Mr. Nelms is a professional librarian in Evansville, Indiana.
Many people who supposedly support the concept of the free market are bitterly opposed to what they consider "cutthroat competition." According to these individuals, competition is acceptable, as long as it is not completely unbridled. If totally unregulated price reduction is allowed to occur, the industry or business in question will be ruined, the quality of goods will decline, and small entrepreneurs will be driven out of existence by larger producers. Thus, not only consumers but also businessmen are harmed when price decisions are left solely to the parties involved. The solution suggested is always the same: the state should regulate prices to "protect" both buyers and sellers.
Any student of freedom readily recognizes the errors in the above argument. It is only through the working of the market that the true price of goods and services can be established. If the government interferes, it can only confuse the issue, inhibit efficiency in production, cause shortages, and prevent consumers from getting the best available products.
An excellent example of how the interests of both businessmen and consumers are best served by the competitive free market is the British bookselling trade of the nineteenth century. A careful review of this story will demonstrate how, without government interference, monopolies were avoided, consumers were provided inexpensive reading matter, and an acceptable income was earned by retail merchants.
The history of English book-selling is rooted in the eighteenth century. The Enlightenment, with its emphasis on intellectual improvement and industrialization, promoted the cause of literacy. Despite the increasing level of education, however, by the turn of the nineteenth century, books could still be purchased only by the wealthy. Most publishers preferred to issue expensive limited editions of books, instead of producing cheaper works for the expanding middle class. As one literary historian has observed: "ironically, as a climax to a century that prided itself on its unprecedented diffusion of learning, new published books were completely out of the ordinary man’s reach."1
An interesting exception to this trend in the book trade was James Lackington, "an ex-shoemaker, random amorist, and converted Methodist." Lackington scandalized the conservative book trade by buying volumes which other bookmen could not market and selling them at very low prices. Instead of maintaining the high prices and mark-ups of his competitors, he hung a sign over his bookstore proclaiming, "Cheapest Bookseller in the World." No one challenged his claim, and his business grew until he had the largest bookstore in London.2
Lackington’s success encouraged other retailers who were willing to accept his belief that "small profits do great things." Ignoring the protests of the older bookmen that underselling was against the best interests of the book trade, these entrepreneurs reaped acceptable profits, provided reading material to people with moderate incomes, and helped spread literacy throughout England.
Alarmed by the practice of competitive pricing, several leading members of the London Booksellers’ Association met on December 9, 1829 to formally approve a document sanctioning control of retail book prices. According to this agreement, no retailer was to sell new books or reprints below the price suggested by the publisher; if he did, publishers could refuse to supply him with works at trade or wholesale prices. A permanent committee was established to enforce these regulations, and within a year 560 members of the book trade had promised to abide by the regulations.
The 1829 agreement brought outcries from booksellers who were unwilling to sacrifice themselves to save the more inefficient members of their trade. Many of these hardy individuals fought the regulations and continued to cut prices.3
The Committee of the Booksellers’ Association was determined to enforce the 1829 accords, and it promptly responded to stop underselling. In addition to boycotts and blacklisting, publishers were told to deny obstreperous sellers credit, and habitual offenders were excluded from public auctions and trade sales. The Committee later began issuing trade tickets to members who abided by the regulations. If a dealer violated the prescribed standards, his ticket was revoked and all privileges of the trade withheld.
Without a doubt, the most obnoxious of all techniques used by the organized book trade was espionage. Not only were merchants encouraged to report to the Committee any violations by fellow members of the profession, but spies were also hired to harass undersellers.4
As the harshness of the Booksellers’ Association increased, the determination of the undersellers also hardened. This explains the necessity of the Committee to meet on July 12, 1850 to reaffirm its 1829 agreement. Such a gathering would have been unnecessary if members had faithfully obeyed the dictates of the organized trade. The truth is that while only a handful of merchants openly refused to obey the Committee’s commands, many did so covertly. As in any market where prices are held artificially high, the profit motive encouraged producers to engage in black market operations. The covert undersellers were encouraged by the booksellers who openly defied the Committee. Needless to say, many of these men paid heavily for their actions, and some even went bankrupt. But the profitability of underselling was great enough to make the risk worthwhile for the few who courageously battled the organized book trade.
Bucking the Association
Among the most remarkable of these men was John Chapman, a publisher and importer of American books, who was only twenty-eight in 1850. Although threatened with blacklisting, boycotting and a cutoff of supplies, he continued to sell at less than the list price. Once, when the Committee promised to take sterner action against him, Chapman replied, "I’d gladly give ten pounds toward the expense of commencing hostilities against your association." He often smuggled books from other areas and bought indirectly from publishers trying to put him out of business.5
Chapman continued his defiance of the Association, and he printed several letters about its coercive activities in the London Times. These letters attracted such public attention that two of the Committee’s most respected members, William Longman and John Murray, felt compelled to respond. They replied that the Booksellers’ Association represented a majority of the London bookmen and that the question of the Committee’s activities was being considered by several prominent London literary figures. Although this last statement was untrue, the publicity it generated forced the Committee to submit the controversy to formal arbitration. A mutually agreeable group of arbiters was selected, and both parties began preparing their cases.6
Encouraged by the possibility of victory through arbitration, Chapman and other undersellers set out to convince the authors of the books they sold that the Association did not serve their best interests. The Committee responded with a circular expounding the dire consequences of unrestricted competition.7
From this debate came a most notable occurrence. On May 4, 1852, while the question of the Committee’s actions was still awaiting arbitration, Chapman called a meeting of distinguished authors to get their opinions of the Booksellers’ Association. Those present included Charles Dickens, Wilkie Collins, and Herbert Spencer. All of the authors decried price fixing and called for the institution of free trade. The words of Henry Cole, a contemporary art critic who was at the meeting, aptly expressed the feeling of all present. He said, "I think the price of books should be allowed to find its own natural level, as in all other manufactures."
