Copyright restrictions on the parallel importation of books

• Parallel Import Restrictions (PIRs) provide territorial protection for the publication of many books in Australia, preventing booksellers from sourcing cheaper or better value-for-money editions of those titles from world markets.
• From the available quantitative and qualitative evidence, the Commission has concluded that the PIRs place upward pressure on book prices and that, at times, the price effect is likely to be substantial. The magnitude of the effect will vary over time and across book genres.
• Most of the benefits of PIR protection accrue to publishers and authors, with demand for local printing also increased.
• Most of the costs are met by consumers, who fund these benefits in a non-transparent manner through higher book prices.
• Some of the effects represent transfers from book purchasers to local copyright holders, but the restrictions also cause economic inefficiencies and a significant transfer of income from Australian consumers to overseas authors and publishers.
• Consumers of culturally significant books directly benefit from their cultural value. At the same time, the PIRs make a contribution to the 'cultural externalities' of books that benefit the broader community.
• PIRs are a poor means of promoting culturally significant Australian works.
  • They do not differentiate between books of high and low cultural value.
  • The bulk of the assistance leaks offshore, and some flows to the printing industry.
• Reform of the current arrangements is necessary, to place downward pressure on book prices, remove constraints on the commercial activities of booksellers and overcome the poor targeting of assistance to the cultural externalities.
• The reform option proposed in the discussion draft was for a 12 month territorial protection within the existing framework. Many participants claimed that it would cause undue distortions between different genres of books. There was also mixed, but critical, commentary about its impact on the industry.
• Having considered industry feedback and undertaken further analysis, the Commission is recommending that the PIR provisions be repealed, and that:
  • Three years notice should be given to facilitate industry adjustment.
  • Current financial assistance for encouraging Australian writing and publishing should be reviewed immediately, and any changes implemented prior to the repeal of the PIRs. The new arrangements should be reviewed after five years.
  • To assist in monitoring the impact of these changes, the ABS should undertake a revised version of its 2003-04 industry survey as soon as possible and update it prior to the five year review.

Background information

Andrew Irwin (Research Manager) 02 6240 3350

Australia's restrictions on the parallel importation of books result in higher local book prices, according to a report released today by the Productivity Commission. While this is a cost to consumers, the benefits to publishers and authors are not well-targeted.

The Commission undertook extensive analysis of international book prices and concluded that the current restrictions create material upward pressure on book prices in Australia. The size of this effect will vary over time and across book genres, and can be substantial.

By removing the restrictions, local booksellers would have the option of accessing better value books from overseas. Local publishers would have a strong incentive to make their prices more competitive and to look for greater efficiencies in their operations, the report said.

Some books have important cultural value, but the Commission found that the support to Australian authors provided by the restrictions is poorly targeted. 'One of the Commission's concerns is that consumers pay higher prices for books, regardless of their cultural significance' the Commission's Deputy Chairman, Mike Woods, said. 'A second concern is that these costs to consumers generate greater benefits for overseas authors and publishers than they do for our local writers. In effect, Australian consumers are subsidising foreign book producers.'

Whereas the Commission's draft report had proposed a partial liberalisation of the import restrictions, following further evidence, the final report recommends their repeal, with the industry having a period of three years to adjust before the changes take effect. The report recommends that the current range of grants and other financial assistance be refined to better target the local writing and publishing that adds cultural value to Australian society.

In commenting on this change, Mr Woods said: 'having considered the industry's feedback on the draft, and undertaken further analysis, the Commission found the case for repealing the restrictions compelling. Coupled with improved subsidy arrangements to address the relevant cultural aspects of Australian literature, the reforms would benefit the community overall.'

• Preliminaries
  Cover, Copyright, Foreword, Terms of reference, Contents, Abbreviations and Glossary
• Overview - including key points
• Recommendations
• Chapter 1 About the study
  1.1 Background
  1.2 Scope of the study
  1.3 Conduct of the study
  1.4 The Commission's approach
  1.5 Commentary on the discussion draft
• Chapter 2 An overview of the books sector
  2.1 Consumption of books
  2.2 Supply of books
  2.3 Producing a book in Australia
• Chapter 3 Copyright law and the broader policy environment
  3.1 Copyright Act provisions
  3.2 Objectives of the provisions
  3.3 The broader policy environment
• Chapter 4 Price and assistance effects
  4.1 Potential price and assistance effects
  4.2 Evidence on the price effects
  4.3 Interpreting the evidence
• Chapter 5 Impacts in the books market
  5.1 Publishers
  5.2 Authors
  5.3 Printers
  5.4 Booksellers
  5.5 Consumers
• Chapter 6 Cultural and related impacts
  6.1 Cultural benefits
  6.2 Educational benefits
  6.3 Effects on external benefits
  6.4 Summing up
• Chapter 7 Net impacts and policy implications
  7.1 The PIR balance sheet
  7.2 The reform options
  7.3 The preferred approach
• Appendix A Public consultation
• Appendix B Other matters
• Appendix C Reform case studies
• Appendix D Price comparison methodologies
• Appendix E Market share methodology
• Appendix F Design of financial support
• References