selling products below cost to attract customers, is illegal. Other restrictions apply to books retailers must not offer discounts of more than 5 percent on the publisher's recommended price. Many independent booksellers choose to offer this discount in the form of a loyalty bonus based on previous purchases. Larger booksellers simply slash the sticker price of books.
But the free delivery offered by Amazon exceeded the legal limit in the case of cheaper books, the union charged.
The union said it was pleased with the court's ruling, which would help protect vulnerable small bookshops from predatory pricing practices.
Amazon.com did not immediately respond to a request for comment.If only the French would allow the free market to work. Alas, many in this country would probably love to see similar regulation of companies (aka Wal-Mart) in order to "protect the consumer."
Earlier this year, the union won a similar legal victory against Alapage.com, an online bookseller with operations in France, Spain and the U.K. The appeals court ruled that Alapage must pay a fine of e50,000 for illegal pricing practices including the offer of free delivery.
It's not been a good month for U.S. e-commerce sites doing business in France: last week, the French auction regulator sued eBay France for breaching rules on the conduct of auctions. The regulator said that eBay's failure to comply exposed consumers to the risk of fraud. In its defense, eBay France maintained that it is not an auctioneer and that it has "invented another way of buying and selling" not covered by the rules.
As Milton Friedman pointed out in this excellent video from his 1980 series Free to Choose, the free market (through the threat of competition) provides more protection for the consumer than any government can.
I hope the French citizens will enjoy the higher costs of reading. Perhaps this will provide Sarkozy with yet another area of France which requires reform and liberalization.
ARC: St Wendeler