Free Trade Prevails
When the question finally came before the arbiters, the under-sellers argued that the regulations were monopolistic, oppressive, inefficient, and contrary to the principles of free trade. The Committee replied that it represented a vast majority of the booksellers and that if "cutthroat competition" continued, publishing and bookselling would suffer irreparable damage. They graphically described a future in which booksellers would be forced out of business and in which the number of books in circulation would be drastically reduced.
After hearing the arguments of each side, the arbiters adjourned to make their decision, which was delivered on May 19, 1852. Their judgment was unequivocal: the Committee’s regulations were criticized as "harmful and vexatious," and inconsistent with the principles of free trade. As a result of this decision, the Committee was disbanded, and the Booksellers’ Association was dissolved.8
Following the breakup of the Association, free trade returned to bookselling with predictable results. Price competition caused discounts to grow, and they were applied to nearly all books in the trade. Between 1852 and 1890 the discount rate rose from two pence to three pence on the shilling, and in some places these rates were exceeded. This process was not confined to London, but extended into the provinces. Provincial booksellers not only competed among themselves but also faced the challenge of London merchants. The rate of gross profit secured by booksellers was eventually half of what it was during the days of the Booksellers’ Association. Naturally, this was to the advantage of the consumers as books became available to people with even the most modest of incomes."
Many members of the book trade moaned the fall in profit margins and argued that it was no longer possible to make an adequate income. This argument has been cited by many historians to show the horrors of unrestricted competition." In reality, however, a comparison of the figures available for the period discloses that profits were such that the number of booksellers actually increased by nearly 25 per cent, instead of decreasing as the critics have claimed. As the most careful student of the nineteenth-century book trade has observed: "it is unlikely that there could have been any decline in the number of bookshops; and it may be conjectured that the average size of bookshop must have been increasing. This conclusion would not be surprising in view of the growth of the economy and the continuing spread of literacy."
Another criticism of the price competition of the period is that booksellers were forced to supplement their earnings by selling other merchandise, such as secondhand books, fancy goods, and stationery. This was quite natural, however, as the traditional divisions between different branches of retail business were beginning to break down under the impact of changes in sale methods and the growing standardization of products. This argument further loses it significance when one realizes that similar circumstances obtained when there was regulation of the trade by the Booksellers’ Association."
Having dealt with the arguments against free trade, it is necessary to assess the benefits of such freedom. As price competition increased, inefficient publishers and retailers were forced to either become more productive or retire from the business. The drive for efficiency led to numerous technological innovations, especially in the binding of books, which further decreased the cost of printed matter to consumers. In addition, novel advertising methods were used to inform the public of new works, and advances were also made in the distribution of books.
Bookmen began to realize the vast market formed by the middle and lower classes, who were eager for reading material. With the developments in technology and the increased efficiency promoted by the free market, the rewards to the consumer were great. In the words of one historian, "whatever its effects on the professional bookseller, the discount system encouraged the reading habit both by reducing actual prices and by increasing the availability of books."14
All of the above circumstances were possible because of the unhampered workings of the free market. Without governmental interference, it was impossible for the Booksellers’ Association to maintain fixed prices. The lure of substantial profits was very tempting, and there were always businessmen willing to risk the displeasure of the organized trade. Even if the Association had not agreed to have its activities arbitrated, it would not have been able to maintain its control. The market for cheap printed matter was expanding, the technological advances were available, and under-sellers were ready, willing and able to respond to the public’s needs. These bookmen deserve much credit for their courage, and they deserve our thanks for demonstrating how the free market can solve the problems of production and consumption.
• FOOTNOTES •
1 Richard D. Altick, The English Common Reader (Chicago & London, 1957), pp. 51-52.
2 Paul Hollister, Comp., The Author’s Wallet (New York, 1934), pp. 8-12.
3 James L. Barnes, Free Trade in Books (Oxford, 1964), p. 14-16; Russi Jal Taraporevala, Competition and its Control in the British Book Trade, 1850-1939 (Bombay, 1969), pp. 16-17.
4 Barnes, Free Trade in Books, pp. 15-17, 22.
5 Hollister, The Author’s Wallet, pp. 36-38.
6 Barnes, Free Trade in Books, pp. 24-25.
7 Ibid., p. 25.
8 Hollister, The Author’s Wallet, pp. 38-44.
9 Barnes, Free Trade in Books, pp. 28-29.
11 Taraporevala, Competition and its Control, pp. 21-26.
Ibid., p. 28-29; Thomas Joy, The Truth About Bookselling (London, 1964), p. 20.
12 Taraporevala, Competition and its Control, p. 27.
13 Ibid., pp. 29-30.
14 Altick, The English Common Reader, p. 305.